Relief to MIRC: CESTAT Grants Refund of Excess Customs Duty Caused by System Error [Read Order]

The Chennai Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT) granted relief to MIRC Electronics Ltd by allowing a refund of excess customs duty caused by a system error.

The Revenue-appellant appealed against the order passed by Commissioner of Customs(Appeals-II) dated  1.5.2023 .In this case, MIRC Electronics Ltd, respondent-assessee, imported 6680 packages of Split Air Conditioners and filed four Bills of Entry for bonding in April 2018. On 26.09.2018, the respondent filed four Ex-bond Bills of Entry through ICEGATE, but they were rejected due to a system error related to bond updates.

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On 26.09.2018, a notification increased the duty on split air conditioners from 10% to 20%, effective 27.10.2018. As a result, the assessee paid an extra duty of Rs. 42,89,795/-. Believing the excess duty would be refunded, the assessee filed refund claims. However, these claims were rejected because the Ex-bond Bills of Entry were filed after the new duty structure came into effect.

The assessee appealed, and the Commissioner (Appeals) set aside the rejection, directing the refund claims to be processed with the necessary updates, following the principles of natural justice.

The Revenue appealed before the tribunal.

Read More:CESTAT Allows Refund Claims: Holds Procedural Lapses Can’t Deny Exemption Benefits

The tribunal, after reviewing the record and hearing the parties, found that the assessee allegedly paid excess duty due to a system error. Revenue contested the claim, citing a lack of proof.

The assessee argued that ICEGATE did not accept the Bills of Entry due to an error code. They claimed the error was caused by non-updating of bond details manually in the ICES system. The OIO confirmed this as the cause of the error.

Revenue's appeal involved a question of fact and law. The rate of duty applied depended on the date the Bills of Entry were presented, as per Section 15 of the Customs Act, 1962. The assessee  argued that the Bills of Entry were filed on 26/09/2018, which was supported by the ICEGATE Bill of Entry Report.

The assessee showed they had filed the Bills of Entry, and it was for Revenue to prove otherwise. Revenue accepted the assessee’s claim, stating that the error was due to non-updating of bond details.

A single member bench comprising M.Ajit Kumar(Technical Member) considered whether the assessee was responsible for the error. The OIO noted that the Bond section's manual process of updating ICES was not feasible daily. The assessee argued the department could not blame them for the delay, as they were not required to keep the electronic bond module updated.

The appellate tribunal also looked at previous rulings, which stated that delays caused by system faults should not penalize the importer. Since the appellant had attempted to file the Bills of Entry before the rate change notification, the CESTAT ruled in favor of applying the duty rate as it was on 26/09/2018.

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Finally, the bench decided there was no need to send the matter back to the Original Authority, as the issues should have been addressed earlier.

The appeal filed by the revenue was disposed of.

To Read the full text of the Order CLICK HERE

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