Time Spent Before Refund Authority to Be Excluded for Limitation: CESTAT Remands Custom Appeal on Post-Clearance FTA Exemption Claim

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that administrative delays and time spent pursuing a refund before the authority must be excluded when computing the period of limitation.

Kalmar India Private Limited (formerly M/s. Cargotec India Private Ltd.) (appellant) regularly imports "Spreaders RSX40" from Malaysia. These goods are eligible for exemption from basic Customs duty under Notification No. 53/2011-Customs if accompanied by aCertificate of Origin (COO).

The appellant cleared the goods by paying the merit rate of duty because they did not possess the COOs at the time of filing the Bills of Entry in March 2018. Upon receiving the COOs, the appellant requested a refund from the Deputy Commissioner of Customs (Refunds) on May 2, 2018.

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The department did not respond for nearly two years. It was only on February 6, 2020 the department informed them that no re-assessment could be allowed unless the original assessment was modified through a statutory appeal.

The appellant subsequently filed appeals before the Commissioner of Customs (Appeals-II), Chennai. The Commissioner rejected these appeals as time-barred, noting they were filed approximately two years after the Bills of Entry, well beyond the 60-day limit (plus a 30-day condonable period) prescribed under Section 128 of the Customs Act, 1962. Aggrieved by this rejection, the appellant approached the CESTAT.

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The bench comprising Mr. Vasa Seshagiri Rao ( Technical Member) relying on Section 14(1) of the Limitation Act, 1963 held that the time spent "honestly and diligently" prosecuting a proceeding before a wrong forum (the Refund Sanctioning Authority) should be excluded from the limitation period.

The tribunal noted that the litigant should not suffer for administrative delays beyond their control, characterizing the two-year delay by the department as "unexplained administrative inaction".

The tribunal observed the lower appellate authority’s order as "vague and cryptic," and also noted that it failed to address core legal pleas regarding the exclusion of time under the Limitation Act.

The bench relied on the Madras High Court decision in Nipman Fastener Industries Pvt. Ltd. Vs Dy.CC, which granted liberty to challenge assessments in similar facts regardless of the limitation period.

The tribunal set aside the impugned order and remanded the matter to the Commissioner (Appeals). The tribunal directed to treat the appeals as filed within time by excluding the two-year period spent before the refund authority.

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The tribunal also directed to Conduct a fresh consideration on merits, including a verification of the Certificates of Origin. The tribunal concluded that the benefit of a Free Trade Agreement (FTA) can be claimed subsequently after verification. The appeal of the appellant was allowed.

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