In a significant ruling, the Customs Excise & Service Tax Appellate Tribunal, Chennai (CESTAT) clarified that the recovery of a wrongly sanctioned refund cannot be upheld if it violates the principles of natural justice.
The decision was rendered by CESTAT while hearing a Customs Appeal filed by Associate Lumber Pvt. Ltd., Mumbai, a prominent importer of teak logs, against the Commissioner of Customs (Import), Chennai.
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The Customs department alleged that Associate Lumber Pvt. Ltd. had availed a refund of Rs.3,31,091/- in respect of goods imported vide Bill of Entry No. 2869391 dated 2.3.2011, which was cleared at Tuticorin Port and did not fall under the jurisdiction of Chennai Customs.
During the hearing, the counsel representing appellant, Shashank Nair, argued that the impugned order was issued in violation of the principles of natural justice and without discussing the issue on merits. He prayed that the order be set aside with consequential relief.
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However the counsel representing respondent, N. Satyanarayanan, countered that the appellant had not updated their address, and the intimation letter was returned with the remarks ‘left and moved’. He argued that sending another notice would serve no purpose and prayed for the appeal to be rejected.
M. Ajit Kumar, Technical Member of CESTAT, Chennai, noted that the department had initiated recovery proceedings even before the appeal period was over, thereby adversely affecting the appellant’s chances of getting relief from a higher appellate forum.
The Tribunal, referring to the Bombay High Court’s judgment in Patel Engineering Limited Vs Union of India (2013), held that the recovery proceedings initiated by the department were premature and without jurisdiction.
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While remanding the matter to the First Appellate Authority, the Tribunal emphasized that the appellant should have been given an opportunity to be heard, as per law, before the impugned order was passed, and that the department’s coercive action was premature.
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