Refund - Validity of Second Show Cause Notice for examining unjust enrichment aspect

PJ/Case Laws/2011-12/1394

Case: COMMISSIONER OF CUSTOMS Versus MILLAT FIBERS

Citation: 2011 (271) E.L.T. 512 (Guj.)

Issue:- Order granting Refund of duty after adjudication after issuance of show cause notice – whether refund claim can be recovered by issuing another show cause notice on ground that unjust enrichment aspect was not examined earlier under Section 28 r/w 27 of the Customs Act?

Brief Facts:- Respondent-assessee at the relevant time was holding a licence of 100% EOU. In connection with alleged illicit clearance of imported Polyester Filament Yarn, show cause notice dated 19-9-2002 was issued to the respondent.

The Adjudicating Authority vide order-in-original, inter alma, confirmed the demand of customs duty against the respondent.

In appeal, the Commissioner (Appeals) held that the Adjudicating Authority had no jurisdiction to confirm such a demand and set aside only that part of the order, whereas the order of confiscation under Section 111 of the Act and redemption fine under Section 125(1) of the Act was upheld.

As the respondent had already deposited the duty amount, it made an application for refund. Vide order-in-original dated 22.02.2005, the claim for refund to the extent of Rs. 2,92,585/- came to be rejected whereas refund of Rs. 2,42,110/- came to be sanctioned.

However, it was directed that the sanctioned refund be appropriated against pending dues.

Later on the adjudicating authority noticed that the doctrine of unjust enrichment was not verified before sanctioning refund of Rs. 2,42,110/-. He, therefore, issued a show cause notice dated 7-6-2005 to the respondent for recovery of refund so sanctioned under Section 28 read with Section 72 of the Act in absence of any proof of incidence of duty not being passed on.

The Adjudicating Authority sanctioned refund of Rs. 2,42,110/- but ordered the same to be credited to the Consumer Welfare Fund.

In appeal, the Commissioner (Appeals) held that the issue of second show cause notice after having already passed an order sanctioning refund by the Adjudicating Authority would amount to reviewing his own order. That the proper course was for the Department to review the order under Section 129D (2) of the Act and thereafter, file an appeal under Section 129 D(4) of the Act. The Commissioner (Appeals) held that as the order passed by the Adjudicating Authority amounts to review of his own order, the same was not permissible and accordingly allowed the appeal.

Revenue filed before the Tribunal. The Tribunal agreed with the reasoning adopted by the Commissioner (Appeals) and dismissed the appeal.

Hence, Revenue is in appeal before the High Court.

Appellant’s Contention:- Revenue invited attention to the provisions of Section 28 of the Act to submit that where any duty has been erroneously refunded, it is permissible for the Adjudicating Authority to serve notice requiring the concerned person to show cause as to why he should not pay the amount specified in the notice. It was submitted that while making the order dated 22nd February, 2005 the aspect of unjust enrichment had not been considered, hence the refund made pursuant to the said order could be said to have been erroneously refunded so as to bring the same within the ambit of Section 28 of the Act. It was, accordingly, submitted that the questions of law as proposed, arise out of the impugned order of the Tribunal.

Reasoning of Judgment:- The High Court examined the records which indicated that the Adjudicating Authority had gone into all issues which were necessary to be looked into for the purpose of deciding the application for refund, including the aspect of unjust enrichment. It was noted that the Adjudicating Authority after duly considering the claim of respondent rejected part of the claim and allowed the claim to the extent of Rs. 2,42,110/- and directed that the same should be appropriated against outstanding Government dues vide order dated 22.02.2005.

It was noted that later on after the said order was implemented another show cause notice came to be issued calling upon the respondent to show cause as to why the refund claim of Rs. 2,42,110/- sanctioned and erroneously refunded by appropriating against the outstanding Government dues should not be rejected and amount so appropriated should not be recovered under Section 28 read with Section 27 of the Customs Act, 1962 in absence of proof regarding burden of duty being not passed on.

The High Court held that the very frame of the show cause notice indicates that the Adjudicating Authority was reviewing the earlier order inasmuch as the respondent had been called upon to show cause as to why the refund granted by the earlier order should not be rejected.

It was noted that Sub-section (2) of Section 129D empowers the Commissioner of Customs to call for and examine the record of any proceeding in which an adjudicating authority subordinate to him has passed any decision or order under the Act for the purpose of satisfying himself as to the legality or propriety of any such decision or order and to direct such authority to apply to the Commissioner (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Commissioner in his order. Sub-section (4) thereof provides for preferring an appeal against the order of the concerned authority. In the circumstances, if the Adjudicating Authority was of the view that the doctrine of unjust enrichment had not been examined while making the order of refund, the proper course to adopt was to take recourse to the provisions of Section 129D.

The High Court held that a perusal of the Order-in-original dated 15-2-2006 shows that the Adjudicating Authority has held that the refundable amount of Rs. 2,42,110/- is required to be credited to the Consumer Welfare Fund established under Section 12C of the Central Excise Act, 1944 and that the same cannot be refunded to the party by appropriating against outstanding Government dues of Rs. 2,75,306/- of Customs Duty vide 0-1-0 dated 3-2-2004. Thus in effect and substance the Adjudicating Authority, has set aside its earlier order dated 13-2-2004 whereby the refund amount had been ordered to be appropriated against outstanding Government dues. The Adjudicating Authority has no power or authority under the Act to reconsider or review or sit in appeal over its earlier order. No such power or authority has been pointed out by the learned counsel for the appellant.

In the aforesaid factual background, the Commissioner (Appeals) was justified in holding that the show cause notice issued by the Adjudicating Authority on the ground of unjust enrichment, would amount to review of his own order which was not permissible. The view expressed by the Commissioner (Appeals) that the proper course of action was for the Department to review the order under Section 129D(2) of the Act and thereafter file appeal under Section 129D(4) is in consonance with the provisions of the Act. The impugned order of the Tribunal whereby it has confirmed the findings recorded by the Commissioner (Appeals) does not suffer from any legal infirmity so as to warrant interference.

Decision:- Appeal disallowed.

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PJ/Case Laws/2011-12/1394

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