Whether production of CA’s certificate is sufficient compliance to avail the benefit of Notification No. 102/2007-Cus?

PJ/Case Laws/2012-13/1439

Case:- MIRC ELECTRONICS LTD. V/S COMMISSIONER OF CUSTOMS, AHMEDABAD

Citation:- 2013(287) E.L.T. 225 (Tri. - Ahmd.)

Brief Facts: - The appellant is the manufacturer of various Electronic goods in their factory at Thane and are also importing Air-conditioners, washing machines DVD Players, Micro ovens etc. which are cleared on payment of import duties including Special Additional Duty at the rate of 4% liable under Section 3(5) of Customs Tariff Act, 1975, on due assessment of Bills of Entry. The appellant had filed refund claim of Rs. 12,41,910/- in respect of Special Additional Duty of Customs (4% SAD) paid by them at the time of import of different models of Air-conditioners, in terms of exemption Notification No. 102/2007-Cus., dated 14-9-2007. On scrutiny of the refund claim, it was noticed that sales of the imported goods i.e. Air conditioner had been made in several different States and the appellant failed to fulfill certain mandatory conditions as envisaged under Notification No. 102/2007-Cus., dated 14-9-2007 to avail the benefit of the said notification. The appellant, while filing the refund claim, had not submitted the required documents like the acknowledgement of VAT returns, copies of VAT challans or ST/VAT documents evidencing payment thereof, sales invoices, and copy of receivable account to substantiate the claim of unjust enrichment. Based on the above noted deficiency, show cause notice F. No. VIII/20-05/Refund/ICD/2009, dated 3-6-2009 was issued calling upon them to show cause as to why the benefit of exemption notification ibid should not be disallowed and consequently the refund claim should not be rejected. After following due process of law the said show cause notice was adjudicated vide impugned order, wherein the adjudicating authority rejected the refund claim of Rs. 12,41,910/- (amount in all four appeals totalled together) on the ground of non-submission of documents evidencing payment of appropriate Sales Tax/VAT as the case may be, as well as on the ground that refund claim is hit by bar of unjust enrichment. The above said impugned orders were challenged by the appellant before the first appellate authority and the first appellate authority had partly allowed the appeal and partly held against the assessee on the ground of unjust enrichment and remanded the matter back to the adjudicating authority for the limited purpose of re-examination and verification of documents to ascertain appropriate payment of VAT/CST based on documents/evidences submitted by the assessee and pass fresh orders after giving them reasonable opportunity to present and defend their case.

Appellant’s Contention: - The appellant submits that they are in appeal against the orders of the first appellate authority on a limited question i.e. on the bar of unjust enrichment which has been held against them by the first appellate authority. They made attention the order-in-appeal dated 1-2-2011 and submit that both the lower authorities have not followed the Board’s circular/instruction. They made attention to C.B.E. & C. Circular No. 16/2008-Cus., dated 13-10-2008 and submit that the Board in its own wisdom has specifically stated that in cases of refund of 4% of special CVD, certificate issued by the chartered accountant is enough. Further they submit that the said circular was further modified by the circular dated 8-7-2010 and reads paragraph 6 of the said circular. It is their submission that they have given a certificate issued by their chartered accountant M/s. M.M. Raji & Co. who is also their statutory auditors and draws attention to the said certificate. It is their submission that both the lower authorities have gone beyond the Board’s instruction and called for the balance sheet and rejected the refund claims only on the basis that they have shown the amount of 4% special CVD as expenses in the P & L account. Further they submit that they had explained the reasoning for showing the same in detail in reply to their show cause notice and had also provided the chartered accountants’ certificate. The judgment of the Tribunal in the case of STP Ltd. v. CCE (Import), Mumbai as reported at 2011 (267) E.L.T. 110 (Tri.-Mumbai) will squarely cover the issue in their favour.

Respondent’s Contention: - The respondent contends that the appellant herein had accounted for the said payment of 4% CVD in their balance sheet/P & L accounts as expenses and subsequently reversed the same to indicate that they had not passed on the amount to their purchasers. They submit that the findings of the lower authorities are very clear as to this aspect.

Reasoning of Judgment: - The Hon’ble Tribunal held that there is no dispute that the appellant had imported various items and paid special i.e. Special Additional Duty. It is also undisputed that the appellant had subsequently sold the said imported goods and claimed the refund of Special Additional Duty under Notification No. 102/2007-Cus. It is also undisputed that the appellant had produced a chartered accountants’ certificate before the lower authorities. They held that both the lower authorities had rejected the refund claim of the appellant only on the ground of unjust enrichment for having recorded in their balance sheet that the payment of 4% CVD was an expense. Further they find that C.B.E. & C. vide circular dated 13-10-2008 had specifically clarified that the ‘statutory auditor/Chartered Accountant’ mentioned in para 6 of the earlier Board’s circular refers to “Chartered Accountant” within the meaning of Section 2(1)(b) of the Chartered Accountants Act, 1949. However, it is clarified that the Customs field formations shall accept the certificate given only by such a Chartered Accountant who either certifies the importer’s financial records under the Companies Act, 1956 or any ST/VAT Act of the State Government or the Income Tax Act, 1961, in order to fulfill the condition that the incidence of duty burden has not been passed on by the importer to any other person for the purpose of refund of 4% CVD. A certificate by any other independent Chartered Accountant would not be acceptable for this purpose. It is seen from this clarification that in 2008 itself, C.B.E. & C. had clearly stated that in order to fulfill the requirement of the condition that the incidence of duty burden has not been passed on by the importer to any other person for the purpose of refund of 4% CVD certificate given by their statutory auditor should be enough. It can be seen that C.B.E. & C. has clearly stated that lower authorities shall accept the certificate given by statutory auditors. It can be seen from the certificate of the chartered accountant, as reproduced by the assessee that they have clearly and unequivocally stated that they are the chartered accountants who certified the annual financial accounts under the Companies Act of the appellant herein. Such a chartered accountant’s certificate has been sought to be dismissed by the lower authorities by calling for the balance sheet of the assessee and after scrutinising the balance sheet, to hold against the appellant only on the ground that the 4% CVD has been charged to P & L account as an expense.
The C.B.E. & C. on the doubts which have been raised, vide their Circular dated 8-7-2010 clarified that there is no need for examination of balance sheet and P & L account and it has been decided that authorities shall accept the certificate from chartered accountant for the purposes of satisfying the condition that the burden of 4% CVD has not been passed on by the importer to any other person. Thus it was found that both the lower authorities have not followed the C.B.E. & C. Circular in its spirit, in this case.
Thus, they held that the clarification given by the C.B.E. & C. and the ratio to the decision of the Tribunal in the case of STP Ltd. squarely covers the issue in favour of the appellant to the extent it is challenged. Thus question as to the non-passing of the incidence of the 4% special CVD with the customers have been fully satisfied by the appellant by producing a certificate, from their statutory auditor. In the absence of any other contrary evidence, the exercise embarked upon by the lower authorities in this case is unwarranted and has been specifically barred by the C.B.E. & C., in the circulars as noted hereinabove.

Decision: - The appeal was allowed.

Comment:-The substance of this case is that when clarification have already been issued that certificate of Chartered Accountant who statutorily audits the accounts of the assessee is sufficient for evidencing the fact that the burden of duty has not passed on, rejecting refund claim by examination of profit and loss accounts and balance sheets of the assessee is not warranted.

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PJ/Case Laws/2012-13/1439

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