whether the application for refund is to be applied when the duty paid amount finally assessed is less that filled in provisionally assessed?

PJ/CASE LAW/2015-16/2709

Case:-INDIAN OIL CORPORATION LTD. VersusCOMMISSIONER OF C. EX., VADODARA-I

Citation:-2015 (315) E.L.T. 49 (Tri. - Ahmd.)

Brief facts:-This appeal had been filed by the appellant against OIA No. COMMR(A)/250/VDR-I/2012, dated 30-4-2012 passed by the Commissioner (Appeals) Vadodara. First appellate authority had upheld the OIO No. Ref. /779/AC.D-IV/BP/2011-12, dated 21-12-2011 under which a refund claim of Rs. 21,20,013/- was rejected by the adjudicating authority as time barred under the provisions of Section 27, read with Section 18 of the Customs Act, 1962.

Appellant’s contention:-Shri W. Christian (Advocate) appearing on behalf of the appellant argued that the refund claim of the appellant was not time barred. It was his case that after finalization of provisional assessment, as per letter, dated 22-2-2008 written by Deputy Commissioner of Central Excise & Customs, Division-IV, Vadodara-I, appellant was found to have excess paid an amount of Rs. 21,20,013/-. It was the case of the appellant that in case of duty found to be paid in excess at the time of provisional assessment, Revenue was required to refund the amount without any refund application filed by the appellant. That was no refund application was required to be filed hence the refund of the appellant cannot be considered as time-barred. He relied-upon the following case laws in support of his arguments:-

(i)         Commissioner of Customs v. Hindalco Industries Ltd. [2008 (231)E.L.T.36 (Guj.)]
(ii)        Commissioner of Customs v. Indian Oil Corporation [2012-TIOL-52-High Court-DEL-Cus. = 2012 (282)E.L.T.368 (Del.)]
(iii)       CCE & ST Vadodara-II v. M/s. Panasonic Battery India Co. Ltd. [2013-TIOL-1367-CESTAT-AHM-LB = 2014 (303)E.L.T.231 (Tri.-LB)]

Respondent’s contention:-Shri Jitendra Nair (AR) appearing on behalf of the Revenue argued that a refund claim was required to be filed within a period of six months from 22-2-2008 (the date on which order for adjustment of duty was made by the Deputy Commissioner) as per Explanation II to Section 27(1) of the Customs Act, 1962. Ld. AR thus strongly defended the findings of the order, dated 30-4-2012 passed by the first appellate authority.

Reasoning of judgment:-Heard both sides and perused the case records. The only issue required to be decided in the present proceedings was whether appellant was required to file any refund claim application under Section 27(1) of the Customs Act, 1962 when on finalization of provisional assessment under Section 18 it was found that appellant has paid excess Customs duty at the time of provisional assessment as compared to duty which was finally assessed. Appellant had placed reliance on the case law in the case of Commissioner of Customs v. Indian Oil Corporation (supra). The facts of that case and the issues before Delhi High Court were as per Paras 3 to 6 and reproduced below :

“3. The respondent imported petroleum crude oil by two bill of entries, dated 24-8-1998 and 2-2-1999. The said bill of entries were provisionally assessed under the Customs Act, 1962 (Act, for short) as the documents regarding FOB value and the freight payable for the crude oil were not available. At the time of provisional assessment, the respondent-assessee had deposited Rs. 6,42,02,664/- and Rs. 10,23,71,807/-.

4. The two bill of entries mentioned above were finally assessed on 21-6-1999 and 15-6-1999 by the Appellate Commissioner of Customs at Vadinar Port. Final duty assessed was Rs. 5,71,84,514/- and Rs. 10,12,97,546/- respectively, which entitled the respondent-assessee to refund of Rs. 70,18,150/- and Rs. 10,74,261/- (total Rs. 80,92,411/-).

5. On 21-1-2004, the respondent-assessee filed an application in Form No. 22 seeking refund of Rs. 80,92,411/-. The application was rejected by the Assistant Commissioner (Refunds) vide order, dated 18-3-2004 on the ground that it had been made after four years and seven months and was clearly beyond period of 6 months stipulated under Section 27(1)(b) of the Act. The contention of the respondent-assessee that they had not received the final assessment orders and therefore, they could not file an application for refund, was rejected by the Assistant Commissioner (Refund). The first appeal filed by the respondent-assessee was dismissed. The first appellate authority relied upon decision of the Bombay High Court in Bussa Overseas and Properties Pvt. Ltd. v. Union of India - 2003 (158)E.L.T.135 (Bom.).

6. The respondent-assessee preferred an appeal before the Tribunal and the said appeal has been allowed by the impugned order, dated 16-3-2011 [2011 (269)E.L.T.405 (Tri.-Del.).]. The Tribunal has preferred to follow the view taken by the High Court of Gujarat in Commissioner of Customs v. Hindalco Industries Ltd. - 2008 (231)E.L.T.36 (Guj.). In the impugned order, the Tribunal has held as under :

(1) The orders, dated 21-6-1999 and 15-6-1999 were not communicated to the respondent-assessee. This factual finding is not disputed before us.

(2) Section 18 and not Section 27 of the Act is applicable.

(3) Under Section 18, the respondent-assessee was not required to file any application for refund and refund should have been paid suo motu by the appellant.

(4) Principle of unjust enrichment is not applicable as the provisions relating to unjust enrichment were incorporated in Section 18 w.e.f. 13-7-2006 and do not have retrospective effect.”

Hon’ble Delhi High Court in Paras 19 & 20 of the above judgmentanalysed the situations, where refund application was not required to be made; as follows :-

“19. We have considered Explanation II to Section 27(1) and whether in view of the said Explanation, the respondent assessee was required to move an application under Section 27 of the Act and accordingly, the conditions stipulated in sub-section (2) of the Act are applicable. We may now notice here that the two situations, which have been specifically referred to by the Gujarat High Court in the case of Hindalco Industries (supra). Two situations are as under :

“9.1 Referring to Explanation II to Section 27 of the Act it was submitted that the same would apply to a case where after the final assessment and the adjustment, if still the Assessee is not satisfied with the adjustment and claims excess amount as refund. Explanation II will have no application in cases where admittedly after final adjustment, refund is due to the Assessee. This is explained with the following illustration :

Duty paid provisionally Rs. 100

Duty finally assessed Rs. 60

Duty to be refunded Rs. 40

In this case Explanation II will have no application since no claim for refund is made and Rs. 40 is to be refunded since the same is admittedly due.

Duty paid provisionally Rs. 100
Duty finally assessed Rs. 70
According to Assessee correct duty payable Rs. 60

In this case, admitted amount of refund of Rs. 30 would be returned and if the Assessee seeks to claim Rs. 10 also (Rs. 70 - Rs. 60) as refund, then Explanation II would apply and the said claim is to be preferred within six months from the date of adjustment of duty. This position is precisely dealt with and explained in the second portion of paragraph No. 104 of Judgment in case of Mafatlal Industries (supra).”

20. The two situations are relevant and important. In the first situation the assessee has paid provisional duty which gets reduced on final assessment. The assessee, therefore, becomes entitled to refund which is payable in terms of Rule 9B of the Excise Act [(sic) Rules], 1944 or Section 18 of the Act. For refund on this account, no application is required to be filed under Section 27 of the Act and therefore, sub-section (2) is not applicable. In the second situation, the assessee becomes entitled to additional refund on account of appellate orders or orders passed by a court. In this situation, the assessee is under an obligation to file an application under Section 27 of the Act, the limitation period accordingly applies and doctrine of unjust enrichment is also applicable. Explanation II to Section 27 of the Act deals with the 3rd category of situations. Such situations may occur after the passing of the final assessment, on account of rectification under Section 154 of the Act or because of any other reason, as a result of which the final order suffers an amendment or a change and some amount becomes refundable. As far as Section 18 of the Act is concerned, when an amount becomes refundable after a final order is passed, the same has to be refunded immediately and for this purpose the assessee is not required to move an application under Section 27 and accordingly sub-section (2) to Section 27 would not apply. It is in this situation that the legislature has intervened and has now inserted sub-sections (3), (4) and (5) to Section 18 w.e.f. 13-7-2006. These insertions obviously are not applicable to the case in hand as they do not have retrospective effect. It was so held in TVS Suzuki Ltd. (supra) when similar amendments were made in Rule 9B of the Rules passed under the Central Excise Act w.e.f. 25-6-1999. However, in 1999, the legislature did not make corresponding amendment in Section 18 of the Customs Act. These amendments were made w.e.f. 13-7-2006.”

In view of the above, the appeal filed by the Revenue in the above case was rejected and issue was decided in favour of the respondent assessee.

As the facts in this case were identical in as much as the present appellant was found to have paid excess duty at the time of finalization of provisional assessment. Accordingly, it was held that during the relevant period when an amount becomes refundable to an assessee upon finalization of provisional assessment by the appropriate authority, the same had to be refunded immediately and appellant was not required to file any refund claim under Section 27 of the Customs Act, 1962. Accordingly, refund claim cannot be held to be time-barred as the same pertained to provisional assessments before 12-7-2006.

In view of the above observations and the settled proposition of the law, appeal filed by the appellant was allowed with consequential relief, if any.

Decision:-appeal allowed

Comment:- the gist of this case is that the assessee should automatically get the refund when the assessee had deposited more duty in provisional assessment than the duty assessed in final assessment. Following the pronouncing of Delhi High court it was held that as per explanation II of section 27 the assessee was to apply within six months only when he is not satisfied with the duty finally assessed. But when an amount becomes refundable after a final order is passed due to the reason that excess duty was deposited in provisionally assessment, the same has to be refunded immediately and for this purpose the assessee is not required to move an application under Section 27.

{prepared by:- Prayushi Jain}

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PJ/CASE LAW/2015-16/2709

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