No Refunds if Claim is not Filed in Time in Appeal

· Note on CVD Refund – Impact Post ITC Judgement of SC(1)

Table of Contents

1 Brief Facts

2 Queries

3 Analysis of Relevant Legal Provisions

4 Applicability of Legal Provisions

5 Conclusion

1. BRIEF FACTS

1.1. During the period, FY 14-15 to FY 15-16, the respective brands had imported mobiles, tablets, and parts of mobile phones under various Bills of Entry. At the time of import of such goods into India, the brands was paying additional customs duty (“CVD”) at the rate of 12.5% as provided under Schedule I of the Central Excise Tariff Act, 1985. (hereinafter referred to as “Central Excise Tariff Act”)

1.2. On 26.03.2015, the Hon’ble Supreme Court of India in the case of M/s. SRF Ltd. vs Commissioner of Customs Chennai, 2015 (318) E.L.T. 607 (SC) interpreted Condition No. 20 of Notification No. 06/2002-CE (Sl. No. 122), whereby exemption from payment of excise duty was subject to the condition that no CENVAT Credit had been taken in respect of the inputs and capital goods used for the manufacture of such products. The Hon’ble Supreme Court held that importers of goods could claim benefit of such notification at the time of import for exemption from payment of CVD, since there was no question of availing CENVAT Credit under the CENVAT Credit Rules, 2002, where inputs are procured from a country other than India and therefore, the condition stands fulfilled.

1.3. Based on the decision of the Hon’ble Supreme Court in SRF (supra), the brands proceeded to file refund claims seeking refund of the duties paid by them at the respective ports i.e. in New Delhi, Mumbai, Chennar etc. In some cases, the refunds have been processed and received by the brands. While in other cases, the refunds are yet to be sanctioned.

Recent Developments

1.4. Recently, the Hon’ble Supreme Court in the case of ITC Ltd. v. CCE, Kolkata -IV, 2019- VIL-32-SC-CU, has finally put an end to a long-drawn battle between the Department and the assessees principally on the issue “whether in the absence of any challenge to the order of the assessment in appeal, any refund application against the assessed duty is maintainable”.

1.5. The Hon’ble Apex Court has held that a claim for refund cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law by taking recourse to the appropriate proceedings and it would not be within the ken of Section 27 of the Customs Act, 1962 (hereinafter referred to as the “Customs Act”) to set aside the order of self-assessment and reassess the duty for making refund.

1.6. In effect, the Hon’ble Supreme Court has overruled the decisions of the Delhi High Court in the case of Aman Medical v. CC, 2010 (250) E.L.T. 30 (Del.) and Micromax Informatics Ltd. v. Union of India, 2016 (335) E.L.T. 446 (Del).

2. QUERIES

2.1. In the above background, we have been asked to advice by the brands on the following issues: -

(a) What is the impact of decision in ITC (supra) on the refunds which have already been sanctioned to the brands?

(b) What will be the impact of the decision in ITC (supra) on the refunds which have not been sanctioned and are pending with the Department?

3. ANALYSIS OF RELEVANT LEGAL PROVISIONS

Provisions related to assessment (as existed prior to 08.04.2011) and under the current regime

3.1. To incorporate the concept of self-assessment under the Customs Act, significant amendments were made vide the Finance Act, 2011 to Sections 2, 17 and 27 of the Customs Act on 08.04.2011.

3.2. Section 2 (2) of the Customs Act, prior to the amendment by the Finance Act, 2011, defined assessment “to include provisional assessment, re-assessment and any order of assessment in which duty assessed is nil”.

3.3. However, vide the Finance Act, 2011, the definition of assessment under Section 2 (2) was amended to include “provisional assessment, self-assessment, re-assessment and any assessment in which the duty assessed is nil.”

3.4. Prior to the introduction of self-assessment regime, Section 17 of the Customs Act required the appraisal of imported and exported goods to be conducted under the supervision of the proper officer of customs. The pre-amended section 17 of the Customs Act is extracted hereunder: -

“17. Assessment of duty. - (1) After an importer has entered any imported goods under section 46 or an exporter has entered any export goods under section 50 the imported goods or the export goods, as the case may be, or such part thereof as may be necessary may, without undue delay, be examined and tested by the proper officer.

(2) After such examination and testing, the duty, if any, leviable on such goods shall, save as otherwise provided in section 85, be assessed.

(3) For the purpose of assessing duty under sub-section (2), the proper officer may require the importer, exporter or any other person to produce any contract, broker's note, policy of insurance, catalogue or other document whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained, and to furnish any information required for such ascertainment which is in his power to produce or furnish, and thereupon the importer, exporter or such other person shall produce such document and furnish such information.

(4) Notwithstanding anything contained in this section, imported goods or export goods may, prior to the examination or testing thereof, be permitted by the proper officer to be assessed to duty on the basis of the statements made in the entry relating thereto and the documents produced and the information furnished under sub-section (3); but if it is found subsequently on examination or testing of the goods or otherwise that any statement in such entry or document or any information so furnished is not true in respect of any matter relevant to the assessment, the goods may, without prejudice to any other action which may be taken under this Act, be re-assessed to duty.

(5) Where any assessment done under sub-section (2) is contrary to the claim of the importer or exporter regarding valuation of goods, classification, exemption or concessions of duty availed consequent to any notification therefor under this Act, and in cases other than those where the importer or the exporter, as the case may be, confirms his acceptance of the said assessment in writing, the proper officer shall pass a speaking order within fifteen days from the date of assessment of the bill of entry or the shipping bill, as the case may be.”

3.5. Section 17 as amended by Finance Act, 2011 is extracted hereunder:

“17. Assessment of duty. - (1) An importer entering any imported goods under section 46, or an exporter entering any export goods under section 50, shall save as otherwise provided in section 85, self-assess the duty, if any, leviable on such goods.

(2) The proper officer may verify the self-assessment of such goods and for this purpose, examine or test any imported goods or export goods or such part thereof as may be necessary.

[(3) For verification of self-assessment under sub-section (2), the proper officer may require the importer, exporter or any other person to produce any document or information, whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained and thereupon, the importer, exporter or such other person shall produce such document or furnish such information.]

(4) Where it is found on verification, examination or testing of the goods or otherwise that the self-assessment is not done correctly, the proper officer may, without prejudice to any other action which may be taken under this Act, re-assess the duty leviable on such goods.

(5) Where any re-assessment done under sub-section (4) is contrary to the self-assessment done by the importer or exporter regarding valuation of goods, classification, exemption or concessions of duty availed consequent to any notification issued therefor under this Act and in cases other than those where the importer or exporter, as the case may be, confirms his acceptance of the said re-assessment in writing, the proper officer shall pass a speaking order on the re-assessment, within fifteen days from the date of re-assessment of the bill of entry or the shipping bill, as the case may be.

(6) Where re-assessment has not been done or a speaking order has not been passed on re-assessment, the proper officer may audit the assessment of duty of the imported goods or export goods at his office or at the premises of the importer or exporter, as may be expedient, in such manner as may be prescribed.

Explanation. - For the removal of doubts, it is hereby declared that in cases where an importer has entered any imported goods under section 46 or an exporter has entered any export goods under section 50 before the date on which the Finance Bill, 2011 receives the assent of the President, such imported goods or export goods shall continue to be governed by the provisions of section 17 as it stood immediately before the date on which such assent is received.]”

(emphasis supplied)

3.6. On a perusal of the above, it can be said that once the self-assessment scheme was introduced, the onus of assessment was shifted from Customs officers to the assessees.

Provisions related to refund in the erstwhile regime (as existed prior to 08.04.2011) and under the current regime

3.7. The relevant portion of the erstwhile Section 27, as existed before 08.04.2011 have been extracted below for ease of reference: -

“27.... Claim for refund of duty. - (1) Any person claiming refund of any duty –

(i) paid by him in pursuance of an order of assessment; or

(ii) borne by him, may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Customs or Deputy Commissioner of Customs -…”

(Emphasis Supplied)

3.8. The erstwhile Section 27 of the Customs Act provided that refund was admissible in respect of duty which was paid in pursuance of the order of assessment or borne by the assessee. Thus, if there was an order of assessment by a proper officer, the same was subject to challenge by way of appeal subsequent to which refund would accrue to an assessee in light of a favourable appellate order.

3.9. The said Section was amended on 08.04.2011. For ease of perusal, the amended Section 27 of the Customs Act is reproduced below:

“27. Claim for refund of duty. — [(1) Any person claiming refund of any duty or interest, —

(a) paid by him; or

(b) borne by him,

may make an application in such form and manner as may be prescribed for such refund to the Assistant Commissioner of Customs or Deputy Commissioner of Customs, before the expiry of one year, from the date of payment of such duty or interest :

******

Provided further that the limitation of one year shall not apply where any duty or interest has been paid under protest :

******

(1A) The application under sub-section (1) shall be accompanied by such documentary or other evidence (including the documents referred to in section 28C) as the applicant may furnish to establish that the amount of duty or interest in relation to which such refund is claimed was collected from, or paid by him and the incidence of such duty or interest, has not been passed on by him to any other person.

(1B) Save as otherwise provided in this section, the period of limitation of one year shall be computed in the following manner, namely :—

(a) in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of section 25, the limitation of one year shall be computed from the date of issue of such order;

(b) where the duty becomes refundable as a consequence of any judgment, decree, order or direction of the appellate authority, Appellate Tribunal or any court, the limitation of one year shall be computed from the date of such judgment, decree, order or direction;

(c) where any duty is paid provisionally under section 18, the limitation of one year shall be computed from the date of adjustment of duty after the final assessment thereof or in case of re-assessment, from the date of such re-assessment.]

(2) If, on receipt of any such application, the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] is satisfied that the whole or any part of the [duty and interest, if any, paid on such duty] paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund :

Provided that the amount of [duty and interest, if any, paid on such duty] as determined by the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to -

(a) the [duty and interest, if any, paid on such duty] paid by the importer, [or the exporter, as the case may be] if he had not passed on the incidence of such [duty and interest, if any, paid on such duty] to any other person;

(b) the [duty and interest, if any, paid on such duty] on imports made by an individual for his personal use;

(c) the [duty and interest, if any, paid on such duty] borne by the buyer, if he had not passed on the incidence of such [duty and interest, if any, paid on such duty] to any other person;

(d) the export duty as specified in section 26;

(e) drawback of duty payable under sections 74 and 75;

(f) the [duty and interest, if any, paid on such duty] borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify :

Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of [duty and interest, if any, paid on such duty] has not been passed on by the persons concerned to any other person.”

3.10. Further, interest on refund is governed by the provisions of Section 27A of the Customs Act. The same has been reproduced below for ease of perusal:

“27A. Interest on delayed refunds. - If any duty ordered to be refunded under sub-section (2) of section 27 to an applicant is not refunded within three months from the date of receipt of application under sub-section (1) of that section, there shall be paid to that applicant interest at such rate, [not below five per cent] and not exceeding thirty per cent per annum as is for the time being fixed [by the Central Government by Notification in the Official Gazette], on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty :

Provided that where any duty, ordered to be refunded under sub-section (2) of section 27 in respect of an application under sub-section (1) of that section made before the date on which the Finance Bill, 1995 receives the assent of the President, is not refunded within three months from such date, there shall be paid to the applicant interest under this section from the date immediately after three months from such date, till the date of refund of such duty.

Explanation. — Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal [National Tax Tribunal] or any court against an order of the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] under sub-section (2) of section 27, the order passed by the Commissioner (Appeals), Appellate Tribunal [, National Tax Tribunal] or as the case may be, by the court shall be deemed to be an order passed under that sub-section for the purposes of this section.]

Recovery provisions under Section 28 of the Customs Act, 1962

3.11. Section 28 (1) of the Customs Act prescribes a period of 2 years for recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. In such cases of normal period of limitation, there is no requirement on part of the Department to prove any collusion or wilful misstatement or suppression of facts with the intention to evade payment of duty. Such recovery proceedings can be initiated by issuance of a notice to demand in the form of a show cause notice.

3.12. The extended period of limitation of 5 years under Section 28 (4) of the Customs Act is invokable where any duty of customs has not been levied or paid or has been short levied or short paid by reason of collusion or any wilful mis-statement or suppression of facts. It is settled law that in order to invoke extended period of limitation, an assessee should have engaged in collusion or wilful mis-statement or suppression of facts.

Provisions relating to appeals against original adjudication under the Customs Act

3.13. Under the Customs Act, the power of adjudication of cases is bestowed on all officers of the rank of Superintendent/Appraiser and above as per the specified monetary limit.

3.14. When an order is passed by an officer below the rank of Commissioner of Customs, the appeal against such order lies before the Commissioner of Customs (Appeals) in terms of Section 128 of the Customs Act. The same has been reproduced below for ease of perusal:

“128. Appeals to Commissioner (Appeals). — (1) Any person aggrieved by any decision or order passed under this Act by an officer of customs lower in rank than a [Principal Commissioner of Customs or Commissioner of Customs] may appeal to the [Commissioner (Appeals)] [within sixty days] from the date of the communication to him of such decision or order :

“[Provided that the Commissioner (Appeals) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of sixty days, allow it to be presented within a further period of thirty days.]

[(1A) The Commissioner (Appeals) may, if sufficient cause is shown at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing :

Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.]

(2) Every appeal under this section, shall be in such form and shall be verified in such manner as may be specified by rules made in this behalf.”

(emphasis supplied)

3.15. Thus, in terms of Section 128 of the Customs Act, any person aggrieved by decision or order passed under the Customs Act by an officer or Customs lower in rank than a Principal Commissioner or Commissioner of Customs may prefer an appeal to the Commissioner (Appeals) within sixty days from the date of communication of such order to him.

3.16. Also, if the aggrieved party is prevented by sufficient cause from presenting an appeal within the time frame of 60 days, he may prefer an appeal within a further extended period of 30 days.

Provisions on amendment of Bill of Entry

3.17. Section 149 provides that a proper officer may allow amendment of any document, after it has been presented in the custom house. The only condition, as provided in the proviso to this section is that no bill of entry shall be authorized to be amended after clearance for home consumption unless the amendment is based on documentary evidence which was in existence at the time of clearance of the goods. For ease of reference, Section 149 is reproduced hereunder:

“149. Amendment of documents – Save as otherwise provided in sections 30 and 41, the proper officer may, in his discretion, authorize any document, after it has been presented in the custom house to be amended:

Provided that no amendment of a bill of entry or a shipping bill or bill of export shall be so authorized to be amended after the imported goods have been cleared for home consumption or deposited in a warehouse, or the export goods have been exported, except on the basis of documentary evidence which was in existence at the time the goods were cleared, deposited or exported, as the case may be.”

3.18. A perusal of the aforesaid section makes it clear that an amendment of bill of entry is permissible even after clearance of the goods, based on documentary evidence which was in existence at the time the goods were cleared. Such amendment is to be permitted by the proper officer.

3.19. Thus, in order to claim an amendment under the said Section, an applicant must prove it to the satisfaction of the ‘proper officer’, that it had sufficient documentary evidence which was in existence at the time the goods were cleared.

3.20. Reference is also made to Section 154 of the Customs Act which provides for correction of clerical errors.

“154. Correction of clerical errors, etc. - Clerical or arithmetical mistakes in any decision or order passed by the Central Government, the Board or any officer of customs under this Act, or errors arising therein from any accidental slip or omission may, at any time, be corrected by the Central Government, the Board or such officer of customs or the successor in office of such officer, as the case may be.

Relevant Judicial Decisions

Appeal against Bill of Entry under Section 128 of the Customs Act

3.21. As discussed above, any aggrieved person may prefer an appeal within sixty days from the date of communication of an order to him. Also, if the aggrieved party is prevented by sufficient cause from presenting an appeal within the time frame of 60 days, he may prefer an appeal within a further extended period of 30 days.

3.22. It is also important to note that a Bill of Entry itself is an appealable order under Section 128 of the Customs Act because it is an assessment on its own. Reference is made to the following decisions: -

(a) J.M Industries v. Commissioner of Customs, Jamnagar 2003 (156) ELT 977 (Tri-Del);

(b) M/s. Ruchi Soya Industries Limited vs. Commissioner of Customs, Jamnagar, 2013 (296) ELT 114 (Tribunal- Ahmedabad)

(c) Commissioner of Customs, ICD, TKD, New Delhi vs. M/s. Digital Computers, 2012 (284) ELT 123 (Tribunal- Delhi)

3.23. Also, the Supreme Court in the case of ITC (supra) has held that an order of self-assessment is nonetheless an assessment order passed under the Act and is appealable by any person aggrieved thereby. Thus, even a self-assessed Bill of Entry is an appealable order. Relevant portion of the said decision is reproduced hereunder: -

“43. As the order of self-assessment is nonetheless an assessment order passed under the Act, obviously it would be appealable by any person aggrieved thereby. The expression 'Any person' is of wider amplitude. The revenue, as well as assessee, can also prefer an appeal aggrieved by an order of assessment. It is not only the order of re-assessment which is appealable but the provisions of Section 128 make appealable any decision or order under the Act including that of self-assessment. The order of self-assessment is an order of assessment as per section 2(2), as such, it is appealable in case any person is aggrieved by it. There is a specific provision made in Section 17 to pass a reasoned/speaking order in the situation i50n case on verification, self-assessment is not found to be satisfactory, an order of re-assessment has to be passed under section 17(4). Section 128 has not provided for an appeal against a speaking order but against "any order" which is of wide amplitude. The reasoning employed by the High Court is that since there is no lis, no speaking order is passed, as such an appeal would not lie, is not sustainable in law, is contrary to what has been held by this Court in Escorts (supra).”

(emphasis supplied)

Maintainability of Refund claim where no appeal is filed against the Bill of Entry

3.24. In the case of CCE v. Flock (India) Pvt. Ltd., 2000 (120) E.L.T. 285 (S.C.), the Hon’ble Supreme Court had held that where an adjudicating authority has passed an order which is appealable under the statute and the party aggrieved did not choose to exercise the statutory right of filing an appeal, it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that the adjudicating authority had committed an error in passing his order.

3.25. In Priya Blue Industries Ltd. v. CC, 2004 (172) E.L.T. 145 (S.C.), relying on the decision of Flock India (supra), it was held by the Hon’ble Supreme Court that where an adjudicating authority passed an order which is appealable and the party did not chose to exercise the statutory right of appeal, it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that adjudicating authority had committed an error in passing his order. Relevant extract of the judgment is as under for easy reference: -

“6. We are unable to accept this submission. Just such a contention has been negatived by this Court in Flock (India)’s case (supra). Once an Order of Assessment is passed the duty would be payable as per that order. Unless that order of assessment has been reviewed under Section 28 and/or modified in an Appeal that Order stands. So long as the Order of Assessment stands the duty would be payable as per that Order of Assessment. A refund claim is not an Appeal proceeding. The Officer considering a refund claim cannot sit in Appeal over an assessment made by a competent Officer. The Officer considering the refund claim cannot also review an assessment order.

7. We also see no substance in the contention that provisions for a period of limitation indicates that a refund claim could be filed without filing an Appeal. Even under Rule 11 under the Excise Act the claim for refund had to be filed within a period of six months. It was still held, in Flock (India)’s case (supra), that in the absence of an Appeal having been filed no refund claim could be made.

8. The words “in pursuance of an Order of Assessment” only indicate the party/person who can make a claim for refund. In other words, they enable a person who has paid duty in pursuance of an Order of Assessment to claim refund. These words do not lead to the conclusion that without the Order of Assessment having been modified in Appeal or reviewed a claim for refund can be maintained.

9. In our view, the ratio in Flock (India)’s case (supra) fully applies. We, therefore, see no substance in the Review Petition. Accordingly, the Review Petition stands dismissed with no order as to costs.

(emphasis supplied)

3.26. It is pertinent to note that the decisions in Priya Blue and Flock India were passed in terms of the provisions of the unamended Section 27 of the Customs Act i.e. before 08.04.2011. The intention of the said decisions was to curb malpractice by assessees from attempting to use the refund mechanism as an alternate route to resolve disputes with the Customs Authorities by challenging the assessment on merits where no appeals had been filed by the assessees.

3.27. Thereafter, the Delhi High Court in M/s. Aman Medical Products Ltd. vs. Commissioner of Customs, Delhi (250) E.L.T. 30 drew a distinction from the aforesaid decisions of the Hon’ble Supreme Court in Priya Blue and Flock India in terms of Section 27 (1) (ii) of the Customs Act which allowed assesses a route to directly file refund claims without challenging assessments in appeal so long as the duty is ‘borne’ by the assessee.

3.28. The basis of the distinction was rooted in factual considerations to analyse if there existed a lis (dispute) between the assessee and the Customs authority on the reason for which refund was being claimed by the assessee. In situations where it could be proven that there was no “lis” or “contest” under the assessment order, refund claims could be filed without pursuing the appellate route.

3.29. The Hon’ble Delhi High Court held that that a claim for refund would be maintainable in absence of an appeal against bills of entry where the duty was paid inadvertently. The relevant portions of the judgment have been extracted below:

“4. If therefore we refer to language of Section 27, it is more than clear that the duty which is paid is not necessarily pursuant to an order of assessment but can also be borne by him. Clause (i) and (ii) of sub-section (1) of Section 27 are clearly in the alternative as the expression ‘or’ is found in between clauses (i) and (ii). The object of Section 27(i)(ii) is to cover those classes of case where the duty is paid by a person without an order of assessment, i.e. in a case like the present where the assessee pays the duty in ignorance of a notification which allows him payment of concessional rate of duty merely after filing a Bill of Entry. In fact, such a case is the present case in which there is no assessment order for being challenged in the appeal which is passed under Section 27(1)(i) of the Act because there is no contest or lis and hence no adversarial assessment order.

5. The Tribunal has referred to the cases of CCE, Kanpur Vs. Flock (India) Pvt. Ltd. [2000(120) ELT 285] = (2002-TIOL-208-SC-CX) and Priya Blue Industries Ltd. Vs. Commissioner of Customs (Preventive) 2004 (172) ELT 145 (SC) = [2004-TIOL-78-SC-CUS] . In both these cases, referred to by the Tribunal there was an assessment order which was passed and consequently it was held that where an adjudicating authority passed an order which is appealable and the party did not chose to exercise the statutory right of appeal, it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that adjudicating authority had committed an error in passing his order. These judgments will therefore not apply when there is no assessment order on dispute/contest, like as is in the facts of the present case.

6. We, therefore, answer the question framed by holding that the refund claim of the appellant was maintainable under Section 27 of the Customs Act and the non-filing of the appeal against the assessed bill of entry does not deprive the appellant to file its claim for refund under Section 27 of the Customs Act, 1962 and which claim will fall under clause (ii) of sub section (1) of Section 27.

7. We accordingly set aside the impugned order dated 3.4.2008 of the CESTAT and uphold the order of the Commissioner of Customs Appeal dated 28.1.2005 and remand of the matter to the original authority viz Deputy Commissioner of Customs (Refund) to examine the merits of the matter in accordance with law after providing due opportunity to the appellant.”

(Emphasis Supplied)

3.30. Thus, for the period prior to self-assessment, there existed a clear distinction via judicial precedents which permitted assessees to directly file refund claims in select factual situations.

3.31. Distinguishing the judgments of the Supreme Court in Priya Blue (supra) and Flock India (supra), there were a series of judgments of the Hon’ble High Courts holding that a claim for refund would be maintainable in absence of an appeal against bills of entry and that consequent to the amendment (post 08.04.2011) to Section 27 of the Customs Act, it is not necessary to opt for re-assessment i.e. filing an appeal against the Bill of Entry before filing a refund claim.

3.32. Further, with respect to the amended section 27 of the Customs, several High court rulings (including Delhi, Calcutta and Madras) had held it is not necessary to opt for appeal / re-assessment before filing a refund claim.

3.33. Reference is made to the decision of the Delhi High Court in Micromax Informatics Ltd. v. UOI, 2016 (335) E.L.T. 446 (Del.), wherein the Hon’ble High Court had distinguished the judgment in the case of Priya Blue (supra) and held that consequent to the amendment to Section 27 of the Customs Act, it is not necessary to opt for re-assessment before filing a refund claim. Relevant extract of the judgement is reproduced as under: -

“12. An important change that has been made is that a person can now claim refund of any duty or interest as long as such duty or interest was paid or borne by such person. The conditionality of such payment having been made pursuant to an order of assessment does not exist. Secondly, once an application is made under Section 27(1) of the Act, it is incumbent on the authority concerned to make an order under Section 27(2) determining if any duty or interest as claimed is refundable to the applicant. …………….. In other words, under Section 27 of the Act, as it now stands, it is not open to an authority to refuse to consider the application for refund only because no appeal has been filed against the assessment order, if there is one.

13. As far as the present case is concerned, there was indeed no assessment order as such passed by the customs authorities. Although under Section 2(ii) of the Act, the word ‘assessment’ includes a self-assessment, the clearance of the goods upon filing of the B/E and payment of duty is not per se an ‘assessment order’ in the context of Section 27(1)(i) as it stood prior to 8th April, 2011, particularly if such duty has not been paid under protest. In any event, after 8th April, 2011, as noticed hereinbefore, as long as customs duty or interest has been paid or borne by a person, a claim for refund made by such person under Section 27(1) of the Act as it now stands, will have to be entertained and an order passed thereon by the authority concerned even where an order of assessment may not have reviewed or modified in appeal.

14. The Assistant Commissioner (Refund), in the present case, appears to have not noticed the decision of this Court in Aman Medical Products Limited (supra) which was rendered in the context of Section 27 of the Act as it stood prior to 8th April, 2011. Further he failed to notice that the said provision has undergone a significant change with effect from 8th April, 2011. The impugned order of the Assistant Commissioner (Refund) rejecting the refund claim of the petitioner on the ground of maintainability was, for the aforementioned reasons, plainly erroneous.”

(emphasis supplied)

3.34. The above-mentioned legal position was subsequently followed by the Hon’ble Tribunal in Commissioner of Customs, New Delhi vs. M/s. Kent RO System Pvt. Ltd., 2016-VIL-619-CESTAT-DEL-CU wherein a refund application was filed without challenging the final assessment order. The appeal of the Revenue against the Hon’ble Tribunal’s decision in the said case was also dismissed by the Hon’ble Delhi High Court in the case of Commissioner of Customs, New Delhi vs. M/s. Kent RO System Pvt. Ltd., reported at 2017 (347) E.L.T. 405 (Del.).

3.35. Thus, for the period under the self-assessment regime, the decision of the Delhi High Court in Micromax Informatics Ltd., v. UOI (supra) provided the assessees a favourable solution. The Hon’ble High Court distinguished the judgment in the case of Priya Blue (supra) and held that consequent to the amendment to Section 27 of the Customs Act, it is not necessary to opt for re-assessment before filing a refund claim. The High Court held that although under Section 2 (2) of the Customs Act, the definition of “assessment” includes a self-assessment, even then, self-assessed bills of entry cannot be considered “per se” an assessment order, particularly if such duty has been paid under protest. The Hon’ble High Court also observed that under the amended Section 27, refund officers have no basis to reject refund claims for not being challenged in appeal.

Recent Decision in the case of ITC

3.36. It is pertinent to note that the Revenue had preferred an appeal against the High Court decisions in the case of Aman Medical (supra) [SC reference - Commissioner v. Aman Medical Products Ltd. - 2010 (256) E.L.T. A57 (S.C.)] and Micromax Informatics Ltd. (supra) [SC reference - Union of India v. Micromax Informatics Limited - 2018 (360) E.L.T. A259 (S.C.)] and other similar orders before the Hon’ble Supreme Court.

3.37. The said matters were clubbed and heard together by a Three Judge bench of the Hon’ble Supreme Court in the case of ITC (supra).

3.38. The Hon’ble Supreme Court in its decision has specially observed that even an order of self-assessment is nonetheless an assessment order passed under the Customs Act and is appealable by either the revenue or the assessee. The cornerstone for this conclusion is reliance on a previous decision of the Hon’ble Supreme Court in Escorts Ltd.^{^[1]} wherein it was held that signing of the bill of entry itself amounted to passing an order of assessment as it signifies the approval of the appraising officer.

3.39. By application of Escorts, the Hon’ble Court observed that the amendment to the language of Section 27 post introduction of self-assessment does not impact the fact that self-assessed documents are also orders.

3.40. The Supreme Court has noted that the proceedings under Section 27 i.e. the proceedings of refund are more or less in the nature of execution proceedings – which if at all, are to flow from the order of re-assessment post appeal. Thus, refund authorities cannot entertain claims of refund against self-assessed documents and it is not open for the authority which processes the refund to make a fresh assessment on merits and correct assessments on the basis of mistake or otherwise.

3.41. Thus, the Hon’ble Supreme Court has set aside the rulings of the Hon’ble High Court in Aman Medical and Micromax.

3.42. Also, the Hon’ble Supreme Court has held that the refund applications shall be maintainable only if the self-assessed documents are first modified and re-assessed in the appellate route provided under Section 128 of the Customs Act or under any provision of the Customs Act.

4. APPLICABILITY OF LEGAL PROVISIONS

4.1. In the instant case, before analysing the refund claims filed by the brands, the different scenarios arising in the refunds filed by the Brands are broadly analysed below.

Refund orders issued beyond 2 years

No SCN can be issued to the brands by invoking the extended period of limitation as all the facts were known to the department

4.2. The Department can issue a SCN under Section 28(1) of the Customs Act for refunds erroneously granted within normal period of 2 years in cases where such refunds are granted without any suppression of information, mis-representation etc. The relevant date for calculating the period of 2 years is the date of refund.

4.3. Further, a SCN can be issued under Section 28 (4) of the Customs Act within 5 years from the date of refund. It is settled law that in order to invoke the extended period of limitation, an assessee should have engaged in collusion or wilful mis-statement or suppression of facts.

4.4. In the instant case, it can be said that the refunds have been granted to the Brands by the Department after examining the Brands’s refund claims. In the refund claims filed by the Brands, the Brands has stated all materials facts and has not engaged in any collusion or wilful mis-statement or suppression of facts. Hence, where the refunds have already been received by the Brands and such orders are beyond a period of 2 years, it is unlikely that the Customs Department will issue a Show Cause Notice invoking the provisions of Section 28 (4) of the Customs Act. Hence, such refund orders which have been sanctioned beyond the period of 2 years cannot be re-opened.

Assuming for a moment, if the SCN is issued invoking the extended period of limitation, the Brands has a strong case.

4.5. Assuming for a moment, even if a SCN is issued under Section 28 (4) of the Customs Act, the Brands has a very strong case to argue on the grounds of limitation, since there is no collusion or wilful mis-statement or suppression of facts by the Brands.

4.6. Apart from the argument on limitation, it is pertinent to note that the Department has not challenged the orders granting refund in terms of Section 128 of the Customs Act. Thus, it can be argued that the said orders have attained finality and refunds granted under the said orders cannot now be re-opened by way of issuance of SCN under Section 28 (4) of the Customs Act.

4.7. In this regard, reference is drawn to the case of TVS Motor Company Ltd. v. CCE, 2017 (5) G.S.T.L. 85 (T), wherein it was held that where the Orders-in-Original sanctioning the refund have already attained finality and the Revenue has not filed any appeal against the sanctioning of the refund, the recovery of erroneously sanctioned refund by parallel proceedings by issuance of SCN is not permitted under law. Relevant portion of the said order is reproduced for ready reference: -

“4. After considering the submissions of both the parties and perusal of the records, I am of the view that the orders-in-original sanctioning the refund have already attained finality and the Revenue has not filed any appeal against the sanctioning of the refund order and the Revenue wants to recover the erroneously sanctioned refund by parallel proceedings by issue of show cause notice which is not permitted under law as held in the decision relied upon by the learned counsel for the appellant. ………………Therefore keeping in view the submission of both the parties, I am of the view that the impugned order is not sustainable in law and the same is set aside by allowing all the appeals of the appellant with consequential relief if any.

(emphasis supplied)

4.8. In this regard, reference is also made to the following decisions: -

(a) CC v. Millat Fibres, 2011 (271) E.L.T. 512 (Guj.)

(b) Doothat Tea Estate Kanoi Plantation (P) Ltd. v. CCE, Shillong, 2001 (135) E.L.T. 386 (T)

(c) Eveready Industries India Ltd. v. CESTAT, Chennai, 2016 (337) E.L.T. 189 (Mad.)

4.9. Therefore, in view of the above, it can be said that in the instant case, where the refunds have been sanctioned vide orders beyond 2 years, and such orders have attained finality since the Department has not challenged them, the Brands will have a strong case to argue, even if a SCN is issued under Section 28 (4) of the Customs Act.

Refunds granted within 2 years where assessment under Bill of Entry was challenged under Section 128 of the Customs Act and the bills of entries were re-assessed.

4.10. Under this category of cases, since the assessment under the respective Bills of Entry has been challenged, the refund claim is maintainable in terms of the decision of the Supreme Court in ITC. Hence, such cases, where refunds have already been granted will not be impacted by ITC.

Refunds granted within 2 years where assessment under Bill of Entry was not challenged under Section 128 of the Customs Act but bills of entries were re-assessed manually under Section 149 of the Customs Act.

4.11. Under this category of cases, the Department can issue a SCN in terms of Section 28 (1) under the normal period of limitation on the ground that refund is not admissible in view of ITC (Supra). The said SCN, if issued under Section 28 (1) of the Customs Act, will most likely be on the ground that refunds have been granted erroneously since the assessment under the Bill of Entry was not challenged under Section 128 of the Customs Act and an “amendment of Bill of Entry” under Section 149 of the Customs Act does not amount to re-assessment in terms of the Customs Act.

4.12. In such cases also, as noted above, it will have to be argued that the orders sanctioning refunds have attained finality and the refunds granted under the said orders cannot now be put onto notice by way of issuance of SCN under Section 28 (1) of the Customs Act. The Tribunals also have upheld this position of law (Refer to Para 4.7 and 4.8 of this opinion).

4.13. Further, if an allegation is raised in the SCN that the amendment of a Bill of Entry under Section 149 does not amount to re-assessment but is merely an amendment, the Brands can argue that re-assessment by way of amendment under Section 149 of the Customs Act has been blessed by the decision of Supreme Court in ITC (Supra). The Supreme Court in the said decision has specifically held that a claim for refund cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law by taking recourse to the appropriate proceedings and it would not be within the ken of Section 27 to set aside the order of self-assessment and reassess the duty for making refund. The Supreme Curt has also noted that in case any person is aggrieved by an order which would self-assessment, he has to get the order modified under Section 128 or other relevant provisions of the Act.

4.14. It may be noted that one of the provisions for amendment of bills of entry is Section 149 under which the subject bills of entry have been amended in case of the Brands as well. Thus, in view of the ITC judgment (supra) refund cannot be denied when the impugned bills of entry have been duly amended by the authority under Section 149. Thus, the Brands will have a strong case to argue vis-à-vis all such refund claims where the Bills of Entry have been manually re-assessed and which are within the period of 2 years if and when a SCN is issued to the Brands.

Refunds pending where the assessment under the Bill of Entry was not challenged under Section 128 but Bills of entries were re-assessed manually under Section 149 of the Customs Act.

4.15. Under these categories of cases, where refunds have not been sanctioned but Bills of Entry have been manually re-assessed, the Department may raise an objection with respect to grant of refund on the ground that since the Bills of Entry have not been challenged under Section 128 of the Customs Act, the refund is not admissible to the Brands basis the decision of ITC.

4.16. As stated above, in such cases, it will have to be argued that the Hon’ble Supreme Court in the ITC decision itself has held that a claim for refund cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law by taking recourse to the appropriate proceedings and in case any person is aggrieved by an order which would self-assessment, he has to get the order modified under Section 128 or other relevant provisions of the Act.

4.17. Therefore, even if the self-assessment has not been challenged under Section 128 of the Customs Act, if the Bill of Entry i.e. the order has been modified in accordance with the provisions of the Customs Act i.e. under Section 149, the refund claim shall be maintainable and thus, a separate reassessment is not required.

5. CONCLUSION

5.1. In view of the above, it is hereby concluded that: -

(a) Refunds granted beyond 2 years

- Where the refunds have been sanctioned vide orders beyond 2 years, and such orders have attained finality since the Department has not challenged them, the Brands will have a strong case to argue, even if a SCN is issued under Section 28 (4) of the Customs Act.

- In such cases, the Brands will have a strong case to argue on merits as well as limitation.

(b) Refunds granted within 2 years where assessment under Bill of Entry was challenged under Section 128 of the Customs Act and the bills of entries were re-assessed.

- Since the assessment under the respective Bill of Entry has been challenged, the refund claim is maintainable in terms of the decision of the Supreme Court in ITC. Hence, such cases, where refunds have already been granted will not be impacted by ITC. The Brands will have a strong case to argue, if an SCN is issued by the Department.

(c) Refunds granted within 2 years where assessment under Bill of Entry was not challenged under Section 128 of the Customs Act but bills of entries were re-assessed manually under Section 149 of the Customs Act.

- Even if the self-assessment has not been challenged under Section 128 of the Customs Act, but if the Bill of Entry i.e. the order has been modified in accordance with the provisions of the Customs Act i.e. under Section 149, the refund claim shall be maintainable in terms of the decision in ITC.

- Additionally, where the refund order sanctioning the refund has not been challenged, the Brands can argue that the said orders have attained finality and such refunds cannot be put to notice by way of issuance of SCN.

- In such cases, the Brands will have a good case to argue.

(d) Refunds pending where the assessment under the Bill of Entry was not challenged under Section 128 but Bills of entries were re-assessed manually under Section 149 of the Customs Act.

- However, as a matter of abundant caution, it is suggested that the Brands can make a request to the assessing authority to reassess the impugned bills of entry basis the amendment made by the authority in relation to the impugned bills of entry.