By TIOL News Service

KOLKATA, FEB 23, 2015 : THE Petitioners are an unincorporated Joint Venture. They are successful bidders for designing and execution of Drinking water supply project for Kolkata Municipal Corporation.

For execution of the above project, the Petitioners had imported tunnel boring machines. Rs.360.46 lakhs was paid as Customs duty. The bills of entry were dated 15th December 2009, 21st December 2009 and 31st May 2010.

This writ application was filed on 24th December 2013, much more than three years after importation of the goods or payment of duty. It is the writ petitioners' case that this large amount of Customs duty was paid by mistake. They want refund of this entire sum.

It is the case of the Petitioner that this period of delay does not matter. In equity the petitioner is entitled to refund of the entire money paid, without any limitation of time. The petitioners feel that they made their classification erroneously. The said goods were properly classifiable under Serial No. 512 of Chapter 9801 read with Chapter 84 or any other chapter of the notification dated 17.03.2012. The duty in that case would be nil. The entire amount of Rs.3 ,60,45,561 was paid in excess which should be refunded to them.

According to the revenue, a claim for refund had to be made within time by the petitioner under Section 27 of the Customs Act 1962. The petitioner had merely made an application before the customs on 4th June 2013 seeking refund which could not be taken as a proper application under Section 27 for refund. In any event, it was hopelessly out of time.

After hearing both sides, the High Court held:

The tunnel boring machines imported by the writ petitioners fits into the description given under heading No 9801. It is not the respondents' case that the petitioners imported something else. Now, the Project Imports Regulations 1986 specifically stated that goods under heading No. 98.01 were to be assessed under those regulations and that any contract in relation to importation of those goods had to be registered with the authorities. If the goods imported by the petitioners falls under Chapter 84 specifically and not under 98.01, the regulations did not apply to such import and it was not at all obligatory on the part of the petitioners to register the contract with the authorities. It is true that the petitioners did not register any contract with the customs authorities or with the Central Government. But this did not disentitle them to claim the benefit of the said notification.

A person to whom money has been paid by mistake by another person, becomes at common law a trustee for that other person with an obligation to repay the sum received. This is the equitable principle on which Section 72 of the Contract Act, 1872 has been enacted. Therefore, the person who is entitled to the money is the beneficiary or cesti qui trust. When the said sum of Rs.360.46 lakhs was paid by mistake by the petitioner to the government of India, the latter instantly became a trustee to repay that amount to the petitioner. The obligation was a continuing obligation. When a wrong is continuing there is no limitation for instituting a suit complaining about it.

Even if I stopped to think of the trustee beneficiary principle and the concept of continuing wrong Part VIII of the Schedule to the Limitation Act 1963, Articles 92-96 pertain to suits relating to trusts and trust property. The Articles do not apply because they are made applicable in cases where the trust property is conveyed to a third party.

For the sake of assumption if we think that Article 113 will apply in such a case, the period of limitation is three years from when the right to suit accrues. The petitioner has specifically pleaded that money was paid by mistake. Now, under Section 17 of the Limitation Act 1963, money paid by mistake can be recovered up to three years from the time the plaintiff discovers the mistake or could have discovered the same with reasonable diligence. The tunnel boring machines were imported between 15th December 2009 and 31st May 2010.

The period of limitation began to run against the petitioners from September 2012 (when they discovered the mistake). On 4th June, 2013 they made a representation to the Commissioner of Customs (Port) claiming refund of the said amount. This was replied to by the Assistant Commissioner to the effect that no "refund has accrued to you". If you take September 2012 to be the beginning of the period of limitation, the petitioner had, under Article 113 of the Limitation Act 1963, a period of three years to institute a suit from that time. Therefore, the claim in the writ application cannot be said to be barred by the laws of limitation.

Accordingly, the High Court ordered refund of the entire duty within 12 weeks of the communication of the order.

(See 2015-TIOL-441-HC-KOL-CUS)