By TIOL News Service

MUMBAI, MAY 13, 2017: AT the time of import,the eligibility for exemption under notification no. 39/96-Cus dated 23rd July 1996 was denied in respect of ‘conventional billet turning lathe'.

The appellant, thereafter, paid duty and sought a refund claim and which was allowed by the Assistant Commissioner of Customs.

Aggrieved by this, an appeal was filed by the department and the Commissioner (Appeals) set aside the order on the ground that sanction of refund without challenging the assessment is contrary to the decision of the Supreme Court in Priya Blue Industries Ltd - 2004-TIOL-78-SC-CUS. Unjust enrichment was also held as a ground to deny refund.

The importer filed an appeal before the CESTAT in the year 2006.

The matter was heard in December 2016 and an order was passed recently.None appeared for the appellant.

The Bench observed -

+ Appellant is an undertaking of the Government of India in the Ministry of Defence. The contract for supply of imported goods has been placed for and on behalf of the President of India. The certificate submitted along with refund application also demonstrates that the imported goods are to be utilised in the manufacture of goods for supply to the Armed Forces of the Union. No reasons have been adduced for rejection of the claim for exemption at the time of import.

+ We take note that, in section 28 of Customs Act, 1962, refund that is sanctioned but is not payable to applicant if he is unable to establish there is no unjust enrichment and is, instead, to be credited to the Fund. In allowing the appeal filed against the order of the original authority, the first appellate authority , despite rendering a finding of ineligibility on account of unjust enrichment, has not transferred the amount sanctioned to the Fund. The setting aside of the order of the lower authorities is, therefore, not sustainable in law.

+ As a manufacturer of defence stores supplied to the Armed Forces of the Union by a departmental undertaking, and not at ascertainable market prices, the first appellate authority has not recorded the reasons for reaching the conclusion that the duties charged at the time of import had been included in the price of the end product. Without such scrutiny and logical conclusion, findings are contrary to facts. Per contra, the original authority has noted the submission of ‘no enrichment' certificate indicating absorption of the duties. It would, therefore, appear that there is no ground to invoke the bar of ‘unjust enrichment.'

+ The refund has been denied by the first appellate authority on the ground of disapproval expressed by the Hon'ble Supreme Court to seeking of refund without recourse to challenging of the assessment. On perusal of the bill of entry, it is seen that the appellant had sought the application of exemption under notification no. 39/96-Cus and that this had been denied without espousing any reasons.

+ It is clear that appellant was entitled to the exemption and ineligibility has not been cited as one of the grounds of appeal before the first appellate authority. It would, therefore, appear that the bill of entry had been wrongly assessed and required rectification.

+ The appellant could have applied for, and obtained, rectification which would have eliminated the duty liability and, thereby, entitle them to refund arising from erroneous computation. The refund has been sanctioned without going through a modification of the bill of entry. The decision of the Hon'ble Supreme Court does not disallow such modifications and consequent refunds. Mere non-compliance with a procedural requirement cannot stand in the way of denial of substantive benefit to an assessee . Moreover, the state cannot enrich itself by collection of taxes that do not have the authority of law.

The impugned order was set aside and the appeal was allowed.

(See 2017-TIOL-1604-CESTAT-MUM )