Dismissed

The Commissioner of Customs (Appeals) v. M/S Alcatel Lucent India Pvt. Ltd.

Karnataka HC30 Sept 2021CSTA/7/2021

Case brief

AI extract

What is this about?

The High Court of Karnataka held that refund claims arising from the finalization of provisional assessments made prior to the 2006 amendment attract Section 18 of the Customs Act and are not subject to the doctrine of unjust enrichment. The appeal by the revenue was dismissed as the Tribunal's decision was legally sound.

What did the court decide?

The appeal of the revenue is dismissed; the Tribunal's order allowing the refund on the ground that Section 18 applies and section 27's unjust enrichment does not, is affirmed.

The Commissioner of Customs (Appeals) Vs M/S Alcatel… — Customs and Excise | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 30^TH DAY OF SEPTEMBER, 2021

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PRESENT

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THE HON’BLE MRS.JUSTICE S.SUJATHA

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AND

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THE HON’BLE MR. JUSTICE RAVI V. HOSMANI

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C.S.T.A.No.7/2021

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BETWEEN :

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THE COMMISSIONER OF CUSTOMS (APPEALS) AIRPORT AND AIR CARGO COMPLEX C.R.BUILDING, QUEEN’S ROAD BENGALURU - 560 001 ...APPELLANT

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(BY SRI VIKRAM ADITYA HUILGOL, ADV.)

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AND :

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M/s ALCATEL LUCENT INDIA PVT. LTD., (FORMERLY KNOWN BY THE NAMES OF M/s AT & T SWITCHING INDIA LTD., M/s TATA LUCENT TECHNOLOGIES HINDUSTAN PRIVATE LTD.) NO.1, 2 & 4 UGF, CREATOR BUILDING INTERNATIONAL TECHNOLOGY PARK WHITEFIELD ROAD BANGALORE - 560 066 …RESPONDENT

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(BY SMT.NEETHU JAMES, ADV. A/W SRI MOHAMMED IBRAHIM, ADV. FOR SRI RAVI RAGHAVAN, ADV.)

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THIS CSTA IS FILED UNDER SECTION 130 OF THE CUSTOMS ACT, ARISING OUT OF ORDER DATED 13.02.2017 PASSED IN FINAL ORDER NO.20246/2017 BY THE CESTAT, SOUTH ZONAL BENCH, BENGALURU.

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THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, S. SUJATHA, J ., DELIVERED THE FOLLOWING:

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J U D G M E N T

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This appeal is filed by the revenue under Section 130 of the Customs Act, 1962 (‘Act’ for short) assailing the order dated 13.02.2017 passed in Final Order No.20246/2017 by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bangalore (CESTAT) raising the following substantial question of

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law:-

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“Whether the Tribunal erred in passing the impugned order dated 13.02.2017 and holding that the respondent is entitled to claim refund of duty paid on import of goods for manufacturing of telecommunication equipment vide Bills of Entry Nos: 1632 dated 13.11.1995, 1667 dated 18.11.1995, 1873 dated 30.12.1995, 1874 dated 30.12.1995, 1875 dated 30.12.1995, 0003 dated 02.01.1996, 0164 dated 02.02.1996 and 0170 dated 03.02.1996, despite the Commissioner (Appeals) concluding that the

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Importer had failed to prove that the excess duty had not been passed on to their customers and therefore, that the refund claim is hit by the concept of unjust enrichment?”

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2. M/s. Alcaetl Lucent India Private Limited

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(formerly known by the names of M/s. AT & T Switching India Ltd., M/s. Tata Lucent Technologies Ltd and M/s Lucent Technologies Hindustan Private Ltd.,) (‘importer’ for short) was engaged in import of goods for manufacture of telecommunication equipment and are the claimant of refund of purported excess payment of customs duty herein. During the year 1995-96, 8 manual bills of entry were filed for import of goods supplied by their overseas suppliers M/s. American Telephone & Telegraph Co., USA and undertook clearance of the goods involved therein on payment of applicable customs duties on the invoice values. At that point of time of import, the related party transactions between the importer and their aforesaid overseas supplier were

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being verified/investigated by the Special Valuation Branch (SVB), Chennai for valuation of import goods and 8 manual bills of entry relating to which the refunds were claimed vide application dated 21.04.1997

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on the ground of error in invoicing coupled with downward revision in the price.

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3. The investigation on the related party

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transactions and the valuation of goods initiated by the SVB, Chennai was pending for consideration at that point of time. The refunding authority returned the refund back to the importer citing pendency of finalization of provisional assessment of respective Bill of Exchange (BOE) directing the importer to resubmit the refund claim only after finalization of the provisional assessment. The provisional assessment of the aforesaid 8 BOEs together with 2 other BOEs was finalized by Order-in-Original dated 23.04.1998 passed by the Assistant Commissioner of Customs, ICD, Bangalore,

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ordering refund of balance amount of Extra Duty Deposit (EDD) holding that there was no unjust enrichment involved as (EDD) was only a deposit. However, the refund claim for an amount of Rs.6,76,84,559/-, came to be rejected by the Deputy Commissioner of Customs vide Order-in-Original No.7/99, dated 08.11.1999 on merits as well as on limitation. The importer filed appeal against the said order. The Appellate Authority allowed the refund claim under Section 27 of the Customs Act, 1962 but ordered to credit the same to the Consumer Welfare Fund, solely on the ground of unjust enrichment principle, holding that the refund claimed filed on 08.01.1999 was not time barred as it was earlier filed on 21.04.1997. It was further observed that the refund claimed was admissible on merit as overseas supplier had indeed wrongly invoiced in excess of the agreed purchase price.

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Being aggrieved, appeal was filed by the

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importer before CESTAT, whereby the matter was remanded back to the Commissioner (Appeals) for reexamination of the unjust enrichment issue in the light of the evidences furnished by the importer vide order 04.01.2005. Pursuant to which, the Commissioner (Appeals) took up the matter for re-examination of unjust enrichment issue. The Appellate Authority concluded that the importer has failed to prove that the excess duty incidence had not been passed on to their customers and therefore, held that the refund claim was hit by the principles of unjust enrichment issue. Being aggrieved, the appellant preferred appeal before the CESTAT. Placing reliance on the ruling of the coordinate bench decision of this Court in the case of M/s. Mangalore Refinery & Petrochemicals Ltd., vs. Commissioner of Customs, Mangalore reported in 2015 (323) ELT 484 (Kar.), the CESTAT held that the doctrine of unjust enrichment will not be attracted and

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set aside the Order-in-Appeal impugned therein,

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directed the authorities to consider payment of refund in cash to the appellant – importer. Being aggrieved, the revenue has preferred this appeal.

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Learned counsel Sri. Vikram Aditya Huilgol

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appearing for the appellant - revenue submitted that Section 18 of the Act is not applicable to the present case as there is no difference between the duty determined in the provisional assessment and the final assessment. Distinguishing the case of M/s. Mangalore

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Refinery & Petrochemicals Ltd., supra, it was submitted that the amendment brought to Section 18 with effect from 13.07.2006 would not have any bearing to the case on hand.

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Learned counsel Smt. Neethu James along with Sri. Mohammed Ibrahim representing the learned counsel Sri. Ravi Raghavan, appearing for the respondent – importer submitted that the respondent

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has been made to fight the legal battle for refund of duty paid in excess from 1997. The First Appellate Authority in the first round having categorically held that the refund claimed was not barred by limitation, proceeded to consider the matter on the principles of unjust enrichment. Pursuant to remand by the Tribunal, the First Appellate Authority concluded that the purchase order prices inclusive of the entire customs duty, the importer has passed on the burden to their customers explicitly. Placing reliance on M/s. Mangalore Refinery & Petrochemicals Ltd., supra, the learned counsel argued that the matter is squarely covered by the said judgment and as such, the substantial question of law has to be answered in favour of the assessee and against the revenue.

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We have carefully considered the arguments advanced by the learned counsel for the parties and perused the material on record.

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The factual aspects of the refund claimed

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and denial of the same on the doctrine of unjust enrichment by the department pursuant to the remand order made by the CESTAT are not in dispute. The main ground of challenge is that Section 18 of the Act is not applicable for the case since there is no difference between the provisional assessment and the final assessment.

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Section 18 of the Act as is relevant for the present reads as under :

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“ SECTION 18. Provisional assessment of duty. - (1) Notwithstanding anything contained in this Act but without prejudice to the provisions contained in Section 46-

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(a) where the proper officer is satisfied that an importer or exporter is unable to produce any document or furnish any information necessary for the assessment of duty on the imported goods or the export goods, as the case may be; or

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(b) where the proper officer deems it necessary to subject any imported goods or export goods to

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any chemical or other test for the purpose of assessment of duty thereon; or

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(c) where the importer or the exporter has produced all the necessary documents and furnished full information for the assessment of duty but the proper officer deems it necessary to make further enquiry for assessing the duty, the proper officer may direct that the duty leviable on such goods may, pending the production of such documents or furnishing of such information or completion of such test or enquiry, be assessed provisionally if the importer or the exporter, as the case may be, furnishes such security as the proper officer deems fit for the payment of the deficiency, if any, between the duty finally assessed and the duty provisionally assessed.

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(2) When the duty leviable on such goods is assessed finally in accordance with the provisions of this Act, then -

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(a) in a case of goods cleared for home consumption or exportation, the amount paid shall be adjusted against the duty finally assessed and if the amount so paid falls short of, or is in excess of [the duty finally assessed], the importer or the exporter of the goods shall pay the

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deficiency or be entitled to a refund, as the case may be;

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(b) in the case of warehoused goods, the proper officer may, where the duty finally assessed is in excess of the duty provisionally assessed, require the importer to execute a bond, binding himself in a sum equal to twice the amount of the excess duty.”

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The amended Section 18 of the Act whereby sub-sections (3), (4) and (5) have been inserted with effect from 13.07.2006 by the Taxation Laws (Amendment) Act, 2006, reads as under :

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“(3) The importer or exporter shall be liable to pay interest, on any amount payable to the Central Government, consequent to the final assessment Order under Sub-section (2), at the rate fixed by the Central Government under Section 28AB from the first day of the month in which the duty is provisionally assessed till the date of payment thereof.

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(4) Subject the Sub-section (5), if any refundable amount referred to in Clause (a) of Sub-section (2) is not refunded under that Sub-

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section within three months from the date of assessment of duty finally, there shall be paid an interest on such unrefunded amount at such rate fixed by the Central Government under Section 27A till the date of refund of such amount.

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(5) The amount of duty refundable under Sub-section (2) and the interest under Sub-section (4), if any, shall, instead of being credited to the Fund, be paid to the importer or the exporter, as the case may be, if such amount is relatable to -

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(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;

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

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(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;

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

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(e) drawback of duty payable under Sections 74 and 75.”

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On considering these amendments (insertion

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of Sections 3 and 4), the Co-ordinate Bench of this

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Court has held that Section 18 of the Act, which deals with the provisional assessment of duty, opens with a non-obstante clause and the only exception being Section 46. It provides for provisional assessment and a proper officer directing the assessee to pay the duty leviable on such goods, be paid on provisional assessment, subject to the condition that the assessee shall pay the duty as may be finally assessed. In terms of sub-section (2), the obligation is cast on the Revenue to make refund of the excess duty paid and collected. Section 27 of the Act provides for claiming of refund of duty which relates to a claim for refund of duty or interest paid by the assessee or borne by him in a case

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not falling under the provisional assessment. The provision of unjust enrichment was conspicuously

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missing in Section 18 of the Act. It was by way of amendment which came into effect from 13.07.2006 the said provisions contained in sub-section (2) of Section 27 of the Act, was added to Section 18 by way of subsection (5). Thus, it has been held that Sections 18 and 27 are merely exclusive. It has been further held that the refund claims consequent upon finalization of provisional assessment does not attract the bar of unjust enrichment for the period prior to the amendment of 2006.

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The CESTAT has analyzed Section 18 of the Act vis-à-vis post amendment and placing reliance on

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the judgment of M/s. Mangalore Refinery & Petrochemicals Ltd., supra, concluded that the assessments were indeed made provisionally subject to SVB clearance of the invoice values at which the appellant had taken imports from their principals. The argument of the revenue that the refund claim made by

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the importer was not on account of finalization of the provisional assessment but on account of excess payment of customs duty for the wrong invoices raised from the supplier was rejected for the reason that the refund claim originally made by the importer on 21.04.1997 was returned to them by the departmental officers with the direction to re-file it after the finalization of the provisional assessments. Once an assessment is provisional, it is provisional for all purposes. The Revenue has challenged the judgment of M/s. Mangalore Refinery & Petrochemicals Ltd., supra, before the Hon'ble Apex Court, the same is pending consideration and there is no stay of the said decision. In this backdrop, the arguments advanced by the revenue that Section 18 of the Act is not at all applicable to the facts of the case is only misconceived, having directed the importer to re-file the refund claim subsequent to finalization of the provisional assessment now cannot take a stance that there is no difference in

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provisional assessment and final assessment. It is the specific case of the importer that excess duty has been paid at the time of provisional assessment and the same was exhaustively examined by the authorities as well as the CESTAT in the first round of litigation and it is only on the doctrine of unjust enrichment, the refund claim was rejected by the authorities. Since the importer has taken a ground that the principles of unjust enrichment will not be applicable prior to 2006 in view of M/s. Mangalore Refinery & Petrochemicals Ltd., case, now the revenue cannot deny the refund on hypertechnicalities that Section 18 of the Act itself is not applicable.

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In the case of Collector of Central Excise, Madras vs India Tyre and Rubber Co. Ltd., reported in 1997 (94) ELT 495 (Mad.), the Hon’ble High Court of Madras has held that the provisional assessment made should for all purposes to be treated as provisional and

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not necessarily provisional in respect of the particular ground considered. An assessment that is provisional will have to be treated as provisional in its entirety subject to finalization. Viewed from any angle, the finding of the CESTAT cannot be held to be perverse or illegal.

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In the case of Commissioner of Customs v/s Hindalca Industries Ltd., reported in 2010 (262)

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ELT, 106, the Hon’ble High Court of Gujarat while considering the final invoice submitted after verifying London Metal Exchange rate though the provisional assessment done on the basis of provisional invoice held that the refund claim was covered under Section 18 of the Act. The said judgment would be certainly applicable to the facts of the present case. In the present case, the imports made by the importer are pertaining to the period November 1995 to February 1996, much prior to the amendment brought to Section

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18, the refund has to be paid in cash to the importer without any reference to unjust enrichment. However, the CVD component of the excess duty is to be deducted from the total refund claim since the same has already been availed as CENVAT credit by the assessee in their manufacturing process.

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For the reasons aforesaid, we answer the substantial question of law in favour of the assessee and against the revenue.

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In the result, the appeal stands dismissed.

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Sd/JUDGE

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Sd/JUDGE

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PMR

The Commissioner of Customs (Appeals) v. M/S Alcatel Lucent India Pvt. Ltd.

Case brief

What is this about?

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The Commissioner of Customs (Appeals) v. M/S Alcatel Lucent India Pvt. Ltd.

Case brief

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