2025 (5) TMI 1926 - AT - Customs

Refund claim - export duty charged on the basis of Wet Metric Tonne (WMT) instead of Dry Metric Tonne (DMT) - failure of the proper officer to pass a speaking order under Section 17(5) of the Customs Act 1962 - HELD THAT - We find that it is a fact on record that the appellant filed shipping bills at the time of export of goods and duty was to be paid on the basis of DMT instead of WMT. The Adjudicating Authority without assigning any reason demanded duty on the basis of WMT in terms of Section 17 (4) of the Customs Act 1962. As per the said provisions where on verification or otherwise it is found 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 reassess the duty leviable on such goods. Further Section 17 (5) of the Customs Act 1962 mandates that if any order passed by the proper officer under Section 17 (4) of the Act he shall pass a speaking order on the re-assessment within 15 days from the date of reassessment of shipping bill. Ongoing through the above provisions we find that in this case the assessments of shipping bills have been done under Section 17 (4) of the Act and further Section 17 (5) mandates that if any order is passed under Section 17 (4) of the Act the proper officer is duty bound to pass a speaking order of re-assessment within 15 days of the order passed under Section 17 (4) of the Act. Admittedly in the case in hand no order under Section 17 (5) of the Act has been passed. Thus the appellant has no reason to challenge the assessment of the shipping bills. Therefore the reasons for denying the refund to the appellant are not sustainable.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the assessment of export duty on the basis of Wet Metric Tonne (WMT) instead of Dry Metric Tonne (DMT) by the Adjudicating Authority, without passing a speaking order under Section 17(5) of the Customs Act, 1962, is final and binding?

- Whether the failure of the proper officer to pass a speaking order under Section 17(5) of the Customs Act, 1962, affects the maintainability of the refund claims filed by the appellant for excess duty paid?

- Whether the rejection of refund claims on the ground that the assessments of the shipping bills have become final due to non-challenge by the appellant is legally sustainable?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Finality of Assessment under Section 17(4) and Requirement of Speaking Order under Section 17(5) of the Customs Act, 1962

Relevant Legal Framework and Precedents:

Section 17(4) empowers the proper officer to reassess duty leviable on goods if the self-assessment is found incorrect on verification or otherwise. Section 17(5) mandates that where such reassessment is contrary to the self-assessment and not accepted in writing by the importer/exporter, the proper officer must pass a speaking order on the reassessment within fifteen days from the date of reassessment.

Court's Interpretation and Reasoning:

The Court emphasized that the reassessment under Section 17(4) without a corresponding speaking order under Section 17(5) is incomplete. The speaking order is mandatory and serves to inform the assessee of the reasons and basis for reassessment. In the instant case, the Adjudicating Authority demanded export duty on WMT basis without assigning any reason and failed to pass the speaking order within the stipulated 15 days.

Key Evidence and Findings:

The factual record confirmed that the appellant's shipping bills were assessed on WMT basis contrary to the contract value on DMT basis. No speaking order under Section 17(5) was passed by the proper officer despite the reassessment.

Application of Law to Facts:

Since the statutory mandate under Section 17(5) was not complied with, the reassessment order cannot be considered final or binding. The absence of a speaking order deprived the appellant of the opportunity to understand or challenge the reassessment effectively.

Treatment of Competing Arguments:

The Revenue contended that the assessments were final and the refund claims were not maintainable as no appeal was filed against the assessment. The Court rejected this argument, holding that finality cannot be attributed to an assessment where the procedural requirement of passing a speaking order was not fulfilled.

Conclusion:

The assessment under Section 17(4) without a speaking order under Section 17(5) is not final and binding on the appellant.

Issue 2: Maintainability of Refund Claims in Absence of Appeal Against Assessment

Relevant Legal Framework and Precedents:

Generally, once an assessment is final and not challenged, refund claims based on excess duty paid are not maintainable. However, this principle presupposes that the assessment itself is valid and final in law.

Court's Interpretation and Reasoning:

The Court observed that the non-passage of a speaking order under Section 17(5) renders the assessment non-final. Consequently, the appellant's refund claim for excess duty paid on the basis of DMT instead of WMT is maintainable. The Court held that the authorities below erred in rejecting the refund claims solely on the ground that the assessment was final due to non-challenge.

Key Evidence and Findings:

The appellant's payment of excess duty and the absence of a speaking order were undisputed facts. The authorities below relied on the finality of assessment without addressing the procedural lapse under Section 17(5).

Application of Law to Facts:

The Court applied the statutory requirement of a speaking order as a precondition for finality, thereby allowing the refund claims to be entertained once the procedural lapse is rectified.

Treatment of Competing Arguments:

The Revenue's reliance on finality due to non-appeal was found misplaced in view of the statutory non-compliance. The Court gave precedence to procedural safeguards over procedural finality claimed by the Revenue.

Conclusion:

The refund claims filed by the appellant are maintainable and cannot be summarily rejected on the ground of finality of assessment without a speaking order under Section 17(5).

Issue 3: Direction for Passing Speaking Order and Further Consideration of Refund Claims

Court's Interpretation and Reasoning:

The Court directed the adjudicating authority to pass a speaking order under Section 17(5) of the Customs Act, 1962, as mandated by law. Post issuance of the speaking order, the refund claims, if maintainable, shall be decided in accordance with law.

Application of Law to Facts:

The Court's order remands the matter back to the proper officer to comply with the statutory requirement and reconsider the refund claims on merits after providing due opportunity to the appellant.

Conclusion:

The matter is remanded for compliance with Section 17(5) and subsequent adjudication of refund claims.

3. SIGNIFICANT HOLDINGS

"Where any re-assessment done under sub-section (4) is contrary to the self-assessment done by the importer or exporter [...] 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."

"In such circumstances, the appellant has no reason to challenge the assessment of the shipping bills. Therefore, the reasons for denying the refund to the appellant are not sustainable."

"We set aside the impugned order and direct the adjudicating authority/proper officer to pass a speaking order under Section 17(5) of the Act and thereafter, if any refund claim is maintainable, the same is be decided in accordance with law."

Core Principles Established:

- The mandatory nature of passing a speaking order under Section 17(5) following reassessment under Section 17(4) is emphasized as a procedural safeguard.

- The absence of such a speaking order renders the reassessment non-final, thereby preserving the appellant's right to challenge and claim refund.

- Finality of assessment cannot be presumed merely due to non-appeal if statutory procedural requirements remain unfulfilled.

Final Determinations:

- The reassessment on WMT basis without a speaking order is not final.

- The refund claims filed by the appellant are maintainable and cannot be rejected on the ground of finality alone.

- The matter is remanded for the proper officer to pass the speaking order under Section 17(5) and thereafter decide the refund claims in accordance with law.