2010 (3) TMI 510 - AT - Customs

Refund Unjust enrichment - The claim of the assessees for refund of the export duty paid on cashew nut kernels during the period 26-9-2006 to 30-11-2006 under 114 shipping bills has been rejected on the ground that the importer has passed on the incidence of duty paid by him to the buyer. Held that mechanism for testing refund claims on anvil of unjust enrichment incorporated only in section 27 and not under section 26. Assessee not required to establish that he has not passed on incidence of duty to any other person. Refund allowed.

Summary

Issues:
Refund of export duty on cashew nut kernels under 114 shipping bills rejected on the ground of passing incidence of duty to the buyer. Claim sanctioned but directed to consumer welfare fund under Section 27(2) of Customs Act, 1962.

Analysis:

1. Refund of Export Duty under Section 26 of Customs Act:
The issue revolves around the assessees' claim for refund of export duty paid on cashew nut kernels. The rejection was based on the assertion that the importer had passed on the duty incidence to the buyer. However, the Vice-President noted that the refund of export duty falls under Section 26 of the Customs Act. The section outlines conditions for refund, including the return of goods to the person who paid the duty, re-importation within a year, and timely application for refund. It was emphasized that the mechanism for unjust enrichment assessment is specified in Section 27, not Section 26.

2. Applicability of Section 27 for Refund of Export Duty:
The judgment highlighted a crucial distinction between Sections 26 and 27 of the Customs Act. The SDR had cited a previous Tribunal decision suggesting that Section 27's provisions on refund of customs duty apply to cess paid on export. However, the Vice-President clarified that Section 27 pertains to refund of customs duty, while the refund of export duty, as in this case, is governed by Section 26. The decision in Commissioner of Customs, Bangalore v. Ken Agritech Pvt. Ltd. was referenced to emphasize that the provisions of Section 27 are not directly applicable to refund of export duty under Section 26.

3. Unjust Enrichment Requirement:
The judgment addressed the concept of unjust enrichment concerning the passing on of duty incidence to another party. It was held that the assessees were not obligated to prove that they had not transferred the duty burden to anyone else. By interpreting the relevant sections of the Customs Act, the Vice-President concluded that the assessees were entitled to the refund of export duty without the need to establish non-passing of duty incidence. Consequently, the impugned order was set aside, and the appeal was allowed.

In conclusion, the judgment clarifies the distinct provisions of Sections 26 and 27 of the Customs Act concerning the refund of export duty, emphasizing that the unjust enrichment requirement applies to Section 27 and not Section 26. The decision underscores the entitlement of assessees to refund under Section 26 without the burden of proving non-passing of duty incidence, leading to the setting aside of the initial rejection and the allowance of the appeal.