2025 (5) TMI 2011 - AT - Customs

Maintainability - refund claims without challenging the provisional assessment - Payment of the export duty under protest - HELD THAT - Admittedly in both the matters the Respondents has paid the export duty under protest at the time of assessment of shipping bills. As duty has been paid under protest therefore assessment of shipping bills was not final. In these terms the Respondents has rightly filed refund claim without challenging the provisional assessment. Assessment is not final unless and until protest is removed. In that circumstances the Ld. Commissioner (Appeal) has rightly sanctioned the refund claims to the Respondent. Consequently we do agree with the observation of the Ld. Commissioner (Appeal) in the impugned order. Thus we do not find any infirmity in the impugned orders the same are upheld. In result the appeals filed by the Revenue are dismissed.

Summary

The core legal questions considered by the Tribunal revolve around the maintainability of refund claims filed by exporters who have paid export duty under protest without challenging the provisional assessment of shipping bills. Specifically, the issues include:

1. Whether the non-challenge of the adjudication or assessment orders by the respondents precludes them from filing refund claims for excess export duty paid under protest.

2. The legal effect of payment of export duty under protest on the finality of assessment and the consequent right to claim refund.

3. The applicability and interpretation of Section 27 of the Customs Act, 1962, particularly concerning refund claims where duty has been paid under protest and the limitation period for such claims.

4. The impact of the self-assessment regime on the necessity and scope of appeals against assessment orders before filing refund claims.

5. The adherence to principles of natural justice in the rejection of refund claims by the lower authorities.

6. The relevance of judicial precedents concerning refund claims, assessment finality, and the interplay between appeal and refund mechanisms under customs law.

Issue 1: Maintainability of Refund Claims Without Challenging Assessment Orders

The legal framework centers on Section 27 of the Customs Act, which governs refund claims of duty paid or borne by a person. The Revenue argued that since the respondents did not challenge the adjudication orders, their refund claims were not maintainable. The respondents contended that payment of duty under protest preserved their right to seek refund without challenging the assessment.

The Tribunal noted that assessment is not final when duty is paid under protest, thus allowing refund claims without prior challenge to the assessment. The Tribunal relied on the proviso to Section 27(1) which exempts refund claims from the one-year limitation period if duty is paid under protest. The Tribunal observed that the Commissioner (Appeal) rightly allowed refund claims on this basis.

Precedents such as the decisions in Excel Glasses Limited and Zenith 1125 were cited to reinforce that non-filing of appeal against assessment does not bar refund claims, especially in a self-assessment regime. The Tribunal emphasized that filing a refund claim itself constitutes a challenge to the assessment.

Issue 2: Effect of Payment Under Protest on Assessment Finality and Refund Rights

The Tribunal held that payment under protest prevents assessment from becoming final. This legal interpretation is supported by the statutory language and judicial pronouncements cited, including the decision in Aman Medical Products Ltd., which clarified that duty paid or borne by a person entitles them to claim refund under Section 27 irrespective of an assessment order.

The Tribunal noted that the lower authority erred in rejecting refund claims on the ground that the assessment was final. The Commissioner (Appeal) found the lower authority's order lacked proper reasoning and was passed with a predetermined notion, violating natural justice principles. The Tribunal concurred, underscoring that the lower authority failed to consider the protest lodged and the documents submitted.

Issue 3: Interpretation of Section 27 of the Customs Act and Limitation Period

The Tribunal analyzed the amended Section 27, particularly the provisos introduced by the Finance Act 2011. It highlighted that the limitation of one year for refund claims does not apply where duty has been paid under protest. The Tribunal quoted the Commissioner (Appeal)'s detailed observations explaining that the refund application was timely and meritorious under the amended Section 27.

Judicial precedents such as Micromax Informatics Ltd. and Aman Medical Products Ltd. were extensively relied upon to affirm that Section 27 mandates authorities to consider refund claims on merits, even if no appeal against assessment has been filed, and that the duty need not be paid pursuant to an assessment order to claim refund.

Issue 4: Impact of Self-Assessment Regime on Appeal and Refund Mechanisms

The Tribunal recognized the regime of self-assessment under customs law, where the traditional appeal mechanism against assessment orders is limited or non-existent. It noted that the non-filing of an appeal does not deprive a person of the right to claim refund of excess duty paid.

References to decisions in Physical Research Laboratory and Liebherr India Pvt. clarified that refund claims serve as a challenge to the assessment in the absence of formal appeal orders. The Tribunal also cited the High Court's observations that the assessing officer has a duty to consider relevant notifications and assess properly, and that writ jurisdiction may be invoked to allow refunds even without appeal.

Issue 5: Principles of Natural Justice and Procedural Fairness in Refund Claims

The Tribunal agreed with the Commissioner (Appeal)'s finding that the lower authority's rejection of refund claims was a mechanical exercise lacking proper reasoning and ignoring submissions and documents filed by the appellants. This was held to be a violation of natural justice principles.

The Tribunal emphasized that the authorities must give due consideration to protests and refund claims, and that failure to do so undermines the fairness and legality of the assessment process.

Issue 6: Judicial Precedents on Refund Claims and Assessment Finality

The Tribunal extensively discussed precedents including Excel Glasses Limited, Zenith 1125, Liebherr India Pvt., Physical Research Laboratory, Micromax Informatics Ltd., and Aman Medical Products Ltd., which collectively establish the following principles:

• Refund claims under Section 27 are maintainable even without an appeal against assessment orders, especially where duty is paid under protest.
• The limitation period for refund claims does not apply if duty is paid under protest.
• The self-assessment regime limits the scope for appeals, making refund claims a primary remedy for excess duty paid.
• Authorities must assess refund claims on merits and cannot reject them on procedural grounds without proper reasoning.
• Payment of duty "borne by" a person entitles them to refund claims, even absent formal assessment orders.

The Tribunal applied these principles to the facts, noting that the respondents paid excess duty based on reassessment on Wet Metric Tone instead of the contractually agreed Dry Metric Tone, lodged protests, and filed refund claims supported by relevant documents including the sales contract and Bank Realization Certificate.

The Tribunal concluded that the lower authority's rejection of refund claims was unsustainable and that the Commissioner (Appeal) correctly allowed the refunds. The appeals filed by the Revenue were dismissed.

"Assessment is not final unless and until protest is removed."

"Where any duty or interest has been paid under protest, the limitation of one year shall not apply."

"Filing of refund claim itself is a challenge of the re-assessment."

"The order seems to be passed on presumption and assumption devoid of any legal backing and thus does not have any foundation to stand the scrutiny of law."

"Non-filing or late filing of appeal against the original assessment on the bill of entry is not relevant and appellant can challenge the assessment by way of a refund application."

"Under Section 27 of the Act, as it now stands, it is not open to an authority to refuse to consider the application for refund only because no appeal has been filed against the assessment order."

The core principles established include:

• The right to claim refund under Section 27 is independent of filing appeals against assessment orders, particularly in a self-assessment regime.
• Payment of duty under protest preserves the right to claim refund beyond the usual limitation period.
• Authorities must adjudicate refund claims on merits, respecting procedural fairness and natural justice.
• Refund claims serve as an effective remedy to challenge wrongful assessments in the absence of appealable orders.

Final determinations:

• The respondents' refund claims for excess export duty paid under protest were maintainable and rightly allowed by the Commissioner (Appeal).
• The lower authority's rejection of refund claims was set aside due to lack of proper reasoning and violation of natural justice.
• The Revenue's appeals challenging the refund orders were dismissed.