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2016 (9) TMI 881 - BOMBAY HIGH COURT

2016 (9) TMI 881 - BOMBAY HIGH COURT - 2016 (341) E.L.T. 164 (Bom.) - Interest on refund under the provisions of Section 27A of the Customs Act, 1962 - import of spares and consumables for carrying out drilling operations - Notification No.21/2002-Cus dated 1st March, 2002 - exemption of goods required in connection with petroleum operations undertaken under petroleum exploration licenses - sub-contractor - Essentiality Certificate - import without claiming benefit and on payment of duty - claim .....

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diately after expiry of three months from the date of receipt of such application, till the date of refund. the decision in the case Ranbaxy Laboratories Ltd Vs. Union of India [2011 (10) TMI 16 - Supreme Court of India] would apply. - The Petitioner had not complied with the conditions of the Essentiality Certificate. It therefore held that the Essentiality Certificate could not be taken to be the basis of the refund and accordingly rejected the refund application of the Petitioner. This or .....

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ned by the Authority - applicant entitled to interest. - Necessary action to be taken against the Secretary, Ministry of Finance (Department of Revenue), Government of India and the Chairman, Central Board of Excise and Customs, New Delhi. It is only they who would possibly realise that the object and purpose is to take expeditious action on refund applications so that revenue loss is avoided in payment of statutory interest. The intent is to discourage the tendency of not taking prompt acti .....

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HIKARI,J. & B. P. COLABAWALLA, JJ. Mr. Prakash Shah a/w Mr. Anil Balani, for the Petitioner. Mr. Pradeep S. Jetly, for the Respondents. JUDGMENT :- [Per B. P. Colabawalla, J] 1. Rule. Respondents waive service. By consent of parties, rule made returnable forthwith and heard finally. 2. By this Writ Petition filed under Article 226 of the Constitution of India, the Petitioner challenges the validity and legality of the order i .....

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peals), as well as the order passed by this Court on 4th April, 2016 (and which is annexed at Exh. B to the Petition). 3. The brief facts giving rise to the present controversy are that, the Petitioner (formerly known as Sedco Forex International Drilling Inc. ) had imported certain spares and consumables etc for carrying out drilling operations on behalf of ONGC on board the mobile offshore drilling unit (Jack Up Rig) named F. G. McClintock. It is averred in the Petition that by Noti .....

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produce an Essentiality Certificate from the Directorate of Hydrocarbons (for short the DGH ), which would be issued only on the recommendation of ONGC. 4. It is then stated that the Petitioner could not avail of the exemption under the said Notification at the time of import, for want of the Essentiality Certificate from the DGH as ONGC did not issue any recommendation letters for issuance of the same. Accordingly, for import of the said spares and consumables, the Petitio .....

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ng for directions (i) against ONGC to issue the recommendatory letters and (ii) against the DGH to issue the Essentiality Certificate. Be that as it may, pending disposal of this Writ Petition before the Delhi High Court, on the recommendation of ONGC, the DGH issued the Essentiality Certificate bearing No.DGH/EC/ONGC/659/2003 dated 13th March, 2003. The said Certificate was issued to the Deputy Commissioner of Customs. Hence nothing survived in the Writ Petition and the same was disp .....

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tion), the Petitioner brought to the notice of the revenue the order of the Delhi High Court passed in Writ Petition 7019 of 2002 as well as the refund application filed by them on 4th April, 2003. The Petitioner also enclosed a copy of the Bill of Entry No. 1744 dated 27th September, 2002 and a copy of the Essentiality Certificate dated 13th March, 2003. The Petitioner submitted that instead of granting the refund in compliance of the Delhi High Court order, the Asst. Commissioner of Customs, v .....

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etitioner to submit certain documents, a list of which is set out in the impugned order (at page 210 of the paper book). These documents were forwarded by the Petitioner to the department under cover of their letter dated 2nd August, 2011. It transpires that thereafter the Refunding Authority passed its order dated 13th December, 2011 (page 67 of the paper book) rejecting the refund claim of the Petitioner. The operative part of this order reads as under:- 14(d): On receipt of the afo .....

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ed on payment of duty were liable to be refunded. I find that the Importer has fulfilled the conditions of Notification 21/2002 dated 1.3.2002, Sr. No. 214 of Table, List 12, Condition 29, by submitting the Essentiality Certificate. I, however, find the Essentiality Certificate was issued subject to the condition that the left over items are subject it Re-export by 30.4.2004. Examining the records, I find that some of the goods were exported vide Shipping Bill No.1000003625 dated 07.1 .....

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ipulated time. The above position clearly bring out the fact that the importer has not complied with the conditions of Essentiality Certificate. In view of the same, the Essentiality Certificate cannot be taken to be the basis of refund. Accordingly, I pass the following order: ORDER I reject the refund application dated 4.4.2003 for an amount of ₹ 1,89,15,549/- filed by M/s Sedco Forex International Drilling INC, Transocean House, Lake Boulevar .....

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ently, the Refunding Authority, after going through the documents submitted by the Petitioner, once again rejected the refund claim vide its order dated 22nd January, 2014. 10. Aggrieved by the order dated 22nd January, 2014, the Appellant directly approached this Court, who by its order dated 5th February, 2014, set aside the order dated 22nd January, 2014 and remanded the case back to the Refunding Authority to decide the matter afresh after granting a hearing to the Petitioner. In .....

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cise. 11. However, as the Petitioner was not granted any interest against this refund amount, the Petitioner filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals), after considering the statutory provisions and more particularly Section 27A, as well as the case law relied upon by the Petitioner, opined that as per the aforesaid section, the Petitioner was eligible for interest on delayed refund. However, the Refunding Authority had nowhere in the entire order d .....

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nd the Refunding Authority was to decide this issue within six week's time. It is pursuant to this direction that the Refunding Authority has passed the impugned order dated 29th April, 2016, under which it held that the refund application filed by the Petitioner was complete in all respects for sanction of refund, only after the Petitioner submitted all the essential documents during the personal hearing held on 12th May, 2014. The refund claim was processed and refund was granted to the Pe .....

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laid great emphasis on Section 27A which deals with interest on delayed refunds which inter alia stipulates that if any duty ordered to be refunded under sub-section (2) of Section 27, is not refunded within three months from the date of receipt of the refund application under sub-section (1) of section 27, then, the Applicant would be entitled to such rate of interest (as notified), from the date immediately after the expiry of three months from the date of receipt of such application, till the .....

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March, 2003. He submitted that even though the Petitioner would be entitled to interest from the expiry of 3 months from 4th April, 2003, the Petitioner is restricting its claim for interest from the expiry of 3 months from 20th June, 2011 till 11th July, 2014 (i.e. the date when the payment of refund was made to the Petitioner). Mr. Shah submitted that the finding of the Refunding Authority that the refund claim was complete in all respects for sanctioning the refund only after the Petitioner .....

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ed by us earlier). For all the aforesaid reasons, Mr Shah submitted that the impugned order is liable to the quashed and set aside and the Refunding Authority ought to be directed to calculate the interest payable on the refund granted to the Petitioner. 13. On the other hand, Mr. Jetly, learned counsel appearing on behalf of the Respondents, submitted that the interest free period of three months for processing the claim would start from the date of receipt of a complete refund appli .....

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on and its return of the applicant within a period of 10 working days, if it is found incomplete in any manner or detail. If however, the application is found to be complete in all respects for the purpose of processing the refund claim the same is to be acknowledged within the period of 10 working days. The interest free period of 3 months for processing the claim while be deemed to start the date of receipt of the complete refund application. (emphasis supplied) 14. Mr. .....

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d the Writ Petition ought to be dismissed. 15. We have heard the learned counsel at length and perused the papers and proceedings in the Writ Petition as well as the annexures thereto. Before we deal with the present controversy, it would be appropriate to set out certain provisions of the the Customs Act, 1962. Section 27 deals with a claim for refund of dues and inter alia stipulates that any person claiming refund of any duty or interest paid by him or borne by him, may make an app .....

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nd the incidence of such duty or interest, has not been passed on by him to any other person. Thereafter, Section 27A deals with interest on delayed refunds. This section was brought on the Statute Book with effect from 26 May, 1995 and reads as under:- 27-A. Interest on delayed refunds.-If any duty ordered to be refunded under sub-section (2) of Section 27 to an applicant is not refunded within three months from the date of receipt of application under sub-section (1) of that section .....

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application under sub-section (1) of that section made before the date on which the Finance Bill, 1995 receives the assent of the President, is not refunded within three months from such date, there shall be paid to the applicant interest under this section from the date immediately after three months from such date, till the date of refund of such duty. Explanation.-Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal or any court against an order of t .....

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ipt of the refund application, then the applicant would be paid interest at such rate as more particularly stipulated in the said section. This interest would be payable immediately after expiry of three months from the date of receipt of such application till the date of refund of such duty. For the purposes of the present controversy, the proviso and the explanation to said section are not really germane to the present dispute. In a nutshell, what this section stipulates is that, once an appli .....

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refund. 17. We must note here that almost identical and pari materia provisions under the Central Excise Act, 1944 came up for consideration before the Supreme Court in the case of Ranbaxy Laboratories Ltd Vs. Union of India. (2011) 10 SCC 292 : 2011 (273) E . L. T. 3 (SC) The Supreme Court, after noting the provisions of section 11B and 11BB of the Central Excise Act, 1944 (and which are almost identical and pari materia to sections 27 and 27A of the Customs Act, 1962) [in the SCC R .....

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interest at such rate, as may be fixed by the Central Government, on expiry of a period of three months from the date of receipt of the application. The Explanation appearing below the proviso to Section 11-BB introduces a deeming fiction that where the order for refund of duty is not made by the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise but by an appellate authority or the court, then for the purpose of this section the order made by such higher appe .....

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the only interpretation of Section 11-BB that can be arrived at is that interest under the said section becomes payable on the expiry of a period of three months from the date of receipt of the application under sub-section (1) of Section 11-B of the Act and that the said Explanation does not have any bearing or connection with the date from which interest under Section 11- BB of the Act becomes payable. 14. It is a well-settled proposition of law that a fiscal legislation has to be c .....

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ed 2-6-1998, whereby a direction was issued to fix responsibility for not disposing of the refund/rebate claims within three months from the date of receipt of application, the Board has reiterated its earlier stand on the applicability of Section 11- BB of the Act. Significantly, the Board has stressed that the provisions of Section 11-BB of the Act are attracted automatically for any refund sanctioned beyond a period of three months. The circular reads thus: Circular No. 670/61/200 .....

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eyond the prescribed period of three months of filing of the claim, the interest thereon shall be paid to the applicant at the notified rate. The Board has been receiving a large number of representations from the claimants to say that interest due to them on sanction of refund/rebate claims beyond a period of three months has not been granted by Central excise formations. On perusal of the reports received from field formations on such representations, it has been observed that in majority of t .....

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fund sanctioned beyond a period of three months. The jurisdictional Central Excise Officers are not required to wait for instructions from any superior officers or to look for instructions in the orders of the higher appellate authority for grant of interest. Simultaneously, the Board would like to draw attention to Circular No. 398/31/98-CX, dated 2-6-1998 [(1998) 100 ELT T-16] wherein the Board has directed that responsibility should be fixed for not disposing of the refund/rebate claims withi .....

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ct with effect from 26-5-1995, the Department has maintained a consistent stand about its interpretation. Explaining the intent, import and the manner in which it is to be implemented, the circulars clearly state that the relevant date in this regard is the expiry of three months from the date of receipt of the application under Section 11-B(1) of the Act. (emphasis supplied) 18. On a harmonious reading of the provisions of section 27 and 27A alongwith the observations of .....

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of the present case, we find that originally, the Petitioner had made an application for refund on 4th April, 2003. However, this application was returned back as premature for want of submission of the Essentiality Certificate with the refund application. Even though this fact (of non-submission of the Essentiality Certificate) is disputed by the Petitoner, we find that admittedly, the Petitioner, by their letter dated 20th June, 2011 enclosed copies of the relevant Bill of entry, the refund ap .....

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in fact states that the Petitioner had fulfilled the conditions of Notification 21/2002 dated 1.3.2002, Sr. No. 214 of Table, List 12, Condition 29, by submitting the Essentiality Certificate. The Refunding Authority, however, held that the Essentiality Certificate was issued subject to the condition that the left over items are subject to Re-export by 30th April, 2004. Examining the records, the Refunding Authority came to a finding that some of the goods were exported beyond the expiry date o .....

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ed in a refund being granted to the Petitioner on 23rd June, 2014 in the sum of ₹ 1,89,15,549/-. As no interest was granted on this refund, the Petitioner challenged the said order before the Commissioner (Appeals). The Appellate Authority (by its order dated 27th October, 2015), after taking into consideration provisions of Section 27A of the Act opined that the Petitioner was eligible for interest on the delayed refund. It further held that since the calculation of interest was not possi .....

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therein. If the interest was payable as held in the appeal, then the calculation thereof was the limited issue which the Refunding Authority was to examine. This Court also held that the statutory provisions are clear that where there is a delay in the grant of refund, then interest must follow. It is only the calculation thereof which would be determined by the Authority. 21. Looking to all these facts, we are unable to agree with the submission of Mr Jetly that the refund applicatio .....

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the Refunding Authority is not powerless. If a refund application filed by a party is incomplete, the Refunding Authority can always return back the refund application saying that it is incomplete in all respects or reject the same on the ground that it is incomplete. As mentioned earlier, initially when the Refund Application was rejected by the Refunding Authority, (by its order dated 13th December, 2011), it was not the case of the Refunding Authority that all the essential documents were no .....

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