TMI Blog2021 (2) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in respect of a deposit made under Section 35-F, provisions of Section 11-B can never be applicable. A deposit under Section 35-F is not a payment of duty but only a pre-deposit for availing the right of appeal. Such amount is bound to be refunded when the appeal is allowed with consequential relief. No order was required either under Section 129E or Section 35F of the respective enactments for deposit the disputed duty or penalty as a condition for hearing the appeal. Only when a person seeks for waiver or partial waiver, an order was required to be passed. These provisions have been liberalized in 2014. Now the maximum amount of pre-deposit has now been capped to 7.5% at the stage of first appeal and 10% at the stage of second appeal before the CESTAT - When the appeals were filed by the petitioner before the Hon ble Supreme Court, the petitioner was enjoined to pay the sums due to the Government as a result of an order passed under sub-section (1) of Section 129-B of the Customs Act, 1962 and 35C of Central Excise Act, 1944 in accordance with the order so passed by CESTAT. Deposits under Section 129E and Section 35F of the Central Excise Act, 1944 are made as a cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the imported goods pending its appeals before the Honourable Supreme Court cannot be said to be a duty for the purpose of Section 27 of the Customs Act, 1962. Therefore, presumption under section 28D of the Customs Act 1962 that the incidence of duty paid has been passed on to the buyer cannot be inferred - Amounts paid pursuant to an adverse order passed under Section 28 of the Customs Act, 1962 whether under Section 129E or under Section 131 of the Customs Act, 1962 are not duty for the purpose of Section 27 of the Customs Act.1962. From a reading of the provisions, it is clear that only refund of duty or interest thereon under Section 27 of the Customs Act, 1962 are governed by the doctrine of unjust enrichment under Section 27 of the Customs Act, 1962 - Pre-deposits as a condition under Section 129E of the Customs Act, 1962 or under Section 35F of the Central Excise Act, 1944 are not governed by the Section 27 and 11B of the respective enactments. In this case, it cannot be said that the amount that was paid pending the appeals was pursuant to an order of assessment before clearance of the goods from the customs barriers. The imported goods were not asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id appeal was filed against Final Order Nos.203-205 dated 07.02.2005 passed by the Customs, Excise and Gold (Control) Appellate Tribunal, Chennai [CEGAT for brevity]. CEGAT which is now called as the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) had partly allowed and partly dismissed the petitioner s appeals vide the aforesaid common order. 3. The aforesaid amount of ₹ 88,44,510/- was paid by the petitioner on 21.03.2001 under protest pending disposal of the above appeals before the Hon'ble Supreme Court in C.A.Nos.3558 and 3559 of 2000 as the Hon'ble Supreme Court had merely ordered notice on the respondents while admitting the appeal on 17.07.2000. The stay petition filed by the petitioner against Final Order Nos. 203-205 dated 07.02.2005 of the CEGAT was also dismissed on 6.11.2000. 4. Under these circumstances, a recovery notice was issued on 29.09.2000 to the petitioner, which called upon the petitioner to pay the aforesaid amount. Therefore, the petitioner paid the aforesaid amount under protest on 21.03.2001. Eventually, the Hon ble Supreme Court allowed the appeal filed by the Petitioner on 07.04.2005. Under these circumstances, the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o above. 12. It was under these circumstances, the petitioner filed C.A.Nos.3558 and 3559 of 2000 before the Hon'ble Supreme Court and the above amount was paid under protest by the petitioner on 21.03.2001 pending disposal of its appeals in C.A.Nos.3558 and 3559 of 2000. 13. As mentioned above, the Hon'ble Supreme Court vide order dated 31.03.2005 allowed C.A.Nos.3558 and 3559 of 2000 filed by the petitioner with the following observations:- 10. This appeal must, however, be allowed on the short ground that the respondent authorities have taken an inconsistent stand. From the narration of facts it is clear that the Commissioner had proceeded on the basis of the capacity of the imported machines and not their actual production. The show cause notice had also been issued on this basis. The Tribunal, on the other hand, has categorically rejected the capacity test and has come to the conclusion that the capacity was irrelevant. It held that the interpretation of the notification in fact shows that the only test was whether the output of a machine in one hour was 30,000 copies per hour in actuality and not whether the machine was designed or capacity of X or Y at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ahmedabad - reported in 2004 (167) ELT 422 and Silwester Textiles P Ltd Vs. CCE., Mumbai, reported in 2003 (156) ELT 216 (T) has been relied upon by the claimant. The Hon'ble Tribunal had held that whenever and wherever duty has been paid subsequent to clearance of goods, at the instance of the Department, the appellant could not have passed on the duty benefit to their customers at the time of clearance of the goods. However, this contention of the appellant is also not acceptable as the goods are imported capital goods. The total value of capital goods will not be absorbed during single financial year as would in the case of any raw material; hence the argument of payment of duty at later date holds no good. 20. Under these circumstances, the petitioner filed an appeal before the 1st respondent Commissioner of Customs (Appeals). Vide impugned order in Appeal No.C.CUS.844/06 dated 21.11.2006 bearing reference No.C3/659/R/2006-SEA, the 1st respondent remanded the case back to the 2nd respondent to decide the issue de novo on the ground as to whether the incidents customs duty had been passed on to the consumer or not. 21. Pursuant to Order-in-Appeal No.C.CUS.844/06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esticide Pvt. Ltd., 2000 (116) E.L.T. 401 (S.C.) ix. Collr of Customs, Madras Vs Indo-Swiss Synthetic Gem Mfg. Co, Ltd., 2003 (162) E.L.T. 121 (Mad.) x. Commissioner of Customs, Chennai Vs Venkateswara Hospitals, 2015 (323) E.L.T. 359 (Mad.) xi. Commissioner of Customs, Cochin Vs Westfort Hi-tech Hospital Ltd., 2018 (361) E.L.T. 355 (Ker.) xii. Golden Iron Steel Forgings Vs Commissioner of Customs, Mumbai , 2003 (157) E.L.T. 650 (Tri. - Del.) xiii. Grasim Industries Vs Commissioner of Central Excise, Chennai, 2003 (157) E.L.T. 123 (Tri. - Chennai) xiv. SRF Ltd Vs Commissioner of Customs, Chennai, 2006 (193) E.L.T. 186 (Tri. - LB) xv. Commissioner of Central Excise, Chennai Vs Grasim Industries, 2015 (318) E.L.T.594 (S.C.) xvi. ModipinFibre Co., Vs Commissioner of Central Excise, Ghaziabad, 2004 (173) E.L.T. 168 (Tri. - Del.) xvii. Plas Pack Industries Vs Commissioner of Customs Central Excise, Ahmedabad, 2004 (167) E.L.T 422 (Tri. - Mumbai) xviii. Silwester Textiles Pvt. Ltd., Vs Commissioner of Central Excise, Mumbai, 2003 (156) E.L.T. 216 (Tri. - Mumbai) xix. Commissioner of Customs, Ahmedabad Vs Mahalaxmi Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r s appeal before it. 32. It is submitted that under these circumstances, against the order of the CEGAT, Civil Appeal Nos.3558 - 3559 of 2000 was filed before the Hon'ble Supreme Court. Since the payment was made pending disposal of the appeal, question of subjecting the petitioner to Section 27 of the Customs Act, 1962 was wholly misplaced. 33. As the said order was eventually set aside by the Hon'ble Supreme Court by its final order dated 06.11.2000 in Civil Appeal Nos.3558 - 3559 of 2000, the petitioner became entitled to the amounts paid by the petitioner pending the appeals. 34. It is submitted that the petitioner had not claimed refund of any amount that was paid as duty under Section 12 of the Customs Act, 1962 but refund of amount paid pending disposal of the appeals before the Hon'ble Supreme Court, as the Hon'ble Supreme Court had declined to grant stay in Civil Appeal Nos.3558-3559 of 2000 vide order dated 06.11.2000. 35. He therefore submits that the amount paid by the petitioner vide Miscellaneous Challan on 21.03.2001 was not a refund of duty or interest under Section 27 of the Customs Act, 1962 during the material time and therefore the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, provided for making of refund.On the other hand, Section 11B(1) dealt with claiming of refund by the person who has paid duty on his own accord. In this connection, Section 4 of the said Act is relevant. In the case of Bombay Tyre (supra) it has been held that Section 3 of the Act refers to levy of duty whereas Section 4 dealt with assessment. Assessment means determination of the tax liability. Under the Act, duty was payable by the manufacturer on his own account. Hence, under Section 11B(1), such a person had to claim refund by making an application within six months from the relevant date except in cases where duty was paid under protest in terms of the proviso. However, even in such cases, the person claiming refund had to pay the duty under protest in terms of prescribed rules. A bare reading of Section 11B(1), therefore, shows that it refers to claim for refund by the proper officer under Rule 9B. 40. She also drew my attention to the decision of the Gujarat High Court in Ajni Interiors Vs. Union of India and Ors ., MANU/GJ/1628/2019. She submits that the Gujarat High Court has taken a contra view while dealing with a similar circumstances. She submits that vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed of in the light of and in accordance with the provisions of Section 11-B. This is for the reason that the power under Article 226 has to be exercised to effectuate the regime of law and not for abrogating it. Even while acting in exercise of the said constitutional power, the High Court cannot ignore the law nor can it override it. The power under Article 226 is conceived to serve the ends of law and not to transgress them. 47. Again in UOI Vs. Mangal Textiles Mills (I) P Ltd. , (2010) 14 SCC 553, the Hon ble Supreme Court observed that the power to issue prerogative writ petition under Article 226 of the Constitution of India is plenary in nature and cannot be curtailed by other provisions of the Constitution or a Statute. 48. Thus, this Court has jurisdiction to entertain a writ petition even if it is assumed that provisions of the Section 27 of the Customs Act, 1962 are attracted or an alternate remedy exist. It would be unfair to relegate the petitioner to an alternate remedy at this distant point of time after a lapse of 13 years since the filing of this writ petition either to CESTAT or to the 2nd respondent to comply with the directions of the 1st respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the burden to others. Sub-section (3) of the amended Section 11-B is emphatic. It leaves no room for making any exception in the case of refund claims arising as a result of the decision in appeal/reference/writ petition. There is no reason why an exception should be made in favour of such claims which would nullify the provision to a substantial degree. So far as lack of incentive argument is concerned, it has no doubt given us a pause; it is certainly a substantial plea, but there are adequate answers to it. Firstly, the rule means that only the person who has actually suffered loss or prejudice would fight the levy and apply for refund in case of success. Secondly, in a competitive market economy, as the one we have embarked upon since 1991-92, the manufacturer's self interest lies in producing more and selling it at competitive prices - the urge to grow. A favourable decision does not merely mean refund; it has a beneficial effect for the subsequent period as well. It is incorrect to suggest that the disputes regarding classification, valuation and claims for exemptions are fought only for refund; it is for more substantial reasons, though the prospect of refund is cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if a manufacturer/assessee, who succeeds in vindicating his claim after a long fight - may be, up to this Court - and applies for refund is asked to satisfy that he has not passed on the burden of tax to another, he would rather keep quiet than fighting the levy. There would be no incentive for him to file the appeal/appeals or approach the higher courts which also involves substantial expense. If after all this fight and expense, he is to be denied the refund on the ground that he has passed on the burden of duty to third parties, why should he fight and spend money for fighting the litigation, says the counsel. Shri Sorabjee and Shri Salve too emphasised this aspect and said that this situation would lead to many an undesirable consequence. The assessing/approving officer (original authority) would become the monarch; whatever he says would be the law since there would be nobody interested in challenging his order. Illegal levies would become the order of the day. Such a situation, the learned counsel point out, is neither in the interest of law nor in the interest of consumer or the larger public interest . It is accordingly submitted that it would be just and proper that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides Ltd. Vs. Union of India , 2005 (183) E.L.T. 9 (Guj.) as affirmed by the Hon ble Supreme Court in Union of India Vs. Gujarat Insecticides Ltd. , 2015 (326) E.L.T. 428 (S.C.), Bombay High Court in Suvidhe Ltd. Vs. Union of India, 1986 (82) E.L.T. 177 (Bom.) and decision of the Hon ble Supreme Court in Union of India Vs. Suvidhe Ltd . (2016) 11 SCC 808, in Mahavir Aluminium Vs. CCE, (1999) 6 SCC 65 , in Commr. of Customs (Import) Vs. Finacord Chemicals (P) Ltd., (2015) 15 SCC 697, in Commr. of Customs (Import) Vs. Finacord Chemicals (P) Ltd., (2015) 15 SCC 697, UCAL Fuels systems Case , 2014 (306) ELT 26(Mad) and few other decisions, wherein, it has been held that refund of pre-deposit made pending appeal were outside the purview of Section 27 of the Customs Act, 1962 and 11B of the Central Excise Act, 1944 would have to be construed as having passed contrary to decision of the Hon ble Supreme Court in Mafatlal Industries Ltd Vs. UOI , 1997(98) ELT 247 : (1997) 5 SCC 536. 61. In Suvidhe Ltd. Vs. Union of India , (1996) 82 ELT 177 (Bom), the Bombay High Court had held that the claim raised by the Department in the show cause notice is thoroughly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong been to consider such deposits as other than duty , such deposits should be returned in the event of the appellant succeeds in appeal or the matter is remanded for fresh adjudication. 2. It would be pertinent to mention that the Revenue had recently flied a Special Leave Petition against Mumbai High Court's order in the matter of NELCO Ltd, challenging the grant of interest on delayed refund of pre-deposit as to whether: i. the High Court is right in granting interest to the depositor since the law contained in Section 35F of the Act does in no way provide for any type of compensation in the event of an appellant finally succeeding in the appeal, and, ii. the refunds so claimed are covered under the provisions of Section 11B of the Act and are governed by the parameters applicable to the claim of refund of duty as the amount is deposited under Section 35F of the Central Excise Act, 1944. The Hon'ble Supreme Court vide its order dated 26.11.2001 dismissed the appeal. Even though the Apex Court did not spell out the reasons for dismissal, it can well be construed in the light of its earlier judgment in the case of Suvidhe Ltd. and Mahavir Aluminium that the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the contents of the Circular No. 275/37/2000-CX.8A dated 02.01.2002, as to the modalities for return of the pre-deposits are reiterated. It is again reiterated that in terms of Hon'ble Supreme Court's order such pre-deposit must be returned within 3 months from the date of the order passed by the Appellate Tribunal/Court or other Final Authority unless there is a stay on the order of the Final Authority/CESTAT/Court, by a superior Court. 5. Delay beyond this period of three months in such cases will be viewed adversely and appropriate disciplinary action will be initiated against the concerned defaulting officers. All concerned are requested to note that default will entail an interest liability, if such liability accrues by reason of any orders of the CESTAT/Court, such orders will have to be complied with and it may be recoverable from the concerned officers. 67. The observations of the Hon ble Supreme Court in Mafatlal Industries Ltd Vs. UOI , 1997(98) ELT 247 : (1997) 5 SCC 536 in paragraph 91 and 92 were made without considering the operations of other provisions of the Act and therefore cannot construed as having laid down the law. It cannot be said that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e waived by these appellate bodies under the scheme of the Act. 75. Therefore, the payments under Section 131 of the Customs Act, 1962 and Section 35N of the Central Excise Act, 1944 are payments which were delayed. Payments under all these provisions are also in the nature of pre-deposit are under the Act pending disposal of the appeals whether before the Appellate Commissioner and CESTAT or the High Court. They are not paid as duties. 76. Such payment will partake the colour of a duty only if the importer or the manufacturer accepts the decision of the CESTAT and does not put such order/decision to jeopardy by way of an appeal or reference. 77. Thus, if such payments are made pending appeal for want of stay order, it has to be considered as pre-deposit akin to the amounts deposited under Section 129E of the Customs Act, 1927/Section 35F of the Central Excise Act, 1944. Therefore, the amount that was paid by the petitioner pending its appeal was not duty though miscellaneous challan slows payment of duty, nevertheless it has to be considered as amount paid for the purity of Section 131 of the Customs Act, 1962. 78. This Court is therefore of the considered view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed under subrule (1) may be cleared for home consumption or export in the same manner as the goods which are finally assessed. Sub-rule (5) provides that when the duty leviable on the goods is assessed finally in accordance with the provisions of these Rules, the duty provisionally assessed shall be adjusted against the duty finally assessed, and if the duty provisionally assessed falls short of or is in excess of the duty finally assessed, the assessee shall pay the deficiency or be entitled to a refund, as the case may be . Any recoveries or refunds consequent upon the adjustment under sub-rule (5) of Rule 9-B will not be governed by Section 11-A or Section 11-B, as the case may be . However, if the final orders passed under sub-rule (5) are appealed against - or questioned in a writ petition or suit, as the case may be, assuming that such a writ or suit is entertained and is allowed/decreed - then any refund claim arising as a consequence of the decision in such appeal or such other proceedings, as the case may be, would be governed by Section 11-B. It is also made clear that if an independent refund claim is filed after the final decision under Rule 9-B(5) reagitating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 11B can never be applicable for refund of the amount deposited by way of pre-deposit under Section 35F for availing the remedy of an appeal. It must be recalled that Section 11B of the Central Excise Act, 1944 is parimateria with Section 27 of the Customs Act,1962. 92. The Court further held that a deposit under Section 35F (which is parimateria with Section 129E of the Customs Act,1962) is not a payment of duty but only a pre-deposit for availing the right of appeal. Such amount is bound to be refunded when the appeal is allowed with consequential relief. There the Hon ble Court castigated the conduct of the department by observing In our judgment, the claim raised by the Department in the show-cause notice is thoroughly dishonest and baseless. 93. The above ratio of the Hon ble Supreme Court will equally apply to amounts paid in terms of Section 131 of the Customs Act, 1962 or under Section 35N of the Central Excise Act, 1944 as amounts that paid under these provisions are pre-deposit pending appeals though not paid as a condition for filing appeal under Section 129E of the Customs Act,1962 and Section 35F of the Central Excise Act, 1944. 94. It must be also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been handed over to this Court. Having regard to the contents of the draft circular we direct compliance with the final order impugned before us and payment of interest in terms of the draft circular. The draft circular shall be appended to and the contents form part of this order. The appeal is disposed of in view of this order any judgment of any High Court holding to the contrary will no longer be good law. (* Central Excise Act, 1944) 100. Coming to the decision of the Hon ble Supreme Court in CCE Vs. Allied Photographics India Ltd., (2004) 4 SCC 34 which was relied by the learned counsel for the respondent, it is to be noted that it is not relevant as the question of law involved in said civil appeal before the Court was as follows:- Whether a claim for refund after final assessment is governed by Section 11-B of the Central Excise Act, 1944? 101. The above decision was rendered in the context of the above question that fell for consideration before the Hon ble Supreme Court. It was in that context, the Hon ble Supreme Court made few observations. Therefore, the said decision cannot be relied by the respondent in this case. 102. The above decision is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stated above, Section 11-B dealt with the claim for refund of duty. It did not deal with making of refund. Therefore, Section 11-B(3) stated that no refund shall be made except in terms of Section 11-B(2). Section 11-B(2)( e ) conferred a right on the buyer to claim refund in cases where he proved that he had not passed on the duty to any other person. The entire scheme of Section 11-B showed the difference between the rights of a manufacturer to claim refund and the right of the buyer to claim refund as separate and distinct. Moreover, under Section 4 of the said Act, every payment by the manufacturer whether under protest or under provisional assessment was on his own account. The accounts of the manufacturer are different from the accounts of a buyer (distributor). Consequently, there is no merit in the argument advanced on behalf of the respondent that the distributor was entitled to claim refund of on-account payment made under protest by the manufacturer without complying with Section 11-B of the Act. 105. Thus, the decision of the Hon ble Supreme Court in CCE Vs. Allied Photographics India Ltd., (2004) 4 SCC 34 is not applicable to the facts of the case and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamination and testing of the imported goods. 113. Further, under Section 28C of the Customs Act, 1962, every person who is liable to pay duty on any goods shall at the time of clearance of the goods, prominently indicate in all the documents relating to assessment, sales invoice and other like documents, the amount of such duty which will form part of the price at which such goods are to be sold. In this case, the petitioner had imported the capital goods for its printing purpose. 114. Though Section 28C was not in the Act during 1987-1988 when the imported goods were assessed a duty by the proper officer under Section 17 of the Customs Act, 1962 and was incorporated only in 1991, nevertheless, indicates that only refund of excess customs duty paid or interest borne thereon as the case may be pursuant to an order of assessment was to be refunded under Section 27 of the Customs Act, 1962. 115. Only if excess duty was paid pursuant to an order of assessment under Section 17 , Section 18 or under Section 19 of the Customs Act, 1962, refund of such duty would subject to compliance of Section 27 of the Customs Act, 1962 and not the amount paid as a consequence of recovery proc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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