Customs, Excise and Gold Tribunal - Bangalore
The Commissioner Of Customs vs Motorola India Pvt. Ltd. on 4 April, 2006
Equivalent citations: 2006(109)ECC239, 2006ECR239(TRI.-BANGALORE)
JUDGMENT T.K. Jayaraman, Member (T)
1. Revenue has filed this appeal against Order-in-Appeal No. 71/2005 Cus (B) dated 30.6.2005 passed by the Commissioner of Customs (A), Bangalore.
2. In the impugned order, the Commissioner (A) allowed the Respondent's appeal filed against two Orders-in-Original along with consequential relief. In the said Orders-in-original, the Asst. Commissioner had sanctioned refund of Rs. 45,77,562/- and Rs. 42,58,312/- but credited the same to the Consumer Welfare Fund, as the Respondents failed to prove that they had not passed on the incidence of duty to their customers. However, the Commissioner (A) in the impugned order has held that the payments made by the Respondents were only deposit and hence, the bar of unjust enrichment was not applicable. He also held that the interest was not payable from the date of issue of OIAs ordering refund of the said amount paid. Revenue is aggrieved over the impugned order and therefore, filed this appeal.
3. The main contention of the Revenue is that the amount deposited by the Respondents is not that of pre-deposit made to avail the right of appeal but of an amount deposited during the course of investigation towards the probable differential duty. The case laws relied on by the Commissioner (A) relate to the pre-deposit made for availing the right of appeal under Section 35F of the Central Excise Act or Section 129E of the Customs Act. Those decisions will not be applicable to the present case. The initial payments were made during investigations of a case booked by the DRI towards differential duty likely to arise after adjudication of the case. Thus, it is very much clear that the amount paid is only duty and not pre-deposit as opined by the learned Commissioner. Hence, the refund has to pass through the test of unjust enrichment prescribed under Section 127(2)(a) of the Customs Act 1962. Further, the Commissioner for his decision relied heavily on the decision of a larger bench of the Tribunal in the case of Indian Thermoplastics (P) Ltd. v. CC, Kandla wherein it was held that the amount collected during the investigation cannot be treated as duty paid for the purpose of Section 27 of the Customs Act 1962 and as such bar of unjust enrichment is not applicable to the said refund. This view is no longer sustainable in the light of the Apex Court decision in the case of Sahakari Khand Udyog Mandal Ltd. v. CCE reported in 2005 (181) ELT 329 (SC), In the above case, the Apex Court has not made any distinction between duty and deposit, since the decision being the latest and from the highest judicial forum, the same shall be prevailed over any other decision. In the present case, the Respondents refused to accept the obligation on their part to prove that the incidence of duty has not been passed on to others and consistently held the view that the bar of unjust enrichment would not be applicable in their case. The Commissioner while ordering refund to the Respondents has also ordered for payment of interest from the expiry of three months from the date of settlement/adjudication. The refund application was submitted to the Department on 14.1.2004. It is on record that all possible efforts were made by the Department to obtain evidence from the Respondents to satisfy the test of unjust enrichment. A Show Cause Notice was also issued by the Department as an final effort to elicit the required information. As the Respondents stubbornly resisted in providing any evidence in respect of unjust enrichment, an order was passed sanctioning the refund amount but crediting to the Consumer Welfare Fund. Hence, the Commissioner's view that there was delay in refunding the amount is not correct and ordering interest to be paid from the expiry of 90 days of the order of adjudication is improper.
4. Moreover, the Commissioner (A) failed to distinguish between an adjudication order issued by the Commissioner of Customs under Section 122 of the Act and an refund order which can be made only under Section 27 of the Act. The Commissioner of Customs in his adjudication order has ordered for refund of balance amount subject to the provisions of the Customs Act 1962. As such the order of Commissioner of Customs cannot be treated as an order for refund. Hence, the payment of interest which can be made only under the provisions of Section 27A is not applicable in the present case. The claim for refund by the Respondent is incomplete in the absence of necessary proof to be submitted by him to the proper officer of Customs to show that the incidence of date had not been passed on to any other person. As such the payment of interest does not arise.
5. In the case of Mafatlal Industries Ltd. v. UOI , the Hon'ble Supreme Court has held that all claims for refund have to be preferred under and in accordance with the relevant provisions of the respective enactments before the specified statutory authorities and within the prescribed limitation -Customs Act, Section 27. As such the order of Commissioner of Customs in their OIO No. 11/2004 dated 27.2.2004 and Order dated 6.10.2003 cannot be termed as refund order as held by the Commissioner (Appeals).
6. Shri K.S. Reddy, learned JDR, who appeared for Revenue, reiterated the grounds of appeal.
7. Shri S.K. Choudhury, Consultant appeared for the Respondent and urged the following points.
(i) Supreme Court judgment in the case of ITC and Ors. 2005 (179) ELT 15 (SC) covers cases of interest on deposits made during investigation also relating to the Civil Appeal filed by the Union of India against the Larger Bench decision of the Tribunal in the case of Jayant Industries case . The Tribunal held that the amounts deposited during investigation did not attract the bar of unjust enrichment. Applying the Doctrine of Merger the above decision should be treated as having merged with the Supreme Court judgment in the ITC case.
(ii) Averment of the Revenue that the initial payment of Rs. 94,91,233/- and Rs. 1,52,55,997/- was towards differential duty likely to arise after adjudication is not correct, as can be seen from the TR 6 Challans showing the said amounts "Towards customs duty, interest and other adjudication levies".
(iii) The cases cited in Ground (b) of the Grounds of Appeal of Revenue are not relevant.
(iv) Therefore, a legal presumption of passing on the full incidence of duty under Section 28D is not invokable in the Respondent's case. Hence, the burden to prove that the incidence of these amounts have been passed on to any other person is on the department. In any case, Section 28D relates to only duty and not interest or adjudication levies.
(v) The ratio of the Supreme Court judgment in the case of Sahakari Khan Udyog Mandal relied on by Revenue is clearly not applicable, as in that case it was an admitted position that the petitioner had recovered the duty amount.
(vi) The SC in the case of UOI v. Suvidhe Ltd. 1997 (94) ELT A 159 (SC) has upheld the judgment of the Bombay High Court to the effect that the deposit made under Section 35F of CE Act, the bar of unjust enrichment is not applicable, if such amount is found refundable. It does not stand to reason when an amount of duty in terms of an adjudication/appellate order deposited for availing the right of appeal is not treated as duty, a lump sum amount deposited during investigation of a case should be treated as duty and bar of unjust enrichment apply.
(vii) The impugned order granting interest on expiry of three months at the rate of 12% is in accordance with the Supreme Court judgment in the ITC case read with Board's Circular dated 8.12.2004. Though the respondent had claimed interest in Appeal No. 45/05 from expiry of 3 months from the date of filing the refund claim. The Respondent has filed Memorandum of Cross Objection against this portion of the Commissioner's order.
(viii) Respondent has submitted certificate dated 3.4.2006 from a Chartered Accountant who has certified that the Respondent had not passed on the incidence of the said sums deposited in May 2001 to its customers or any other persons.
8. We have gone through the records of the case carefully. Revenue has filed an appeal against the impugned order of the Commissioner on the following points.
(i) Applicability of unjust enrichment with regard to amounts deposited during the course of investigation of a case.
(ii) Grant of interest for refund claimed by the Respondents.
9. The refund amount due to Respondent arise consequent to the following developments. The DRI, Bangalore undertook investigation into fulfillment of the Respondent's export obligation in respect of certain advance licenses. DRI informed the Respondent about certain short fall in their export obligation on account of certain shipping bills logged in the DEEC book more than once. In view of the anticipated short levy of duty the Respondents had deposited a sum of Rs. 94,91,233/- on 11.5.2001 towards purported duty/interest and possible adjudication levies in respect of two advance licenses. Subsequent verification of records by the Respondent revealed that there was no short fall in meeting their export obligation in respect of one of the licenses No. 7001272. Since the amount deposited included amounts relating to the above license the Respondent filed a regular refund claim to the Dy. Commissioner, Bangalore for an amount of Rs. 71,65,634/- (being the amount deposited relating to the said license.) against the total amount of Rs. 94,91,233/- deposited on 11.5.2001. The said claim was duly acknowledged by the Department on 9.11.2001. Some queries were raised by the Dy. Commissioner (Refunds) but no action was taken. In the mean time, DRI issued Show Cause Notice alleging shortfall in meeting export obligation in respect of five advance licenses including 7001272 and 7002576. The Commissioner of Customs vide his Order-in-Original No. 11/2004 dated 27.2.2004 held that the appellant had fulfilled their export obligation under license 07001272 and ordered refund of an amount of Rs. 45,77,562/-. When the Respondents requested the Asst. Commissioner to implement the Commissioner's order, the AC (Refund) rejected the claim on the ground of unjust enrichment. The Respondent filed appeal No. 45/05 which was allowed by the Commissioner of Customs (A) in the impugned order dated 30.6.2005 but with interest only on expiry of three months from the Commissioner's order dated 27.2.2004 in terms of Supreme Court judgment in ITC Ltd. case reported in 2005 (179) ELT 15 (SC) read with Board's Circular No. 802/35/2004-CX dated 8.12.2004. The Respondent's in their Cross Objection claimed interest on expiry of three months from the date of making such claim. They relied on the following case laws:
a. Super Electronics v. CCE b. Super Cassette Indus. Ltd. v. CCE c. BMP Industries 2001 (128) ELT 557 (GOI).
d. PRG International 1999 (113) ELT 751 (GOI).
The Commissioner's (A) in the impugned order dealt with another Appeal No. 44/05 of the Respondent against OIO dated 24.1.2005 passed by AC, Air Cargo Complex rejecting the refund application for refund of Rs. 45,58,312/- along with interest. This refund arose consequent to order dated 6.10.2003 issued by the Commissioner of Customs, Bangalore on the directions issued by the Customs and Central Excise Settlement Commissioner, Chennai through Final Order dated 8.9.2003.
10. It is clear that the Commissioner (A) dealt with two refund claims in respect of each of the appeal filed before him. The fact that the amounts were paid during investigation is not in dispute. The duty liability on the Respondents is settled consequent to Commissioner's order dated 6.10.2003 in respect of Appeal No. 44/05. But as regards Appeal No. 45/05, the Respondents filed the refund claim before the Asst. Commissioner as earlier as 9.11.2001 though the Commissioner passed his order on 27.2.2004. The point is that in respect of both the claims, the amounts were deposited during the course of investigation by the DRI. The Commissioner (A) has elaborately discussed the issues and come to the conclusion that the excess amount deposited after taking into account the duty liability determined by the Commissioner is in the nature of a deposit and therefore, the bar of unjust enrichment is not applicable. We agree with the learned Consultant's submission (for the Respondent) that when the duty paid during the pendency of an appeal before the appellate authority is considered as deposit, there is no reason why the amount deposited during investigation cannot be considered as deposit. We also find that the decision of the larger Bench in the case of Jayant Industries (Supra) has merged with the Apex Court's decision in the case of ITC (Supra) . Hence, the bar of unjust enrichment would not be applicable even to the amounts deposited during investigations. The contentions raised by Revenue are not tenable. Hence, we do not want to interfere with the findings of the appellate authority.
11. Once the above amounts are considered as deposits, then in accordance with Board's Circular dated 8.12.2004, the amounts due to the party should be refunded to them within a period of three months of the disposal of the appeals in the assessee's favour. In the present case, the refund amount of Rs. 52,58,312/- arose consequent to Commissioner of Customs order dated 6.10.2003. Therefore, the refund in respect of this amount ought to have been paid within three months from 6.10.2003. Since it was not paid, interest at 12% p. a. with effect from the expiry of three months from 6.10.2003 has to be paid. This is the order of the Commissioner (A) and we have no reason to interfere with it. As regards, the amount of Rs. 45,77,562/-in the other appeal before the Commissioner (A), the refund claim was originally filed even on 9.11.2001, therefore the provisions of Section 27A of the Customs Act are attracted.
Section (27A - 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, there shall be paid to that applicant interest at such rate, (not below five percent) and not exceeding thirty per cent per annum as is for the time being fixed (by the Central Government by Notification in the Official Gazette), on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty:
Provided that where any duty, ordered to be refunded under Sub-section (2) of Section 27 in respect of an 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 the (Assistant Commissioner of Customs or Deputy Commissioner of Customs) under Sub-section (2) of Section 27, the order passed by the Commissioner (Appeals), Appellate Tribunal or as the case may be, by the court shall be deemed to be an order passed under that Sub-section for the purposes of this section.)
12. A careful reading of 27A reveals that the Respondent in the second refund claim are entitled for payment of interest from the date of expiry of three months from the date of refund claim as contended in the Cross Objection by the Respondent. Hence, we are inclined to allow the Cross Objection in respect of this refund claim. Thus, Revenue's appeals are dismissed and Respondent's Cross Objection is allowed.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)