Madras High Court
Commissioner Of Customs (Airport) vs Customs Excise & Service Tax on 19 April, 2017
Author: Rajiv Shakdher
Bench: Rajiv Shakdher, R.Suresh Kumar
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 19.04.2017
CORAM
THE HONOURABLE MR.JUSTICE RAJIV SHAKDHER
And
THE HONOURABLE MR.JUSTICE R.SURESH KUMAR
C.M.A.Nos.597 to 599 of 2005
Commissioner of Customs (Airport)
Air Cargo Complex,
Meenambakkam,
Chennai 600 027. ...Appellant in all CMAs
Vs.
1. Customs Excise & Service Tax
Appellate Tribunal
West Block No.2,
R.K.Puram,
New Delhi 110 066.
2. M/s. LUCAS TVS Ltd.
Padi,
Chennai 600 050. ... Respondents in all CMAs
Common Prayer:
Appeals filed under Section 130 of the Customs Act, against the Final Order Nos.820/04-NBA, 821/04-NBA and 822/04-NBA respectively, dated 05/08/2004 passed by the Hon'ble Customs Excise & Service Tax Appellate Tribunal, New Delhi.
For Petitioner : Mr.A.P.Srinivas
For Respondents : Mr.P.Sridharan for
M/s.Lakshmi Kumaran
C O M M O N J U D G E M E N T
(Order of the Court was delivered by RAJIV SHAKDHER,J.)
1.These are appeals preferred by the Revenue against the common judgment and order dated 05.08.2004 passed by the Customs, Excise and Service Tax Appellate Tribunal (in short, the Tribunal).
2.These appeals were admitted on 10.03.2005 and the following questions of law were framed, for consideration of this Court:
1. Whether the CESTAT is right in holding that the importer is entitled to get refund claim, even though the importer has made the refund claim beyond the limitation period as prescribed under Sec.27 of Customs Act, 1962?
2. Whether the CESTAT is right in holding that periodicity of 6 months as envisaged under Section 27 of Customs Act, 1962 is not applicable to the refund amount realised by the Revenue by enforcing Bank Guarantee as this does not represent any duty under Section 27 of the Customs Act?
3.We may note that the parties in the three appeals are identical.
3.1.In order to adjudicate upon the appeals, which raise common questions of law, the following facts are required to be noticed:
3.2.Respondent no.2, it appears, imported various capital goods and assessories under the EPCG Scheme. Accordingly, having regard to the said Scheme, clearances were allowed at a concessional rate of duty of 15% subject to the conditions specified in the Custom's Notification No.110/95, dated 05.06.1995.
3.3.In terms of the aforementioned Notification, respondent no.2 executed three Bank Guarantees of different amounts, as also, bonds. One of the conditions stipulated qua, respondent no.2 was that it was required to fulfil the stipulated export obligation, within a period of five years, from the date of issuance of EPCG Licenses.
4.Evidently, notice was issued to respondent no.2 by the concerned Authorities, to submit documents evidencing fulfilment of export obligation.
4.1.Respondent no.2, it appears, submitted the documents in March, 1999, evidencing completion of export obligation, within the stipulated period of five years. As a matter of fact, respondent no.2 claims that the export obligation was completed within 1996-97.
4.2.This fact is not disputed by the appellant, before us, save and except, the fact that the Export Obligation Discharge Certificate (in short, EODC) had not been submitted by respondent no.2 to the concerned Authority i.e., Joint Director General for Foreign Trade (in short, JDGFT).
5.It is, in this background, that three show cause notices (SCN) of different dates were issued to respondent no.2, i.e.,SCN dated 12.02.2001 (which is relatable to CMA 597/2005); SCN dated 02.12.1997 (which is relatable to CMA 598/2005); and SCN 05.12.1997 (which is relatable to CMA 599/2005).
5.1.It appears, that after respondent no.2 had been given due opportunity, three separate orders - in - original of even date, i.e., 30.04.2003 were passed qua, the aforementioned SCNs.
5.2.It appears, that pending the adjudication of the said SCNs, the appellant invoked the three Bank Guarantees, furnished by respondent no.2, on 04.08.2001. The three Bank Guarantees - in - issue bear the following details:
C.M.A.No.
BG No. & Date
Amount Encashed For Which Refund Sought (in Rs.)
597/2005
G/95-96/182 dated 01.12.1995
7,00,000
598/2005
G/95-96/62 dated 19.07.1995
4,43,000
599/2005
G/95-96/126 dated 19.09.1995
6,82,630
6.The record also shows that after respondent no.2 had filed the documents and/or, applications with JDGFT to obtain EODC from the JDGFT. Three separate applications were made, the details of which are as follows:
C.M.A.No.
Date on which EODC applied
597/2005
25.03.1999
598/2005
25.03.1999
599/2005
21.12.2000
6.1.Admittedly, EODC's were issued on the following dates: 02.04.2002 (relatable to CMA 597/2005); 07.06.2001 (relatable to CMA 598/2005) and 06.05.2002 (relatable to CMA 599/2005).
6.2.EODC's were also submitted to the appellant on the following dates:02.07.2002 (relatable to CMA 597/2005); 09.06.2001 (relatable to CMA 598/2005) and 02.07.2002 (relatable to CMA 599/2005).
6.3.What also emerges from the record is that the period of five years, in respect of each of the three licenses, which were, incidentally, issued in 1995, the due date for fulfilment of export obligation would have expired in different months in 2000. The exact details with regard to the aforesaid aspects are set out hereinafter:
C.M.A.No.
EPCG License No. & Date
Due Date For Fulfillment Of Export Obligation
597/2005
2123906 dated 26.10.1995
25.10.2000
598/2005
2123833 dated 06.06.1995
05.06.2000
599/2005
2123603 dated 31.08.1995
30.08.2000
7.It appears, that pursuant thereto, as indicated above, since the necessary documents had been filed, three separate applications, for refund were lodged by respondent no.2. These applications, bear an even date i.e., 21.04.2003.
8.However, despite these facts, obtaining in the matter, respondent no.2, failed in its appeal, preferred before the Commissioner of Customs (Appeals).
8.1.The Commissioner of Customs (Appeals), vide a common order dated 31.12.2003, rejected the appeals, on the ground that the refund claims had not been preferred, within the period of limitation, as then obtaining under Section 27 of the Customs Act, 1962 (in short the "Act").
8.2.It is, against this common order passed by the Commissioner of Customs (Appeals), that respondent No.2 preferred appeals, before the Tribunal. The Tribunal, as indicated right at the outset, has passed a common order, in respect of the three appeals, preferred before it, by respondent no.2.
8.3.The Tribunal, has in sum, held that at the point in time, when the Revenue encashed the Bank Guarantee, on account of non-production of the EODC's by respondent no.2, it could not be said that it was realizing import duty from respondent no.2, for failure to fulfil export obligation. The amount realized by the Revenue, by way of encashment of Bank Guarantee was not duty and consequently, provisions of Section 27 of the Act, were not applicable.
8.4.In coming to this conclusion, the Tribunal relied upon the judgment of the Supreme Court in Oswal Agro Mills Limited Vs. Assistant Collector of Central Excise, Ludhiana, 1994 (70) E.L.T. 48 (S.C.).
8.5.It is, against this order, that the Revenue, as adverted to above, has perferred the present appeals.
9.Mr.Srinivas, who appears for the Revenue, submits that the order passed by the Tribunal, is erroneous for the following reasons:
(i)That the Bank Guarantee was encashed towards the duty amount, as, at the relevant point in time, requisite documents had not been furnished, which would have entitled respondent no.2, to claim exemption under the aforementioned Notification, i.e., Notification No.110/95.
(ii)The Tribunal erred in applying the judgment of the Supreme Court in the matter of Oswal Agro Mills Limited, in as much as, the ratio of the said judgment was not applicable to the facts of the instant case.
9.1. In support of his submissions, the learned counsel has relied upon a series of judgments, the details of which, are set forth hereafter:
(i)ITW Signode India Ltd. Vs. Assistant Commissioner of Customs and Central Excise., Hyderabad, 2000 (122) E.L.T.651 (A.P.);
(ii)Elecon Engineering Co. Ltd., Vs. Union of India, 2002 (146) E.L.T. 301 (Guj.);
(iii)Daewoo Motors India Ltd. Vs. Union of India, 2003 (153) E.L.T. 32 (S.C.);
(iv)Commissioner of Customs, Kochi Vs. Tollin Rubbers (P) Ltd., 2014 (302) E.L.T. 341 (Ker.);
(v)DCW Ltd. Vs. Union of India, 2015 (324) E.L.T.702 (S.C.); and
(vi)Ruchi Soya Industries Ltd. Vs. Union of India, 2016 (336) E.L.T. 423 (Guj.)
10.On the other hand, the learned counsel for respondent no.2, has largely relied upon the judgment of the Tribunal, in resisting the appeals filed by the Revenue.
11.We have heard the learned counsels for the parties and perused the record.
12.According to us, what clearly emerges is that respondent no.2 had been issued three licenses between June, 1995 and October, 1995, for importing capital goods at a concessional rate of duty. This facility could be made available to respondent no.2, by virtue of the provisions of Notification No.110/1995. Admittedly, under the EPCG Scheme, respondent No.2, had a leeway of five years for completing the export obligation.
12.1.Concededly, the export obligation qua, each of the three licenses undertaken by respondent no.2, was discharged between the period 1996-97. The requisite documents, to demonstrate the fulfilment of export obligations qua, each of the three licenses issued to it, were also submitted by March, 1999. The only document, which, respondent no.2 was unable to place before the appellant, was the EODC, which had to be issued by the JDGFT.
12.2.As a matter of fact, respondent no.2 had applied for issuance of EODC with respect to two licenses, as is indicated above, in our narration, on 25.03.1999, while qua the third license, the application had been made on 21.12.2000.
12.3.Admittedly, the EODC was issued to respondent no.2, vis-a-vis, each of the three licenses, between June, 2001 and May, 2002. The exact dates, qua which, are set out herein above.
12.4.The EODCs' were thereafter submitted to the appellant between June, 2001 and July, 2002. The dates, in this behalf, are also indicated by us, herein above.
13.Therefore, quite clearly, in so far as respondent no.2 was concerned, it not only fulfilled the export obligation, well within the time frame, provided under the EPCG Scheme, but also furnished all documents in that behalf.
14.The delay with regard to the submissions of EODC, in our view, could not be attributed to respondent no.2, as requisite steps had been taken by it, immediately after, fulfilment of export obligation by furnishing other relevant documents, which would have demonstrated that the export obligation in point of fact stood fulfilled.
15.The narration of facts, set out above, would show that the appellant infact had also discharged the bond and/or cancelled the bond, once, documents evidencing export had been submitted by respondent no.2 in March, 1999. Therefore, it is not quite understood by us, as to why, the Bank Guarantees in issue, were invoked and encashed by the appellant, after the bond has been cancelled.
16.Be that as it may, the only explanation, perhaps, which is available, and that, which emerges from the record is, that, at the point in time, the Bank Guarantees were encashed, which was on 04.08.2001, in at least, two out of the three cases the EODC's were not furnished to Respondent No.2 for onward submission to the appellant.
17.The fact remains, as indicated above, that EODCs were thereafter submitted, upon being furnished and refund claims were lodged by respondent no.2 to retrieve, what was, in our view, money retained by the appellant, in the form of security.
18.Mr.Srinivas's argument that the Bank Guarantees were encashed towards payment of duty, is, according to us, completely fallacious, as the moment EODCs were furnished, the said EODC would relate back to the date, when, the import was made. The EODC's and other import documents, when read together, even according to the appellant, would demonstrate that respondent No.2 had complied with the conditions of Notification No.110/95 and, was, therefore, entitled to avail of the benefit of concessional rate of duty.
19.In our view, there is no error, in the approach adopted by the Tribunal. The reliance by the Tribunal on the judgment of the Supreme Court rendered in Oswal Agro Mills Limited, is also in order. The relevant observations made by the Supreme Court are contained in paragraphs 9 and 10; which, for the sake of convenience are extracted hereafter:
9. Section 11 B applies when an assesses claims refund of excise duty. A claim for refund is a claim for repayment. It presupposes that the amount of the excise duty has been paid over to the excise authorities. It is then that the excise authorities would be required to repay or refund the excise duty.
10. The question, therefore, is whether it can be said that the furnishing of a bank guarantee for all or part of the disputed excise duty pursuant to an order of the court is equivalent to payment of the amount of excise duty. In our view, the answer is in the negative. For the purposes of securing the Revenue in the event of the Revenue succeeding in proceedings before a Court, the Court, as a condition of staying the demand for the disputed tax or duty, imposes a condition that the assesses shall provide a bank guarantee for the full amount of such tax or duty or part thereof. The bank guarantee is required to be given either in favour of the principal administrative officer of the Court or in favour of the concerned Revenue authority. In the event that the Revenue fails in the proceedings before the Court the question of payment of the tax or duty, the amount of which is covered by the bank guarantee, does not arise and, ordinarily, the Court, at the conclusion of its order, directs that the bank guarantee shall stand discharged. Where the Revenue succeeds the amount of the tax or duty becomes payable by the assesses to the Revenue and it is open to the Revenue to invoke the bank guarantee and demand payment thereon. The bank guarantee is security for the Revenue, that in the event the Revenue succeeds its dues will be recoverable, being backed by the guarantee of a bank. In the event, however, unlikely, of the bank refusing to honour its guarantee it would be necessary for the Revenue or, where the bank guarantee is in favour of the principal administrative officer of the Court, that officer to file a suit against the bank for the amount due upon the bank guarantee. The amount of the disputed tax or duty that is secured by a bank guarantee cannot, therefore, be held to be paid to the Revenue. There is no question of its refund, and Section 11B is not attracted.
(Emphasis is ours)
20.We must indicate that Mr.Srinivas, has submitted that the said judgment is not applicable, as the Bank Guarantees were furnished pursuant to an interim order.
20.1.According to us, the ratio of the judgment is that the purpose for which a Bank Guarantee is furnished, has to be examined keeping in mind the background facts and the reason, why it was furnished in the first place. If the Bank Guarantee is furnished, as in this case, in the form of a security, towards fulfilment of an obligation, then surely, provisions of Section 27 of the Act will not apply. That was exactly, what the Supreme Court has also said in Oswal Agro Mills Limited.
20.2.Furthermore, we find that a similar view has been by two Division Benches of this Court in: (i) Commissioner of Customs (Exports), Chennai Vs. JRAJ Exports (P) Limited, 2007 (217) E.L.T. 504 (Mad.) and, (ii) Commissioner of Customs, Chennai Vs. Aristo Spinners Pvt. Ltd., 2008 (226) E.L.T. 42 (Mad.).
20.3.A Single Judge of this Court, has also come to a similar conclusion, as regards the applicability of the Section 27 of the Act in somewhat comparable circumstances in the matter of: Vamadev Exports Vs. Commissioner (Appeals), Chennai, 2015 (325) E.L.T.748 (Mad.).
21.According to us, in the given facts and circumstances of the case, we find that the said judgments are applicable and we have no reason to take a different view qua a similar issue.
21.1.Besides this, as noted above, Mr.Srinivas, also relied upon the judgment of the Supreme Court in DCW Limited Vs. Union of India, 2015, (324) E.L.T. 702 (S.C.), which according to us, is clearly distinguishable as in that case, the Bank Guarantee furnished was encashed towards duty, which had to be paid by the Assessee.
21.2.The other judgments, which have been relied upon by Mr.Srinivas, to which, we have made a reference above, also adopt the same reasoning.
21.3.Therefore, in our opinion, what has to be borne in mind, is as to the nature of the amount deposited in whichever form. If, the amount deposited, is, towards security, surely, once the Assessee succeeds, he is entitled to seek restitution. Restitution, in such like circumstances, is not covered by Section 27 of the Act.
22.Having regard to the aforesaid reasons, the two questions of law framed in the matter, have to be answered in favour of the Assessee/ respondent no.2 and against the Revenue.
23.The appeals are accordingly dismissed. Cost will follow the result.
[R.S.A.,J.] [R.S.K.,J.]
19.04.2017
pri/sli
Speaking order / Non Speaking order
Index: Yes / No
Internet: Yes / No
To
1.The Customs Excise & Service Tax
Appellate Tribunal
West Block No.2,
R.K.Puram,
New Delhi 110 066.
RAJIV SHAKDHER,J.
AND R.SURESH KUMAR,J.
pri/sli C.M.A.No.597 to 599 of 2005 19.04.2017