Tata Iron and Steel Co. Ltd. Vs. Commissioner of Customs (Port) - Court Judgment

Excerpt:
1.1. the present appeal is against an order passed by the commissioner of customs (appeals), kolkata (hereinafter referred to as "the commissioner (appeals)" whereby he confirmed the order dated 7th january, 2003 of "assistant commissioner of customs for appraising refund (hereinafter referred to as the "assistant commissioner") rejecting the appellant's application for refund of excess customs duty paid amounting to rs. 94,99,736/- on goods imported in march, 2002.1.2. the appellant is engaged in the manufacture of steel at its jam-shedpur factory. somewhere, in march-2002, they imported a consignment of 80 nos. of rolls with t/c rods as spare parts for its rolling mill (hereinafter referred to as the "said goods") valued at swedish kroner 765960.00 fob and filed in the edi system of.....

Judgment:
1.1. The present appeal is against an Order passed by the Commissioner of Customs (Appeals), Kolkata (hereinafter referred to as "the Commissioner (Appeals)" whereby he confirmed the order dated 7th January, 2003 of "Assistant Commissioner of Customs for Appraising Refund (hereinafter referred to as the "Assistant Commissioner") rejecting the appellant's application for refund of excess Customs Duty paid amounting to Rs. 94,99,736/- on goods imported in March, 2002.

1.2. The appellant is engaged in the manufacture of Steel at its Jam-shedpur factory. Somewhere, in March-2002, they imported a consignment of 80 nos. of Rolls with T/C Rods as spare parts for its Rolling Mill (hereinafter referred to as the "said goods") valued at Swedish Kroner 765960.00 FOB and filed in the EDI system of the Customs Department, a Bill of Entry Declaration form containing the necessary particulars including the invoice value is Swedish Kroner 765960.00 FOB. On receipt of the Check list, the same was signed by the appellant's representative and resubmitted to the Customs EDI system.

Thereafter, the Bill of Entry as generated by the EDI system and bearing No. 1545926, dated 26-3-2002 was scrutinised by the Assessing Group 5A of the Customs Department and assessed for payment of duty and clearance of the goods. Accordingly, duty of Rs. 1,13,28,477.00 (as assessed) with interest of Rs. 7,449.00 (totalling Rs. 1,13,35,926.00) was paid vide TR6 No. 99034715 dated 21-3-2002, the said goods were allowed to be given out of Custom charge after examination.

1.3. After clearance of the said goods, from the Customs control, they were received in the appellant's factory at Jamshedpur and or atound 27-3-2002 and stored. The cost of the materials including the total duty paid was entered into Stores-in-transit pending removal for use in the plant.

1.4. Appellants employ a fully computerised Enterprise Resource Planning (ERP), known as Systems Application Product ("SAP") for recording all transactions. It is an integrated system with full availability of information on line i.e. the status as at a particular time for a consignment. For procurement of imported material the system looks for a Purchase Order. Based on the purchase order, all payment whether related to custom duty or to foreign supplier (CIF Value) are recorded as "down payments" according to this system, materials received are first recorded as "stock in transit" but are not charged to the Profit and Loss Account until the materials are issued to the appropriate Cost center and also all costs accumulated within a group of Cost centers are charged to determine the cost of the finished product. In other words, the cost of an imported material including the duty paid thereon gets reflected in the Profit and Loss Account only when the material is entered into the relevant Cost center. In the present case, the subject imported goods could not be entered into the relevant Cost center due to excess duty paid thereon and were/are kept pending as "stores in transit" and are thus not charged to Profit and Loss Account. The said goods also could not be removed from the stores as the duty actually paid was found to have exceeded, the value limit earmarked for the duty level on the SAP (computerised transaction).

1.5. On scrutiny of the import documents and check mades, it was observed by the appellants that due to a mistake in the Customs EDI System Recording, there was an error in the subject Bill of Entry in respect of the "currency", instead of "Swedish Kroner" as per invoice, "Swiss franc" had been printed with the result that the total assessable value was shown as Rs. 2,23,00,150.78 instead of the correct value of Rs. 36,15,256.77, as was required to be worked out on the basis of conversion of Swedish Kroner into Indian Rupee. There was thus an excess levy and realisation of duty to the extent Rs. 94,99,376.00 on 21-3-02.

1.6. Consequently, on 14-8-2002, an application was filed by them, with the Deputy Commissioner of Customs, Group 5A, Kolkata seeking refund of amount of duty of Rs. 94,99,376.00 paid in excess along with all relevant documents. The Assistant Commissioner of Customs (ARS), Kolkata, alleged non-submission of documentary evidence regarding non-passing of the incidence of duty, to any other person and also the Certificate from the Central Excise authorities, regarding non-availment of Modvat benefit and requiring submission of reply thereto. The appellant drew attention to the fact that, they had already submitted an attested copy of the "Non-availment of Modvat Credit" certificate to the Appraising Group, along with the Refund claim. Nevertheless, another copy of the same was sent and they intimated the Assistant Commissioner that the original thereof would be produced during the personal hearing. As regards the incidence of duty the appellant explained that the goods imported were "Capital" in nature and were not and could not be taken into their stock. As the duty was wrongly paid, as aforesaid on 7.11.2002 the appellant's representative appeared before the Assistant Commissioner and explained the issue of the passing of incidence of duty with documents. It was shown that the incidence of duty has not been passed on to any other person, as the goods had not been taken into the cost accounts. The appellant followed this up by its letter dated 8.11.2002 to the Assistant Commissioner, wherein the appellant explained in details its accounting procedure including separate record on the SAP for the imported goods in question, with documentary evidence in support thereof. In response to a letter dated 14.11.2002. The Assistant Commissioner seeking for documentary evidence to show that the cost of the imported material was not taken into Books of Account in the Profit and Loss Account and that the incidence of duty had not been passed on to the buyers during 2001-2002 and a copy of the Balance Sheet and the break up showing non-accounting of the material in question. The appellant submitted its Annual Report as on 31.3.2002, along with enclosures, under cover of its letter dated 20.11.2002, to show that the amount of Rs. 94,99,376.00 was lying as advance in "stores in transit" as on 31.3.2002 and hence not included in the Profit and Loss Account as on 31.3.2002 and also that the incidence of the excess duty had not been passed on to any other person. The above were personally explained to the Assistant Commissioner by the appellant's representative.

1.7. By a letter dated 18.12.2002, the Assistant Commissioner informed the appellant that refund cannot be given unless the assessment order on the Bill of Entry is set aside by the appellate authority and that in this case no appeal had been filed and he asked for clarification from the appellant. A personal hearing was granted by the Assistant Commissioner on 31st December, 2002 and availed.As regards unjust enrichment the appellant explained that the question of passing on the incidence of the excess duty paid on the said goods did not arise since the goods had not been taken into use and was still lying in store. In this connection, the appellant referred to the different records/documents already submitted by it, as aforesaid. However, they were also agreeable to execute an indemnity bond. However, by Order (Original) No. S107-17/2002-ARS, dated 7.1.2003 the Assistant Commissioner of Customs, rejecting the refund claim.

1.8. Aggrieved by the said Order, they preferred an appeal before the Commissioner (Appeals). On 13th October, 2003, they received Order-in-appeal No. KOL/CUS/95/CKP/03, dated 18th September, 2003 passed by the Commissioner (Appeals) rejecting the appeal after Observing: (i) The issue in the present appeal relates to admissibility of refund claim, on account of erroneous computation of assessable value in the Bill of Entry. The brief facts of the case are that the appellant imported goods, viz. 80 nos. Rolls which T/c Rods for the purpose of captive use in their Plant. The appellant submitted that though the invoice value was indicated in Swedish Kroner, inadvertently, the same had been printed/computed in EDI in 'Swiss Franc', which resulted in erroneous assessable value and consequential excess payment of duty by them. However, the refund claim of the appellant was rejected by the lower authority on the ground that the assessment on the relevant Bill of Entry had not been appealed against and accordingly, the refund claim would not be admissible principle of unjust enrichment. Being aggrieved by the impugned order, the appellant has come up in appeal.

(ii) Admittedly, in the present case, there was a slip/clerical error, in as much as the exchange value had been wrongly computed, on account of conversion in wrong currency. In terms of Section 154 of the Customs Act, 1962, such clerical error/accidental slip or omission can be corrected at any time. However, in the event, the correction of omission/accidental slip has implication for refund of duty or entails grant of refund, the same is to be governed under the provisions of Section 27 of the Act, including the period of limitation and principle of unjust enrichment incorporated therein.

Further, it is seen that the assessment order on the Bill of Entry had attained finality and the same was not appealed against. Law is well-settled that refund contrary to the assessment in the Bill of Entry would not be admissible. The following case laws are relied upon in this regard: (iii) In view of the rulings mentioned above, the refund claim of the appellant does not merit any consideration. Though there are a few decisions of Hon'ble Tribunal in favour of the appellant, in view of the categorical decision of Constitutional Bench of Hon'ble Apex Court in the case of M/s. Mafatlal Industries Ltd. refund of duty cannot be claimed, unless the assessment order is set aside according to law. The decision of Constitutional Bench of Hon'ble Apex Court in the case of M/s.

Mafatlal Industries (Para No. 70) as cited above, shall govern the present issue of admissibility of refund. In other words, since the assessment in the Bill of Entry had not been appealed against/set aside, no question of refund/consequential relief would arise in the matter. In the case , Hon'ble Tribunal held that their Commissioner (Appeals) had no jurisdiction to upset the original assessment which was not challenged under a regular appeal, while considering an application for refund. The instruction issued by C.B.E.C. dated 11.9.2001 (Manual of Instructions/Chapter 3/Para 17) also laid down the requirement of appeal against an adverse assessment order. Since the appellant did not file any appeal against the assessment order, pursuant to which duty was paid by them and neither duty was paid under protest, the refund claim is not legally admissible.

(iv) In the present case, the appellant imported the impugned goods which are in the nature of capital goods and used those captively in the manufacture of final products. Presuming that the refund of duty is admissible, such refund in case of captive utilisation of goods, would be barred by the principle of unjust enrichment. Hon'ble Apex Court in the case of M/s. Solar Pesticides Pvt. Ltd. 2000 (116) E.L.T 401 (S.C.) inter alia held that passing on of duty incidence indirectly by way of loading on to price of finished goods, would attract the bar of unjust enrichment under Section 27 of Customs Act, 1962. In Para No. 20/21 of the said order, Hon'ble Apex Court held as under: To claim refund of duty, it is immaterial whether the goods imported are used by the imported himself and the duty thereon passed on to the purchaser of the finished products or that the imported goods are sold as such with the incidence of tax being passed on to the buyer. In either case, the principle of unjust enrichment will apply and the person responsible for paying the import duty would not be entitled toget the refund because of the plain language of Section 27 of the Act".... Therefore, the principle of unjust enrichment incorporated in Section 27 would be applicable in respect of imported raw material and captively consumed in the manufacture of a final product.

Relying on the Hon'ble Apex Court's decision in Solar Pesticides Ltd. and Tribunal's earlier order in case of M/s. Punj & Sons Co.

Ltd. v. CC, Hon'ble Tribunal in the case reported in 2001 (135) E.L.T. 878 (Tri.) and clearly held that the doctrine of unjust enrichment applies to refund of duty paid on capital goods, which are captively consumed in the manufacture of final product. The ratio of the aforesaid decisions of Hon'ble Apex Court and Hon'ble Tribunal, is fully applicable to the facts of the present case.

(v) Since the present case relates to captive utilisation of capital goods for manufacture of final product, the appellant should have adduced proper and relevant documentary evidence to prove that the duty incidence under claim, had not been passed on to the buyer of the final product. That the excess duty incidence paid on the impugned goods had not been taken into account in the costing/price structure of the final products sold during the relevant period, is not corroborated by any evidence on record. Since the appellant failed to produce any documentary evidence to prove that the duty incidence under claim was not passed on to the buyer of goods and the presumption under Section 28D of the Act being that the appellant had passed on the duty incidence to the buyers, the present refund claim shall be hit by the bar of unjust enrichment.

Hence, even presuming that the appellant may have a case of refund otherwise, the said refund claim would be barred by the principle of unjust enrichment. Thus, both on the question of merit as well as principle of unjust enrichment, the, claim of the appellant is not legally sustainable/maintainable.

2.1. The Customs Manual of Instructions has been issued on 11th September, 2001 by the Central Board of Excise & Customs (in short "the Board"). In Chapter 15 of the said Manual it has been clarified that in cases where excess payment of duty has been made due to incorrect assessment by the Customs authorities, the importer must file a claim under Section 27 of the Customs Act for refund of the excess amounts.

The relevant portion of the Manual [Para 1 of Ch. 15] is produced herein below: On import and export of goods, at times, it is found that the duty had been paid in excess of what was actually leviable on the goods.

Such excess payment may be due to lack of information on the part of the importer/exporter or non-submission of documents required for claim of lower value or rate of duty. Sometimes, such excess payment of duty may be done to shortage/short landing, pilferage of goods or even incorrect assessment of duty by Customs. In such cases, refund of excess amount of duty paid can be claimed by the importer or exporter. If any excess interest has been paid by the importer/exporter on the amount of duty paid in excess, its refund claim can also be claimed. Section 27 of the Customs Act, 1962 refers in this regard" (Emphasis supplied). The impugned order of the Commissioner (Appeals) conspicuously glosses over the said binding Instructions of the Central Board of Excise Customs while conveniently referring to another Chapter and para thereof to support his patently erroneous finding.

It is settled law that Circulars and Instructions issued by the Central Board of Excise & Customs are binding on the Department unless they are contrary to the law laid down by the Supreme Court on the issue. In this connection reliance be made on the following decisions of the Supreme Court:Fenner India Ltd. v. Collector of Central ExciseHindustan Aeronautics Ltd. v. Commissioner of Income-tax by the ld. Advocate is well founded. Commissioner (Appeals) was bound to follow the Instructions of the Board as in the Manual. There is no decision of the Supreme Court, including the one referred to in the said order and the one which have laid down that even in case like this as referred in the Board's Manual of instruction, there cannot be any refund, without assailing the Assessment Order. This order, therefore, being contrary to the said binding Instructions of the board is invalid and on this ground required to be set aside.

2.2. In the present case, as would appear from Paragraph 3 of the said order even according to the Commissioner (Appeals) and, as the case was, there was "admittedly" a "slip/clerical error" in as much as the exchange value has been wrongly computed on account of conversion in wrong currency". Section 154 of the Act clearly provides that [as acknowledge by the Commissioner (Appeals) also] "such clerical error/accidental slip or omission can be corrected at any time". In the premises the question of filing any appeal against the assessment order by the appellant in the present case, in any event, would not arise.

The assessing authority can amend an order of assessment, as far as clerical slips/errors are concerned. The respondent Customs authorities, had the authority and consequently a duty, to correct the said "admitted" "clerical error/accidental slip" as soon as the same was brought to their notice irrespective of the status of an order of assessment on a Bill of Entry. On making of such correction under Section 154 of the Act, consequential return of amount of duty of customs would be available to an importer and would require to be made is the mandate of law as laid down.

2.3. (a) The Commissioner (Appeals) is to be found to have erred in holding that the refund claim of the appellant did not merit any consideration in the light of the decisions referred by him in para 3 of the said order. For the reasons arrived herein above, the said decisions, as well as the decision of the Supreme Court in Priya Blue Industries Ltd. v. Commissioner of Customs (Preventive) , have or can have no manner of applicability to the present case of amendments of a Clerical Mistake in exercise of statutory provisions of Section 154 of Customs Act, 1962. Reliance upon the Constitution Bench decision of the Supreme Court in the case of Mafatlal Industries Ltd. v. Union of India thereof by the Commissioner (Appeals) is misplaced.

(b) None of the decisions, referred to by the Commissioner (Appeals), involve a case like the present case where "admittedly" even according to the Commissioner (Appeals), excess duty amounts were realised or paid as a consequence of a "slip/clerical error due to wrong computation of the Foreign Exchange rates of conversion, and where Section 154 of the Act is applicable if in the event even in such cases also it was incumbent upon an assessee to file an appeal under, inter alia, Section 128 of the Act, only whereupon the said clerical error/slip would be corrected, there was or could be no requirement or necessity of Section 154 of the Act. The presence of Section 154 in the Act, clearly evidences the intention of the legislature to the contrary. In such cases the corrections could or are to be made "at any time" and therefore there is no need for preferring any appeal to effect corrections in the decision or order of the concerned Customs authority, which would obviously includes and has to include an assessment orders made, by endorsement on the Bill of Entry or otherwise.

(c) Commissioner (Appeals) has erred in holding that the appellant had failed to produce any documentary evidence to prove that the duty incidence claimed as refund was not passed on to the buyer of the goods and therefore even otherwise the refund claim was barred by the principle of unjust enrichment. This finding of the Commissioner (Appeals) ex facie demonstrates patent non-application of mind and/or closed mind with which the said order has been passed as would be evident from the materials on record, but also from the order of the Assistant Commissioner dated 7th January, 2003, which was before the Commissioner (Appeals) wherein it could be seen head "Discussions and Findings" that nowhere the Assistant Commissioner alleges or states that the appellant had not submitted documentary evidence demonstrating non-passing of the duty amount claimed as refund in the present case.

The following finding of the Assistant Commissioner and the reason because of which he had purported to deny the valid and legal refund claim of the appellant (at page 3 thereof).

The claimant were alleged that they passed on incidence of duty to other persons. In this respect they stated that they have not taken the amount of claim in their profit and loss account therefore there is no question of passing on incidence to duty to any other person.

In this regard I find that the assessee had submitted balance sheet for the year 2001-02 and duty was paid during this year as on 21.03.02. It is not understood why they have not taken the amount in their books of account under profit and loss account as they could have taken the correct amount in their expenditure account but they did not do so and it cannot be ruled out if the claim in question is allowed, the total duty paid under the above Bill of Entry would be the part of the costing of the finished goods in the next financial year. Hence, it appears that unless the correct amount is shown in the profit and loss account no refund can be given as possibility of passing on in incidence of duty under claim to their buyers by charging in their profit and loss account in the financial year 2002-03 cannot be ruled out. The goods are lying with the claimant and ultimately the cost including incidence of duty would be part of the expenditure incurred on the finished goods. They have also failed to establish by documentary evidence whether the incidence of duty under claim was not taken into account during 2002-03. Nothing has prevented them to produce such documents for non-passing on incidence of duty during running financial year 2002-03 (till the issue of this order). In one another case of refund of Rs. 53,95,563/- the claimant has already passed on incidence of duty under claim to their buyers and also filed the claim with this office. The claimant in that case has admitted categorically the fact that they passed on incidence of duty to other person. I have already passed an order vide Order-in-Original No. 01/2003-ARS, dtd.

1.1.03 rejecting the claim. Similarly in this case the incidence of duty under claim would be passed on later on.

do not support the findings. The Computer System has classified the goods 'in transit'. Therefore, the incidence could not in any case, it is to be held and it is clear and evident that the categorical finding of the Assistant Commissioner was that the incidence of duty under claim had not been passed on to any customer by the appellant under the agreement, but would be "passed on later on". When it is clear and apparent that duty incidence had not been passed on by the appellant, then they were entitled to refund in accordance with Section 27(2) of the Act. The refund can not be denied on the presumptuous ground that the appellant would pass on the same "later on". Section 27 of the Act does not provide for denial of refund on any such hypothetical conclusions. The Assistant Commissioner, while referring to another case of refund in which order of rejection was passed by him by his order dated 1st January, 2003 has incorrectly recorded facts. In the other case, the appellants initially filed the refund claim on 22.9.98 when the imported goods were still lying in their stores unused and the question of passing the incidence of the duty to others did not arise at that time. However, when on appeal the case was remanded back to the original authority, the appellant informed the Assistant Commissioner of Customs (ARS) that they had since capitalised the excess duty in the gross-block and a depreciation @ 5.28% had been claimed on the excess duty, Refund was denied on that ground of unjust enrichment. No information was suppressed by the appellant and hence no mala fide could be imputed. This would appear from, inter alia, the said order dated 1st January, 2003 of the Assistant Commissioner itself.

3.1. The appeal is therefore, to be allowed, the impugned order of the Commissioner (Appeals) is to be set aside and the respondent Customs authorities directed to refund the excess duty of Rs. 94,99,376/- at the earliest.