M/S Dsm Sinochem Pharmaceuticals India ... vs Commissioner Of Customs (Imports), ...

(Arising out of Order-in-Appeal No. 528(CRC-IIA)/2014(JNCH)IMP-493 dated 27.2.2014 passed by the Commissioner of Customs (Appeals), Mumbai-II).

For approval and signature:

Honble Shri Anil Choudhary, Member (Judicial)

======================================================

1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy : Seen of the order?

4. Whether order is to be circulated to the Departmental : Yes authorities? ======================================================

M/s DSM Sinochem Pharmaceuticals India Pvt. Ltd. Appellant

Vs.

Commissioner of Customs (Imports), Mumbai-II Respondent

Appearance: Shri Ashok Dhingra, Advocate with Ms. Sonia Gupta, Consultant for Appellant

Shri Chatru Singh, AC (AR) for Respondent

CORAM: SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL)

Date of Hearing: 23.01.2015

Date of Decision: 23.01.2015

ORDER NO.

Per: Shri Anil Choudhary

The appellant M/s DSM Sinochem Pharmaceuticals India Pvt. Ltd. is importer and manufacturer of bulk drugs and subsequent to sale in India, they had filed refund claim, which are mentioned as follows: -

Sr. No. B/E No. & date TR-6 challan No. & date Date of submission SAD claimed (Rs.)

1. 861122 24.9.2010 10635098 27.9.2010 11.02.2013 25,413/-

2. 4372498 17.8.2011 2001785621 18.8.2011

-Do-

53,717/-

3. 5749812 17.1.2012 DEPB Lic. No. 2210012338 22.12.2012

-Do-

2,39,232/-

The appellant is aggrieved by the rejection of its refund claim on the ground of limitation.

2. The brief facts are that the importer was required to deposit Special Additional Duty (SAD) in lieu of Sales Tax at the time of import under Section 3(5) of the Customs Tariff Act, 1975. Vide Notification No. 102/2007-Cus dated 14.9.2007, the Central Government in exercise of powers under Section 125, had provided for exemption of SAD on all goods when imported for subsequent sale subject to terms and conditions as follows: -

2. The exemption contained in this notification shall be given effect if the following conditions are fulfilled:

(a)?the importer of the said goods shall pay all duties, including the said additional duty of customs leviable thereon, as applicable, at the time of importation of the goods;

(b)?the importer, while issuing the invoice for sale of the said goods, shall specifically indicate in the invoice that in respect of the goods covered therein, no credit of the additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 shall be admissible;

(c)?the importer shall file a claim for refund of the said additional duty of customs paid on the imported goods with the jurisdictional customs officer;

(d)?the importer shall pay on sale of the said goods, appropriate sales tax or value added tax, as the case may be;

(e)?the importer shall, inter alia, provide copies of the following documents alongwith the refund claim :

(i) document evidencing payment of the said additional duty;

(ii) invoices of sale of the imported goods in respect of which refund of the said additional duty is claimed;

(iii) documents evidencing payment of appropriate sales tax or value added tax, as the case may be, by the importer, on sale of such imported goods.

3. The jurisdictional customs officer shall sanction the?refund on satisfying himself that the conditions referred to in para 2 above, are fulfilled.

2.1 Subsequent to this notification, the Central Government issued another Notification No. 93/2008-Cus dated 1.8.2008 under Section 25(1) of the Customs Act, wherein clause 2(c) of Notification No. 102/2007 was substituted as follows: -

(c)?the importer shall file a claim for refund of the said additional duty of customs paid on the imported goods with the jurisdictional customs officer before the expiry of one year from the date of payment of the said additional duty of customs;.

(emphasis supplied)

Thus, the net effect of subsequent notification was that the time limit for refund of SAD was provided, being before expiry of one year from the date of payment of SAD. The claims of the appellant was rejected by the Assistant Commissioner of Customs vide Order-in-Original dated 08.03.2013 on the ground that out of two Bills of Entry, the earlier duty paid challan is dated 27.09.2010 and the refund application has been filed beyond a period of one year from the said date in terms of Notification No. 93/08 and secondly, the importer has also filed SAD refund claim for Bill of Entry under DEPB scheme as detailed in Sr. No. 3 of the table quoted above, is not within the time permissible under Boards Circular No. 10/12, where the time is permitted upto 30.6.2012.

2.2 Being aggrieved the appellant had preferred appeal before the Commissioner (Appeals), who vide the impugned order upheld the Order-in-Original rejecting the refund claim holding that the same is time barred vide Notification No. 102/07 read with Notification No. 93/08. Being aggrieved, the appellant is before this Tribunal.

3. The learned Counsel for the appellant urges that the issue of time limit is no more res integra and the same has been considered by the Hon'ble Delhi High Court in the case of Sony India Pvt. Ltd. Vs. Commissioner of Customs, New Delhi  2014 (304) ELT 660 (Del), wherein the Hon'ble High Court has considered the question of time period of limitation in filing the refund claim, specified in the impugned Notification No. 93/08-Cus, be made applicable with retrospective effect, in absence of the limitation period in the original Notification No. 102/07-Cus, in respect of goods imported prior to the issue of the impugned notification. The facts in the case of Sony India before Hon'ble High Court were that the appellant had imported some items between 1.12.2007 to 5.12.2007. Vide Notification No. dated 1.8.2008 the time limit of one year was prescribed for refund, from the date of payment. The Hon'ble High Court, taking into account the provisions for payment of additional duty under Section 3(5) of the Customs Tariff Act and also the Notification, have observed as follows: -

12. The provisions of the Customs Act and the rules and? mechanism for refund is incorporated by reference into the CTA only so far as may be applicable. Since SADC levied under Section 3(5) is refundable only on subsequent sale (i.e. the point at which sales tax/VAT liability arises), it is the opinion of this Court that no limitation period can possibly be imposed for advancing a refund claim. This is because the right to claim refund only accrues to the importer once sale, an entirely market driven event, is complete. Given the vagaries of the market, the importer has limited control over when the sale is complete. To uphold a limitation period starting from the date of payment of duty, as prescribed in the amending notification, would amount to allowing the commencement of a limitation period for refund claims before the right of refund has even accrued. To this extent, this Court is of the opinion that the refund provisions under the Customs Act are inapplicable to the duties levied under Section 3(5) of the CTA. Thus, neither Section 27 nor a notification under Section 25(1), such as the amending Notification No. 93/2008-Cus., dated 1-8-2008 can be used to impose a limitation period on the right to claim refund of additional duty of customs paid under Section 3(5). If a limitation period is sought to be imposed in respect of refund claims in a case where the importer advances a refund of SADC paid owing to having incurred sales tax/VAT liability on subsequent sale of goods, it must be introduced by legislation, given the expropriatory consequences of such a limitation period.

13. Customs duties, properly so charged, are those which every importer knows to be leviable on the importation of goods, of course subject to any exemption which may be provided. The regime under which customs duty can be recovered concerns known events and details. Several contingencies with respect to rate of duty, removal of goods, their warehousing, etc. are envisioned in the scheme of the Customs Act. However, in the case of SADC, which is a levy meant to offset any advantage, there is inherent a right to refund, once the importer shows that the goods have been sold or the other taxation incident, i.e. payment of VAT occurs. This duty was imposed as Indias response to offset any advantage that importers might secure, by way of a non-discriminatory levy, by importation of goods at cost or prices lower than what could be obtained by domestic manufacturers. A discriminatory tax could not have been levied, given Indias obligations as a participant in the WTO and having regard to its treaty obligations.

14. The expression? so far as may be in this context, under Section 27 is significant as well as instructive. The levy under Section 3(5) is conditional upon the Central Governments opinion that it is necessary to counter-balance the sales tax, value added lax, local lax or any other charges for the time being leviable on a like article.; the rate of duty - where more than one levy exists, would be the highest of such rates and the terms of imposition of SADC would be spelt out in the notification. In this case, the regime existing before the notification of 2008 did not specify any period of limitation - and perhaps advisedly so. Some customs authorities apparently started applying Section 27, drawing inspiration from Section 3(8) which led to confusion. In Notification No. 102/2007-Cus., dated 14-9-2007 there was no period of limitation; by Circular No. 6/2008-Cus., an amending notification providing for one year period from the date of payment of the additional duty of customs was issued, through Notification No. 93/2008-Cus., dated, 1-8-2008, amending Para 2(c) of the 2007 Notification. The net effect of these was that a one year period was insisted upon for refund applications. That period was calculable from date of payment of duty (SAD) : Dr. Partap Singh & Anr. v. Director of Enforcement, Foreign Exchange Regulation Act & Ors., 1985 (3) SCC 72 is an authority for the proposition that the use of the phrase so far as may be in a later statute, with reference to provisions in an earlier statute, means that the provisions of the referred (earlier) statute are to be followed to the extent possible. The Supreme Court, in that case turned down the argument that the letter and content of Section 165 of the Code of Criminal Procedure was to be followed in Foreign Exchange Regulation Act proceedings, by virtue of Section 37(2) of that Act. It was held, crucially that:

The submission that Section 165(1) has been incorporated by pen and ink in Section 37(2) has to be negatived in view of the positive language employed in the section that the provisions relating to searches shall so far as may be apply to searches under Section 37(1). If Section 165(1) was to be incorporated by pen and ink as sub-section (2) of Section 37, the legislative draftsmanship will leave no room for doubt by providing that the provisions of the CrPC relating to searches shall apply to the searches directed or ordered under Section 37(1) except that the power will be exercised by the Director of Enforcement or other officer exercising his power and he will be substituted in place of the Magistrate. The provisions of sub-section (2) of Section 37 has not been cast in any such language. It merely provides that the search may he carried out according to the method prescribed in Section 165(1).

16. Section 27(1) of the Customs Act prescribes a time limit of expiry of one year, from the date of payment of such duty or interest.... Section 27(1B) lists out three contingencies when the one year limit applies with modified effect. That provision has the effect of shifting the date from which the refund claim is to be reckoned. All that can be inferred from the term so far as may be would be that specific provisions relating to the mechanism applicable for refund, in the Customs Act, applied; not the period of limitation. The Customs authorities had never understood Section 27(1) as to mean that a one year period of limitation was applicable. Audioplus (supra) and United Chemicals Industries (supra) are both testimony to this. It is the circulars/notifications of 2008 and No. 16/2009 which for the first time harped on the one year period of limitation. Circular No 6/2008, dated 28-4-2008 issued by the C.B.E. & C. stated that :

4. Time-Limit:? 4.1 In the Notification No. 102/2007-Cus., dated 14-9-2007, no specific time-limit has been prescribed for filing a refund application. Under the circumstances, a doubt has been expressed that whether the normal time-limit of six months prescribed in Section 27 of the Customs Act, would apply. In the absence of specific provision of Section 27 being made applicable in the said notification, the time-limit prescribed in this section would not be automatically applicable to refunds under the notification. Further, it was also represented that the goods imported may have to be dispatched for sale to different parts of the country and that the importer may find it difficult to dispose of the imported goods and complete the requisite documentation within the normal period of six months. Taking into account various factors, it has been decided to permit importers to file claims under the above exemption upto a period of one year from the date of payment of duty. Necessary change in the notification is being made so as to incorporate a specific provision prescribing maximum time-limit of one year from the date of payment of duty, within which the refund could be filed by any person. It is also clarified that the importers would be entitled to refund of duties only in respect of quantities for which the prescribed documents are made available and the claims submitted within the maximum prescribed time of one year. Unsold stocks would not be eligible for refunds. Notification No. 93/2008, dated 1-8-2008 was issued prescribing the period of limitation as one year from the date of payment of additional duty of Customs.

17. Plainly, therefore. Section 27 was understood as not applying to SAD cases, even though it was in the statute book for many years. Yet, with the introduction of the circular and then the notification (No. 93), the Customs authorities started insisting that such limitation period which was prescribed with effect from 1-8-2008 (by notification) became applicable. There is a body of law that essential legislative policy aspects (period of limitation being one such aspect) cannot be formulated or prescribed by subordinate legislation. Khemka and Co. (Agencies) Private Ltd. v. State of Maharashtra, (1975) 35 STC 571 and other decisions are authority on the question that in matters which deal with substantive rights, such as imposition of penalties and other provisions that adversely affect statutory rights, the parent enactment must clearly impose such obligations; subordinate legislation or rules cannot prevail or be made, in such cases. The imposition of a period of limitation for the first time, without statutory amendment, through a notification, therefore could not prevail.

18.For these reasons, this Court holds that the? amending notification must be read down to the extent that it imposes a limitation period. The question of law framed is therefore, answered in favour of the assessee and against the Revenue. The appeal accordingly succeeds and is allowed without any order as to costs.

3.1 The learned Counsel further urges that the Hon'ble High Court has considered the issue and have read down the notification in its observation that the limitation period cannot be prescribed before the claim for refund crystallizes. Thus, in this view of the matter and the decision of the Hon'ble High Court, the learned Counsel prays for allowing the appeal.

4. The learned AR appearing for the Revenue relies on the impugned order and further relies on the Division Bench order of this Tribunal in the case of Neyveli Lignite Corporation Ltd. Vs. Commissioner of Customs, Madras  1983 (12) ELT 855 (CEGAT), wherein it was held, the case of refund under Section 27 of the Customs Act, 1962 is a self contained enactment, therefore, any claim for refund of duty must be treated under Section 27 of the Customs Act, which prescribes the period for refund of duty. The customs authority would be right in rejecting the claim for filing after expiry of the period contemplated thereunder. The appellate Tribunal has no jurisdiction to go beyond the provisions of Customs Act in condoning delay, by invoking Section 5 of the Customs Act. The learned AR also relies upon the ruling of the Hon'ble Supreme Court in the case of Eagle Flask Industries Ltd. Vs. Commissioner of Central Excise, Pune  2004 (171) ELT 296 (SC) wherein a question arose before the Tribunal, was examined under Notification No. 11/88-CE (NT) subject to filing of declaration and giving an undertaking specified in such notification. The Apex Court has observed that filing of declaration is not an empty formality. It is the foundation for availing the benefits under the notification. It cannot be said that these are mere procedural requirements, with no consequences attached for non-observance. The requirement and the conditions prescribed for exemption need to be verified for claiming its benefit.

5. Having considered the rival contentions, I find that there is no limitation for refund of SAD prescribed under Section 27. Further, I agree with the Hon'ble Delhi High Court as held in Sony India case (supra), that limitation period cannot be started before the claim has crystallized. Accordingly, I hold that the appellant is entitled to refund of SAD. The appeal is allowed. I further direct the concerned adjudicating authority to grant the refund with interest as per rules within a period of six weeks from production of a copy of this order.

(Dictated and pronounced in Court)

(Anil Choudhary) Member (Judicial)

Sinha

1