M/S. Indian Oil Corporation Ltd vs Commissioner Of Customs, Trichy

(Arising out of Order-in-Appeal No. 55/2005 TTN (CUS) ADK dated 8.3.2005 passed by the Commissioner of Customs & Central Excise (Appeals), Tiruchirappalli)

M/s. Indian Oil Corporation Ltd. Appellant

Vs.

Commissioner of Customs, Trichy Respondent

Appearance

Shri S. Muthuvenkataraman, Advocate for the Appellant Shri L. Paneer Selvam, AC (AR), for the Respondent

CORAM

HONBLE SHRI R. PERIASAMI, TECHNICAL MEMBER

Date of Hearing / Decision: 26.3.2015

Final Order No. 40348 / 2015

This appeal is arising out of Order-in-Appeal dated 8.3.2005 passed by the Commissioner (Appeals).

2. The brief facts of the case are that the appellants M/s. Indian Oil Corporation Ltd. (Marketing Division) imported furnace oil, LSD/HSD and opted for provisional assessment as the price was not finalized. Subsequently, the same were finalized for the period February 1999 to August 1999. On finalization of the provisional assessment, the appellants were eligible for refund of excess CVD and BCD paid amounting to Rs.7,75,157/-. The adjudicating authority vide order dated 30.7.2004 sanctioned the amount but credited the same to the Consumer Welfare Fund on the ground that the appellants have not crossed the bar of unjust enrichment. On appeal, the lower appellate authority rejected the appeal. Hence the present appeal.

3. Heard both sides and perused the records.

4. The learned counsel for the appellant submits that the finalization of the provisional assessment pertains to the year 1999 and refund was sanctioned in the year 2004. He further submits that the provision of unjust enrichment was introduced under Section 18 of Customs Act, 1962 only with effect from 13.7.2006. Since their assessment was finalized in the year 1999, the unjust enrichment clause cannot have a retrospective effect. He relied on the decision of the Honble High Court of Delhi rendered in their own case reported in 2012 (282) ELT 368 (Del.).

5. On the other hand, the learned AR for Revenue reiterated the findings of the authorities below. He submits that Section 18 is applicable as the refund was sanctioned in 2004 and unjust enrichment has been rightly invoked. He relied on the following decisions:-

(i) Bussa Overseas and Properties Pvt. Ltd. Vs. Union of India  2004 (164) ELT A177 (SC)

(ii) Sahakari Khand Udyog Mandal Ltd. Vs. CCE  2005 (181) ELT 328 (SC)

(iii) Commissioner of Customs Vs. Scientific Instruments Co. Ltd.  2014 (307) ELT 83 (Mad.)

6. I have considered the submissions of both sides and perused the records. The only issue to be decided in the present case is whether the refund arising out of finalization of provisional assessment on the imports of the appellants which was sanctioned and credited to the Consumer Welfare Fund on the ground of unjust enrichment is applicable or not. Finalization of provisional assessment under Customs law is governed under Section 18(5)(a) of Customs Act, 1962. Sub-section (3), (4) and (5) of Section 18 was inserted with effect from 13.7.2006. Sub-section (5)(a) of Section 18 is reproduced below:-

(5) The amount of duty refundable under sub-section (2) and the interest under sub-section (4), if any, shall, instead of being credited to the Fund, be paid to the importer or the exporter, as the case may be, if such amount is relatable to

(a) the duty and interest, if any, paid on such duty paid by the importer, or the exporter, as the case may be, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;

7. With effect from 13.7.2006, all cases of finalization of provisional assessment under Customs Act are covered by unjust enrichment clause. In the present case the finalization of provisional assessment was completed in the year 1999 much before the insertion of sub-section (5) to Section 18 of Customs Act. The decisions relied by the learned AR for Revenue is not applicable to the present case as the case of Sahakari Khand Udyog Mandal Ltd. (supra) deals with refund arising out of excess excise duty paid. Similarly, the case of Scientific Instruments Co. Ltd. (supra) relates to finalization of provisional assessment completed on 16.7.2009 after the amendment of Section 18 of the Customs Act. The Honble High Court of Bombay in the appellants own case has considered the case of Bussa Overseas and Property Pvt. Ltd. (supra). The relevant paragraphs of the order is reproduced below:-

18. We may notice here that Gujarat High Court in the case of Hindalco Industries (supra) has specifically referred to decision in the case of Allied Photographic India Ltd. (supra) but the said case has not been noticed by the Bombay High Court in the case of Bussa Overseas and Properties Pvt. Ltd. (supra). The decision of the Gujarat High Court in the case of Hindalco Industries Ltd. (supra) has been followed by Orissa High Court in CCE C.& ST, Bhubaneshwar-I v. Paradeep Phosphates Ltd. - 2010 (252) E.L.T. 502 (Ori.). The said decision also refers to the three earlier judgments of the Supreme Court mentioned above.

19. We have considered Explanation II to Section 27(1) and whether in view of the said Explanation, the respondent assessee was required to move an application under Section 27 of the Act and accordingly, the conditions stipulated in sub-section (2) of the Act are applicable. We may now notice here that the two situations, which have been specifically referred to by the Gujarat High Court in the case of Hindalco Industries (supra). Two situations are as under:

9.1?Referring to Explanation II to Section 27 of the Act it was submitted that the same would apply to a case where after the final assessment and the adjustment, if still the Assessee is not satisfied with the adjustment and claims excess amount as refund. Explanation II will have no application in cases where admittedly after final adjustment, refund is due to the Assessee. This is explained with the following illustration:

Duty paid provisionally Rs. 100 Duty finally assessed Rs. 60 Duty to be refunded Rs. 40 In this case Explanation II will have no application since no claim for refund is made and Rs. 40 is to be refunded since the same is admittedly due.

Duty paid provisionally Rs. 100 Duty finally assessed Rs. 70 According to Assessee correct duty payable Rs. 60 In this case, admitted amount of refund of Rs. 30 would be returned and if the Assessee seeks to claim Rs. 10 also (Rs. 70 - Rs. 60) as refund, then Explanation II would apply and the said claim is to be preferred within six months from the date of adjustment of duty. This position is precisely dealt with and explained in the second portion of paragraph No. 104 of Judgment in case of Mafatlal Industries (supra).

20. The two? situations are relevant and important. In the first situation the assessee has paid provisional duty which gets reduced on final assessment. The assessee, therefore, becomes entitled to refund which is payable in terms of Rule 9B of the Excise Act [(sic) Rules], 1944 or Section 18 of the Act. For refund on this account, no application is required to be filed under Section 27 of the Act and therefore, sub-section (2) is not applicable. In the second situation, the assessee becomes entitled to additional refund on account of appellate orders or orders passed by a court. In this situation, the assessee is under an obligation to file an application under Section 27 of the Act, the limitation period accordingly applies and doctrine of unjust enrichment is also applicable. Explanation II to Section 27 of the Act deals with the 3rd category of situations. Such situations may occur after the passing of the final assessment, on account of rectification under Section 154 of the Act or because of any other reason, as a result of which the final order suffers an amendment or a change and some-amount becomes refundable. As far as Section 18 of the Act is concerned, when an amount becomes refundable after a final order is passed, the same has to be refunded immediately and for this purpose the assessee is not required to move an application under Section 27 and accordingly sub-section (2) to Section 27 would not apply. It is in this situation that the legislature has intervened and has now inserted sub-sections (3), (4) and (5) to Section 18 w.e.f. 13-7-2006. These insertions obviously are not applicable to the case in hand as they do not have retrospective effect. It was so held in TVS Suzuki Ltd. (supra) when similar amendments were-made in Rule 9B of the Rules passed under the Central Excise Act w.e.f. 25-6-1999. However, in 1999, the legislature did not make corresponding amendment in Section 18 of the Customs Act. These amendments were made w.e.f. 13-7-2006.

21. In view of the? aforesaid position the question of law is answered in the affirmative and against the appellant and in favour of the respondent-assessee. The appeal is accordingly disposed of. No costs.

8. Further the Honble High Court of Delhi has considered the judgments of the Honble Supreme Court rendered in the cases of Commissioner Vs. Allied Photographics Idnia Ltd.  2004 (166) ELT 3 (SC), Commissioner Vs. Oriental Exports  2006 (200) ELT A138 (SC) and Commissioner Vs. TVS Suzuki Ltd.  2003 (156) ELT 161 (SC) and held that unjust enrichment clause shall not apply for finalization of the provisional assessment for the cases prior to 13.7.2006.

9. Respectfully following the decision of the Honble High Court of Delhi in the appellants own case, I find that the appellants are eligible for refund of CVD and BCD amounting to Rs.7,75,157/- and is not covered by unjust enrichment clause as the period involved is prior to 13.7.2006. Accordingly, the impugned order is set aside and the appeal is allowed with consequential relief.

(Dictated and pronounced in open court)

(R. PERIASAMI) Technical Member Rex

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