Refund to SEZ Units - Jurisdiction - DGEP letter of 2012 directing return of refund claims to parties on ground that customs has no jurisdiction is quashed - When customs collected duty, assessee has right to seek refund from Customs: HC
By TIOL News Service
AHMEDABAD, DEC 08, 2014: IF a unit in SEZ wants to file a refund claim of customs duties or any deposits made pursuant to import of goods, who is the competent authority? Customs or SEZ authorities? Or neither? The High Court has recently decided this issue in a batch of Petitions filed by different SEZ units.
Facts of the case taken from one of the appellants are that the unit in Kandla SEZ had imported certain raw materials. The Commissioner, Customs, Kandla disputed the valuation as well as the description of goods declared as old garments , adjudicated the case enhancing the value and imposed penalties, confiscated goods. During adjudication proceedings, the unit had deposited Rs 25 lakhs and Commissioner appropriated the same. On appeal, the Tribunal partly granted relief to the extent of setting aside confiscation of goods. Though department filed appeal against the Tribunal's order, there is no stay.
In this backdrop, the unit filed a claim for refund of 25 lakhs with the Commissioner (Customs) and his real trouble started.
Referring to a direction dated 01.11.2012 issued by the DGEP, the Deputy Commissioner (Customs) (Refunds) conveyed to the assessee to approach the Department of Commerce for refund. The relevant part of the direction dated 01.11.2012 reads thus:
In view of the above, the matter has been taken up with Department of Commerce for incorporation of provisions relating to refunds as well as appeal and review in the SEZ law to ensure disposal of cases related to these issues. In the light of the same it is requested that in case any such refund application/request is received or is pending, these may be returned to the concerned parties and they may be suitably advised to approach the Department of Commerce as the issue has already been taken up with DOC by DOR, for speedy settlement of their cases. Similarly, if any appeal/request for accepting appeal is received or is pending, the parties may be similarly advised to approach DOC for settlement of their case.
Now, the assessee approached the Deputy Commissioner, Kandla SEZ and prayed for refund. The Deputy Commissioner held that in the absence of explicit provisions in SEZ Act, he was unable to process the refund and conveyed:
In view of the above, your refund cannot be processes by this office until the incorporation of statutory provision in the SEZ Act or Rules made thereunder that authorizes Deputy Commissioner of Customs/Specified Officer or any such officer of this office to sanction the refund of excess Customs Duty/Fine/Penalty/Security Deposit etc till that time you may approach to the jurisdictional Customs Authority(Refund) to file your refund claim. Accordingly, your aforesaid original application for refund claim along with all enclosures are returned herewith.
At that stage, the petitioners filed this petition before the High Court and prayed for a declaration that the Customs authorities functioning under the Customs Act, 1962, would be the proper authority to decide the refund claim of the petitioners. Further prayer was made for a direction to the respondents to refund the petitioners sum of Rs.25 lakhs with interest.
Before the High Court, authorities of both the Ministries reiterated their positions and continued the confusion and impasse.
Disposing the Petitions, the High Court held:
In our opinion, the entire approach was thoroughly incorrect. Firstly, without making statutory changes, it was simply not possible for the Ministry of Finance by a mere communication to stop the Commissioner of Customs from processing refund claims which was his statutory duty. Secondly, if such mechanism was to be changed for SEZ units from the authorities of the Customs Commissionerate to Commissionerate( SEZ), there had to be matching provisions providing such mechanism under the SEZ law. This admittedly was not done. In fact, till date it has not been done. Thirdly, all the refund claims, appeals and reviews were to be returned with an advise to approach the Ministry of Commerce. We may recall this communication issued by the Ministry of Finance.
It is undisputed that duty was collected by the Commissioner of Customs. Whatever be the character of the duty, the Commissioner of Customs collected the same on a perceived opinion that unit concerned was required to pay such customs duty, redemption fine or penalties as the case may be. If later on such duty, fine or penalty is declared illegal, the person from whom the same has been collected would have a right to seek refund thereof. Such right would be covered by statutory provisions particularly, section 27 contained in the Customs Act, 1962. Such refund application would have to be made within the time permitted under section 27 of the Customs Act, 1962. It may also be subject to verification on the question of unjust enrichment. Many issues may arise which are not clear to us. But one thing is clear that such issues can be decided only by the authority under the Customs Act.
The directives issued by the Ministry of Finance in its letter dated 1.11.2012 are invalid and would have no force of law. It is declared that unless proper mechanism is framed under the SEZ laws and statutory provisions are enacted/amended, the Commissionerate of Customs would continue to hold the authority under section 27 of the Customs Act, 1962 to entertain refund claims of excess payment of customs duty, redemption fine or penalties as the case may be, adjudicated and collected by the Customs authority under the Customs Act, 1962, even with respect to units situated in SEZ areas.
(See 2014-TIOL-2162-HC-AHM-CUS)
