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Cus - Conscious violation of law by Dy. Commr. - Refund to be allowed with interest - Commr. to call for an explanation and take further action - Costs imposed of Rs.10,000/-: High Court

By TIOL News Service

NEW DELHI, AUG 05, 2016: THE Petitioner,as part of its business activities, imported mobile handsets including cellular phones.

On the B/Es filed in January - February 2015, the Petitioner paid additional customs duty (CVD) @ 6%.

However, Serial No. 263A of Notification No. 12/2012 - CE dated 17th March 2012 (as amended) provided for an effective rate of duty @ 1% of CVD for mobile phones provided no CENVAT Credit on inputs or capital goods has been availed.

The petitioner states that the above condition regarding non-availing of CENVAT credit on inputs or capital goods was interpreted by the Supreme Court in SRF Ltd. - 2015-TIOL-74-SC-CUS. Inasmuch as the apex Court had explained that for quantification of CVD in case of imported goods, it would have to be presumed that the imported goods were manufactured in India and the excise duty leviable thereon would then have to be ascertained for determining the extent of exemption from payment of CVD to which the importer would be entitled.

The refund claim dated 28.12.2015 filed by the Petitioner was examined by the Deputy Commissioner (Refunds) and a memorandum dated 1st February, 2016 was issued pointing out that:

a. That the Petitioner has not provided any re-assessed Bills of Entry in respect of the refund claims.

b. That the Petitioner has not submitted copy of audited balance sheet for the subject period.

c. That the Petitioner has not submitted CA certificate from Statutory Auditors in support of claim for Unjust Enrichment.

d. That the Petitioner has not provided any calculation cum co-relation sheet certified by Statutory Auditor.

The Petitioner replied on 18th February 2016 inter alia pointing out that under Section 27 of the Customs Act there was no requirement of getting the B/E re-assessed for the purposes of claiming refund. Case laws were also cited.

A hearing took place before the respondent original authority on 17th March 2016. The Petitioner in its reply dated 21st April, 2016 specifically adverted to the decision in Micromax Informatics - 2016-TIOL-978-HC-DEL-CUS and pointed out that there was no obligation on the Petitioner to get the B/Es in question re-assessed for the purposes of claiming refund; that for the purpose of claiming a refund under Section 27 of the Act it is not open to the Authority to refuse to consider the application for refund only because an appeal has not been filed against the assessment order.

The respondent, by an order dated 7th July 2016rejected the Petitioner's refund application. As far as the decision of the Supreme Court in SRF Ltd (supra) was concerned, the Respondent chose to highlight in bold letters in the impugned order the fact that the Department had filed a review petition in the Supreme Court which had been admitted and was pending consideration. As far as the decision of this Court in Micromax Informatics (supra) was concerned, Respondent again highlighted in bold letters in the impugned order that "the above order of the Hon'ble High Court has not been accepted by the Department and the Department has now decided to file a SLP before the apex Court against the orders of the Hon'ble High Court."

The refund claim of Rs.2,10,96,725/- was held to be non-maintainable and hence, rejected.

Against this order, the petitioner is before the Delhi High Court.

At the outset, the High Court remarked -

2. This is another instance of open defiance of the law and the judgments of the Courts by a statutory authority vested with both the power and the responsibility to comply with the mandate of the governing statute.

As for the case and the order of the Deputy Commissioner rejecting the refund claim, the High Court had this to say -

++ The mere fact that the Department was contemplating or in fact filed a review petition or an appeal against an order of the High Court or the Supreme Court that was 'unacceptable' to the Department cannot be a valid justification for not complying with or implementing the order. Unless the operation of the orders is stayed in subsequent proceedings by a Court of competent jurisdiction, the binding effect of the said orders on the Department continues. [Kamlakshi Finance Corporation Ltd. - 2002-TIOL-484-SC-CX-LB referred.]

The High Court also adverted to the decisions in E.I. Dupont India Pvt. Ltd. - 2013-TIOL-1172-HC-AHM-CX, Legrand (India) Pvt. Ltd. - 2007-TIOL-380-HC-MUM-CUS, where it is held that a failure to follow a binding decision would render the authority liable for prosecution under the Contempt of Courts Act.

Noting that the Department's review petition against the decision of the Supreme Court in SRF Ltd. is dismissed by the Supreme Court by order dated 15th July, 2016 and as far as the decision of this Court in Micromax Informatics is concerned no order in an SLP staying the said decision had been produced, the High Court observed that the Respondents were unable to defend the impugned order which had been clearly passed in defiance of the binding decisions of the Supreme Court and this Court and, therefore, there was absolutely no justification for the Respondent to have rejected the Petitioner's refund claim.

The impugned order dated 7th June 2016 passed by the Respondent rejecting the Petitioner's refund claim was set aside.

The High Court, therefore, concluded -

++ The refund claim filed by the Petitioner on 28th December 2015 is allowed. The Respondents will now pay to the Petitioner the amount of refund as claimed together with interest due thereon up to the date of refund not later than two weeks from today.

++ A copy of this order to be sent to the Commissioner of Customs Air Cargo Export, Refund Section New Customs House with a direction to him to call for an explanation from Deputy Commissioner Refund on the administrative side and take further action as he considers appropriate in accordance with law.

The petition was allowed with cost of Rs.10,000/- to be paid by the Respondents to the Petitioner.

(See 2016-TIOL-1641-HC-DEL-CUS)


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