JUNE 10, 2024

By S K Rahman, IRS, working as AR at Delhi CESTAT

(Part 1 of Series of Two Articles)

THE CESTAT has passed Final Order No. 55859-55891/2024 dated 04.06.2024 - 2024-TIOL-528-CESTAT-DEL in the cases of Vishal Video & Appliances Pvt. Ltd. on the issue of recovery of erroneously sanctioned refund of Rs 4.55 Cr and also rejection of application for re assessment of Bills of Entry for refund purposes on limitation of time. It is a 59 page detailed speaking Order authored by Hon'ble Justice Mr.Dilip Gupta, President, CESTAT.

2. The Order covers

(a) Vishal Video & Appliances Pvt. Ltd Vs Commissioner of Customs, ACC (Import), New Custom House, New Delhi in Customs Appeal No. 50091 of 2022 and Customs Appeal No 50286 of 2022 on the issue of recovery of erroneously sanctioned refund of Rs 2.37 Cr +Rs 2.18Cr = Rs 4.55 Cr arising out of Order-in-Original No. 03-04/2021-22 dated 24.05.2021 passed by Principal Commissioner of Customs, ACC (Imports), New Custom House, New Delhi and

(b) Vishal Video & Appliances Pvt. Ltd Vs Commissioner of Customs, ACC (Import), New Custom House, New Delhi in Customs Appeal Nos. 50510 of 2021 to 50540 of 2021 (31 appeals)on the issue of application for re assessment of Bills of Entry for refund purposes on limitation of time arising out of Order-in-Appeal No. CC(A)/Customs/D-I/Import/NCH/808-838/2020-21 dated 17.12.2020 passed by Commissioner of Customs (Appeals), New Delhi

This Order thus deals with a total No. of 33 appeals. All these appeals are bunched together as both sets of appeals arise out of the the same 31 Bills of Entry

3 The brief facts of the case are as follows :

The Appellant has imported mobile phones by paying Additional Duty of Customs at the rate of 6% / 12.5% during the period 17-10-2014 to 17-07-2015 (31 bills). After the Hon'ble Supreme Court judgement in the matter of SRF Ltd, - 2015-TIOL-74-SC-CUS, the Appellant importer has claimed benefit of serial No.263A for paying Additional Duty of Customs at the rate of 1% which was available to the manufacturers on fulfilment of condition of non availment of CENVAT credit on Inputs and Capital goods

4 Appeal Nos C/50091/2022 and C/50286/2022 :-. In these two appeals,for these 31 Bills of entry the appellant has claimed refund of differential additional duty of customs paid by Rs 2.37 Cr +Rs 2.18Cr =Rs 4.55. The amount was initially rejected vide order dated 30-06-2016. But as per the judgement dt 05-09-2016 of Hon'ble High Court of Delhi the refund was sanctioned vide Order dt 27-09-2016. Department has filed SLP Nos. 2865/2017 against the Delhi High Court's order dated 05.09.2016. This appeal was a part of bunch matters decided vide the decision in the case of ITC Limited vs. Commissioner of Customs, Kolkata, - 2019-TIOL-418-SC-CUS-LB. Then the Commissioner ACC Import, New Delhi issued show cause notice Vlll(1)20/Ref/1399-D/2015 dated 26.09.2018 for recovery of erroneously sanctioned refund of Rs 4.55 crores

5 Vide ITC Limited supra, the Hon'ble Supreme Court on 18.09.2019 allowed the SLPs filed by the Union of India including the SLP Nos. 2865/2017 in the case of Appellant and held that the claim for refund cannot be entertained unless the order of assessment or self-assessment is modified. The Principal Commissioner has passed OIO dt 24-05-2021 confirming the demand of Rs. 4.55Cr The present Appeal Nos C/50091/2022 and C/50286/2022 are against this demand

6 Appeal Nos C/50510/21 to C/50540/21 (31 appeals):- after delivery of Hon'ble Supreme Court judgement in the case of ITC Limited vs. Commissioner of Customs, Kolkata, - 2019-TIOL-418-SC-CUS-LB, Appellant filed appeals on 17-12-2019 with Commissioner(Appeal) with a prayer for re-assessment of the assessment of same 31 Bs/E along with application under section 14 of the Limitation Act, 1963 seeking exclusion of time in computation of limitation period.

7 The Commissioner (Appeals) passed OiA dated 17-12-2020 rejecting the 31 appeals filed by the appellant on the ground of time limitation.Appellants filed appeal before Hon'ble CESTAT against the OiA dated 17-12-2020. The present Appeal Nos Appeal Nos C/50510/21 TO C/50540/21 (31 appeals), are against such rejection for re assessment

8 In the Part 1 of the series of two articles, the first set of appeals dealing with recovery of erroneously sanctioned refund would be discussed. In the Part 2 of the series of two articles, the second set of appeals dealing with application for re assessment is proposed to be discussed

9 Appeal Nos C/50091/2022 and C/50286/2022:-. In these two appeals, the contentions of the appellant are as follows :

10 TIME LIMIT OF 6 MONTHS FOR ADJUDICATION. :-The appellant has argued that the Order-in-Original No. 03-04/2021-22 dated 24.05.2021 should be set aside for the sole reason that the show cause notices were not adjudicated within six months from the date of issuance of notices. The chronology of events is as follows:

11 The Counsel for appellant submitted that the time specified in section 28(9) is to be calculated from the date when the reason ceases to exist but it was not passed within 6 months from the date when the reason for keeping the adjudication on hold ceased to exists on 18.09.2019, on which date ITC was decided by the Supreme Court. The show cause notices were, therefore, required to be adjudicated by 17.03.2020, irrespective of the date of receipt of certified copy of the judgment but they were adjudicated on 24.05.2021. He further stated that the order dated 08.03.2021 passed by the Supreme Court in suo-moto proceedings relating to Covid Pandemic would not be applicable in the present proceedings as Supreme Court in suo-moto proceedings are applicable for institution of proceedings and not disposal thereof. The provisions of the Relaxation Act would also not come to the aid to the department for extending the time period for adjudicating the show cause notices since the limitation expired prior to 20.03.2020

12 The Authorised Representative for the Revenue, has argued that the period from 26-09-2018 to 18-09-2019 got excluded as it was kept in call Book. The Authorised Representative for the Revenue, has brought to the kind attention of Hon'ble CESTAT, the portion of OIO where the Principal Commissioner in the OIO has stated that the period from 20-03-2020 to 31-12-2020 got excluded on account of Section 6 Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. The section 6 shows that only the time limit which falls during the period from 20.03.2020 to 31.12.2020. In the present case, the time limit expired on 17.03.2020. Considering the Department's reliance on Section 6 Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, still the three days from 17-03-2020 to 20-03-2020 goes un explained.

13 The Authorised Representative for the Revenue, has drawn the kind attention of Hon'ble CESTAT, the portion of OIO where the Principal Commissioner in the OIO has mentioned about the Supreme Court suo-moto proceedings. The Hon'ble CESTAT has relied upon the Supreme Court suo-moto proceedings specifically Orders dt 08-03-2021 and dt 23-09-2021 relating to Covid Pandemic which ordered that the period from 15.03.2020 till 02.10.2021 shall stand excluded in computing the period prescribed under any law for instituting proceedings. Thus the deficiency of 3 days gets covered. The OIO was issued dt 24-05-2021 which is much before the outer limit of 02-10-2021. The Hon'ble CESTAT in para 42 of the Order states that "The show cause notices, therefore, in view of the orders dated 08.03.2021, 27.04.2021 and 23.09.2021 could have been adjudicated upto 02.10.2021 and in the present case they were adjudicated on 24.05.2021. Thus, the show cause notices were adjudicated within time".

14 It is also seen that the Chief Commissioner had also extended the time for adjudicating the show cause notices upto 30.06.2021 by exercising powers under the proviso to section 28(9) of the Customs Act. The Hon'ble CESTAT in para 44 of the Order states that "It is, therefore, not possible to accept the contention of the learned counsel for the appellant that the show cause notices were not adjudicated within the time stipulated in section 28(9) of the Customs Act.". Thus the submissions of appellant are set aside

15 ISSUE OF "ERRONEOUSLY GRANTED REFUND":- The Learned counsel for the appellant submitted that the show cause notices could not have been issued to the appellant as the present case cannot be termed as a case of 'erroneously granted refund'. As on the date of issue of SCNs dt26-09-2018, the Departmental appeal was still pending in Supreme Court. Before issue of Supreme Court Order dt 18-09-2019 calling a sanctioned refund as erroneously granted refund' was not justified.

16 The Authorised Representative for the Revenue, has argued that the refund as sanctioned on 28-09-2016 and hence protective demand had to be issued within two years as per section 28 of Customs Act 1962. In view of the departmental SLP No 2865/2017 pending in Hon'ble Supreme Court, for want a final decision from the Hon'ble Apex Court, these protective demands (SCNs) have been kept pending, waiting for the outcome of final decision of Supreme Court. The Hon'ble CESTAT in para 48 of the Order states that "It cannot, therefore, be urged by the appellant that since it was not a case of erroneous refund on the date the show cause notices were issued, it was not permissible for the department to issue the show cause notices."

17 Considering all these grounds the Hon'ble CESTAT in the Final Order No. 55859-55891/2024 dated 04.06.2024- 2024-TIOL-528-CESTAT-DEL has dismissed the party appeals and upheld the OIO.

18 The lessons learnt from this Order are:

19 Fundamental and quite obvious are : Lesson 1 -In any refund, particularly refunds arising out of Hon'ble Supreme Court judgement in the matter of SRF Ltd, - 2015-TIOL-74-SC-CUS, the aspects to be verified are whether the Bills of entry are reassessed before filing refund, and whether un just enrichment is applicable

20 REQUIREMENT OF RE ASSESSMENT :- In the instant case,the refund applications were initially rejected vide orders no. dated 30.06.2016 on the ground that the Appellant has not provided re-assessed bills of entry in respect of said refund claims and Priya Blue Industries Ltd. V Commissioner - 2004-TIOL-78-SC-CUS was relied upon.

21 UNJUST ENRICHMENT :- In the instant case,the refund was sanctioned by Deputy Commissioner vide sanctioning orders dated 28.09.2016 in compliance with the direction of the Hon'ble High Court Delhi order dated 05-09-2016 against WP(C) No. 7851/2016 While passing the refund sanction, the DC has stated that "The petitioner is not entitled to refund of differential CVD borne by the ultimate consumer, as it would result in unjust enrichment Hence, amount of refund sanctioned shall be credited to consumer welfare fund. Moreover, the Bs/E importing mobile phone handsets of CTH 8517 with payment of Additional Duty of Customs @ 6% /12.5% is on MRP of the Mobile set. There were no two MRPs on the product when it was being sold. The amount recovered from the Customers is as per MRP. The incidence of Additional Duty of Customs @ 6%/12.5% is passed and hence unjust enrichment happened.

22 Apart from the above, the specific aspects covered in this Hon'ble CESTAT's Final Order No. 55859-55891/2024 dated 04.06.2024- - 2024-TIOL-528-CESTAT-DEL are as follows :

23 Lesson 2: For any SCN issued under Section 28 of Customs Act 1962, the adjudication shall be finalised within the time limits prescribed under subsection (9) of section 28.

24 However during Covid period the exclusion of time can be on the basis of Supreme Court suo-moto proceedings dated 23-03-2020, dt. 08-03-2021, dt. 27-04-2021 & dt. 23-09-2021 for the period from 15-03-2020 to 02-10-2021 or rather than relying upon the Section 6 Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 which gives exclusion only for the period from 20.03.2020 to 31.12.2020.

25 Lesson 3: For any refund sanctioned as per the directions of a court order, Protective demand SCNs can be issued as erroneously sanctioned refund pending Departmental appeal against such Court Order. The SCNs may be kept in callbook and as and when the court order gets finalised, the SCNs can be adjudicated. The Hon'ble CESTAT in this order has directed that no party can claim that as on the date of issue of SCN, the refund cannot be called as erroneously sanctioned refund.

26 The article would be concluded in Part 2 to be published in next week.

(The views expressed are personal and not in official capacity)