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Refund Arising out of Finalisation of Provisional Assessment

JULY 08, 2024

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

THE CESTAT has passed Final Order No. 55946/2024-dt 28.06.2024 - 2024-TIOL-621-CESTAT-DEL in the case of M/s. Indian Oil Corporation Limited, on the issue of Refund arising out of finalisation of Provisional Assessment

2 In this case there was Customs Appeal No.50429 of 2021 (DB) in the case of M/s. Indian Oil Corporation Limited vs Commissioner of Customs, New Customs House, Near IGI Airport, New Delhi arising out of Order-in-Appeal No.D-1/Gr.7/308/2019 dated 26.08.2019 passed by the Commissioner of Customs (Appeals), New Customs House, New Delhi. The appellant had filed refund claim arising out due to finalisation of the provisional assessment of a particular Bill of Entry whereby the appellant had imported petroleum products, crude oil, etc., and stored them in the bonded warehouse. The chronology of events is as follows:

Date
Event
09-10-2002
Provisional assessment of bill of entry
06.01.2009, 02.04.2009 and 31.08.2009
final assessment of the warehoused B/Es
i)21.07.2009
ii) 24.07.2009 -
iii) 16.09.2009 -
iv) 05.03.2010 -
The appellant filed four refund claims i.Rs. 76,21,139/- (later corrected as Rs.78,53,423/-)
ii.- Rs. 55,91,777/-
iii - Rs.35,49,386/-;
iv - Rs.33,15,827
 
Assistant Commissioner rejected the claims
31.03.2011
Commissioner (Appeals), vide order dated 31.03.2011 set aside the assessment order and restored the refund claims to be considered afresh
02.04.2013
passed the final re-assessment order under Section 18 of the Customs Act, 1962
10.05.2013
appellant filed the refund claim for Rs.2,03,10,413/-
16.09.2013
Assistant Commissioner vide order dated 16.09.2013 sanctioned the amount of Rs.1,25,74,088/- on the basis of final assessment order dated 02.04.2013 and rejected the balance amount of Rs.77,36,325/-.
06.04.2018
appellant then filed a fresh refund application on 06.04.2018 for the balance amount of Rs.77,36,325/-
 
rejected as being filed beyond the period of one year from the final reassessment order
26.08.2019
Party appeal with Commissioner (Appeal) has been rejected by the impugned Order-in-Appeal no.D-I/ Gr.7/308/2019 dated 26.08.2019.

3 The arguments from the appellant are that in case of provisional assessment under Section 18, provisions of Section 27 of the Act are not applicable and, therefore, the refund sanctioning authority is required to suo-moto grant refund without insisting on filing of refund application or taking into account, if there is any delay in filing the said application. Thus, there is no requirement to follow the procedure as prescribed in Section 27 of the Act.

4 The counter arguments from Revenue are that the refund claim has, therefore, attained finality as no appeal was filed against the order of final re-assessment dated 02.04.2013

5 The Hon'ble CESTAT has held that

i. the Apex Court in Mafatlal Industries Ltd. case 2002-TIOL-54-SC-CX-CB dealing with refund claims consequent upon finalisation of provisional assessment and in para-95, has held that if an independent refund claim is filed after the final decision under Rule 9-B(5) re- agitating the issues already decided under Rule 9-B -assuming that such a refund claim lies - and is allowed, it would obviously be governed by Section 11-B.

This case law squarely applies in the given situation.

ii. Gujarat High Court in the case of Hindalco Industries Ltd 2008-TIOL-477-HC-AHM-CUS has cited two situations as under

Situation-1
Situation-2
Duty paid provisionally Rs.100 Duty finally assessed Rs.60 Duty to be refunded Rs.40
Duty paid provisionally Rs. 100 Duty finally assessed Rs. 70 According to assessee correct duty payable Rs. 60
no need to file separate refund application since no claim for refund is made and Rs. 40 is to be refunded since the same is admittedly due.
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 it is necessary that refund claim is to be preferred within six months from the date of adjustment of duty.

The instant case is squarely covered by the second situation given above as stated in the Gujarat High Court in Hindalco Industries

6 In the present case, the refund has been sanctioned in terms of the final re-assessment order dt. 02-04-2013 but according to the appellant the refund payable is higher. In respect of the specified B/E though the amount claimed by the appellant was Rs.76,36,325/-, however, the amount assessed by the Assessing Officer was Rs.64,329/-. So, in order to claim any amount beyond what has been assessed, the appellant will have to comply with the conditions under Section 27 of Customs Act 1962.

7 In the instant case, on remand by the Commissioner (Appeals) on 31.03.2011, final re-assessment order dated 02.04.2013 was passed by the Assistant Commissioner. The amount paid in excess by the appellant was finally re-assessed and, therefore, the refund was allowed in consonance to the amount so assessed by the Adjudicating Authority. The refund sanctioning authority could not have gone beyond the assessment order and hence, there was no error in the order dated 16.09.2013 rejecting the refund of Rs.77,36,325/- as it was not part of the final re-assessment order. If the appellant had any grievance against the final re-assessment order, the proper remedy would have been to have challenged the same and get the final reassessed amount modified.

8 Thus keeping in view of the (a) Apex Court order in Mafatlal Industries Ltd. case 2002-TIOL-54-SC-CX-CB (b) Gujarat High Court order in the case of Hindalco Industries Ltd 2008-TIOL-477-HC-AHM-CUS & (c) and in appellant's own case Delhi High Court Order in the case of CC Vs. Indian Oil Corporation, 2012-TIOL-52-HC-DEL-CUS the appellant would be liable to file a refund application under Section 27 of the Act and the provisions of the limitation period and the principle of unjust enrichment would be applicable. The refund applications dt 06.04.2018 were filed after 5 years from the date of finalisation of re assessment i.e. on 02.04.2013

9 Moreover the final re-assessment order had attained finality .The refund could have been ordered within the four corners of the said order. In this regard one is guided by the decision of the Apex Court in the case of Priya Blue Industries Vs. Commissioner of Customs 2004-TIOL-78-SC-CUS and ITC Ltd. Vs. Commissioner of Central Excise, Kolkata 2019-TIOL-418-SC-CUS-LB that all assessments, including self-assessments are appealable and, therefore, unless the same is modified, no refund could be sanctioned

10 Considering all the above, the Hon'ble CESTAT did not find any merit in the party's appeal, and accordingly the same was rejected.

11 The Take a way from this Final Order No. 55946/2024-dt 28.06.2024 - 2024-TIOL-621-CESTAT-DEL are

a. It is wrong to assume that the whenever provisional assessments are being finalised as per Section 18 of the Customs Act 1962, any refund arising out of the final assessment has to be allowed, without any claim or application for the same in all cases and there is no need for filing a refund claim at all.

b. For the provisional assessments finalised, one has to see if the importer is seeking the refund claim more than what has been finalised in provisional assessment fialisation order and if so more important is the refund application has to be filed as per the time limits prescribed in Section 27 of Customs Act 1962

c. Most fundamental is in terms of the decision of the Apex Court in the case of Priya Blue Industries Vs. Commissioner of Customs 2004-TIOL-78-SC-CUS and ITC Ltd. Vs. Commissioner of Central Excise, Kolkata 2019-TIOL-418-SC-CUS-LB all assessments, including self-assessments are appealable and, therefore, unless the same is modified, no refund could be sanctioned

d. If any appellant is aggrieved of the final re-assessment order, the proper remedy would be to challenge the final re-assessment order and get the final reassessed amount modified

12 Last but not the least is refund claims shall always filed with in the time period and for correct amount as per re assessment order

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

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)

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