2011 (3) TMI 1316 - AT - Customs

Tribunal Upholds Unjust Enrichment Principles in Refund Claim Appeals

ITC LTD. Versus COMMISSIONER OF CUSTOMS, VISAKHAPATNAM

ITC LTD. Versus COMMISSIONER OF CUSTOMS, VISAKHAPATNAM - 2011 (272) E.L.T. 673 (Tri. - Bang.) Issues Involved:1. Refund of cess paid on export of rice under the repealed APFPEC Act.2. Applicability of the principles of unjust enrichment to the refund claims.3. Validity of refund claims without challenging the assessment orders.4. Timeliness and procedural aspects of the Department's appeal.5. Applicability of provisions of the Customs Act, 1962 to the APFPEC Act.Detailed Analysis:1. Refund of cess paid on export of rice under the repealed APFPEC Act:The appellants, exporters of rice, paid a cess of 0.5% ad valorem under the APFPEC Act on exports made in June 2006. The APFPEC Act was repealed effective 1-6-2006. The original authority sanctioned the refund claims under Section 27 of the Customs Act, 1962. However, the Department contested these refunds, arguing that the principles of unjust enrichment applied. The Commissioner (Appeals) found that the exporters had included the cess in the FOB value and thus passed the burden to the buyers. The appellants argued that the cess was paid without authority of law and should be refunded.2. Applicability of the principles of unjust enrichment to the refund claims:The Department argued, citing the Solar Pesticides case, that the principle of unjust enrichment applied as the FOB value realized by the exporters included the cess. The Commissioner (Appeals) concluded that the cess was included in the FOB value based on the definition of FOB in Incoterms, 2000. The appellants contended that their contracts specified that export duties and taxes were on the seller's account, implying the duty burden was not passed on. The Tribunal found that the definition of FOB did not conclusively prove that the cess was included in the FOB value and noted the lack of reliable findings to support the Department's claim.3. Validity of refund claims without challenging the assessment orders:The Tribunal referred to the Priya Blue Industries case, which held that a refund claim is not maintainable unless the assessment order is challenged and modified. The Tribunal observed that the appellants did not successfully challenge the assessments on the shipping bills. The Tribunal upheld the view that refunds cannot be granted unless the assessment orders are contested.4. Timeliness and procedural aspects of the Department's appeal:M/s. Al Gyas Exports Pvt. Ltd. argued that the review orders were passed beyond the permissible time, making the Department's appeal time-barred. However, this argument was not substantiated with relevant dates and was raised for the first time before the Tribunal. The Tribunal rejected this challenge, noting the appellant's participation in the proceedings without earlier objections.5. Applicability of provisions of the Customs Act, 1962 to the APFPEC Act:M/s. Al Gyas Exports Pvt. Ltd. contended that the provisions of the Customs Act relating to review and appeal were not applicable to the APFPEC Act. The Tribunal noted that Section 3 of the APFPEC Act made the provisions of the Customs Act applicable to the levy and collection of cess, including those relating to refunds and exemptions. Therefore, the Tribunal rejected the appellant's objection, affirming that the Customs Act's provisions applied to the APFPEC Act.Conclusion:The Tribunal rejected all the appeals, affirming that the principles of unjust enrichment applied, and the refund claims were not maintainable without challenging the assessment orders. The procedural objections regarding the timeliness of the Department's appeal and the applicability of Customs Act provisions to the APFPEC Act were also dismissed. The appeals were pronounced rejected in court on 8-3-2011.