2012 (10) TMI 386 - AT - Customs

Customs Tribunal Upholds Decision: Refund Claim Requires Challenging Assessment Order

The Tribunal dismissed the Appeal, upholding the lower authority's decision that a refund claim under Section 27 of the Customs Act is not maintainable ... Refund claim of duty paid under protest rejected on ground that if the assessment is not challenged by filing any appeal, the refund claim made u/s 27 would not be maintainable - assessee imported Coking coal classifiable under heading 27011910 and claimed benefit of exemption Notification No.21/2002 - provisional assessment under Heading 27011910 @5% BCD - Held that:- The basic philosophy denying refund without challenging an Assessment Order, as held by the Apex Court in case of PRIYA BLUE INDUSTRIES LTD (2004 (9) TMI 105 - SUPREME COURT OF INDIA), rests on the principle that the proceedings of refund and filing of appeal against an assessment order are two separate proceedings and the scheme under the Act meticulously provides relief to the assessee, when the assessment order is not acceptable to him. It provides that when an assessee is aggrieved by the assessment order, the recourse open to him is to file an appeal before the appellate forum instead of asking for refund directly by short-circuiting the process of appeal prescribed to be followed under the Act, before the appropriate authority. Appeal filed by the Appellant is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether a claim for refund of customs duty under the statutory refund provision is maintainable where the importer has not challenged the (provisional or final) assessment order by filing an appeal. 2. Whether a communication by a subordinate officer (Superintendent) that a Bill of Entry has been 'finally assessed' can be treated as an appellable assessment order or otherwise as sufficient to initiate refund proceedings, where the importer contends no proper assessment order by an officer competent under the Customs Act was passed. 3. Whether provisional assessment procedure and any unilateral change in classification or duty by the assessing officer can be challenged by way of refund where the importer paid duty under protest but did not file an appeal against the assessment. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Maintainability of refund under the statutory refund provision where assessment was not appealed Legal framework: The Customs Act defines 'assessment' to include provisional assessment and any order of assessment (Section defining assessment includes provisional assessment, reassessment and orders where duty assessed is nil). The statutory refund provision permits refund of duty paid in specified circumstances; separately, the Act provides review and appellate remedies (Sections dealing with review/modification and appeals) which the scheme envisages as the proper route to contest assessment. Precedent Treatment: The Tribunal applied the binding reasoning of an earlier apex-court decision which holds that once an assessment order stands unchallenged (i.e., no appeal filed), a refund claim cannot be used to circumvent the appeal/remedy mandated by the statute. A High Court decision post-dating that apex decision (and another High Court decision that recognized appealability of assessed bills) has been followed to the extent that an unchallenged assessment bars a refund claim. Interpretation and reasoning: The Court reasoned that refund proceedings are not a substitute for appeal proceedings. The officer considering a refund cannot sit in appeal over, review, or modify an assessment made by a competent assessing officer. The legislative scheme contemplates that where an assessee is aggrieved by assessment, the remedy is to prefer an appeal; directly seeking refund would short-circuit the prescribed appellate process. This principle applies equally to provisional assessments, because the statutory definition expressly includes provisional assessment within 'assessment.' Ratio vs. Obiter: Ratio - A refund claim under the refund provision is not maintainable if the assessee has not challenged the assessment by filing the prescribed appeal; provisional assessments are included within 'assessment' and thus appealable. Obiter - ancillary observations on policy reasons and comparisons with other decisions are supplementary. Conclusions: The refund claim is not maintainable where the appellant paid duty (even under protest) following a provisional/final assessment and did not file an appeal against that assessment. The Appeal is therefore dismissed on this ground. Issue 2 - Effect of a subordinate officer's communication that a Bill of Entry has been 'finally assessed': appellability and sufficiency Legal framework: The Act contemplates decisions or orders passed by officers of Customs that are appealable under the statutory appeal provisions; the competence to assess and to pass appealable orders vests in officers specified by the statute and rules. The definition of assessment includes provisional assessment, and Section(s) dealing with appeals require an appeal against an assessment/order passed by an officer of Customs. Precedent Treatment: The Tribunal noted reliance placed by the appellant on decisions which treat certain communications as not constituting appealable assessment orders; however, the Tribunal relied on higher-court authority and a High Court decision recognizing that assessments (including provisional assessments) are appealable and that failure to appeal bars refund, thereby treating a departmental communication of final assessment as operative for appealability/limitations purposes. Interpretation and reasoning: The Court considered the argument that a Superintendent's communication merely informing that the Deputy Commissioner had finally assessed the Bill of Entry could not be construed as an assessment order because the Superintendent is not an officer empowered to pass an assessment order or an appellable order. The Tribunal found that the record showed the provisional assessment was the result of departmental proceedings (including discussions in the Deputy Commissioner's chamber) and that the importer had notice, paid duty under protest and expressly reserved right to appeal. The statutory definition including provisional assessment, together with the importer's reservation to appeal and failure to institute appeal, meant that the communication of final assessment operated as the trigger for appeal remedies; the appellant's contention that the Superintendent's letter was a mere communication did not render the assessment non-appealable or permit refund in lieu of appeal. Ratio vs. Obiter: Ratio - Where assessment (including provisional assessment) has been effected and the importer had notice and opportunity to appeal but did not appeal, subsequent departmental communications that the bill has been finally assessed cannot be used to validate a direct refund claim; the importer must resort to appellate remedies if aggrieved. Obiter - Observations on the technical status of Superintendent vis-à-vis officer of Customs are contextual and do not alter the core holding that assessment (including provisional) is appealable. Conclusions: The Superintendent's communication did not defeat the availability of appeal remedies nor render the assessment non-appealable; absence of appeal precludes refund even if the importer contends no formal assessment order was passed by a particular designated officer. Issue 3 - Validity of provisional assessment procedure and unilateral classification change; remedies available when duty paid under protest but no appeal filed Legal framework: Statutory scheme allows provisional assessment; the definition of assessment encompasses provisional assessment. Procedural safeguards exist (including requirement to pass speaking orders within prescribed time after amendment of the statute) and the importer has statutory remedies (appeal, review) where assessment is contested. Precedent Treatment: The Tribunal acknowledged earlier decisions that procedural infirmities in provisional assessments may render the provisional act unsustainable; however, the Tribunal relied on binding appellate authority holding that the mere absence of a speaking order or procedural lapses does not entitle the importer to a refund where no appeal was filed against the assessment. The Tribunal also referred to pre- and post-insertion jurisprudence emphasizing that non-speaking assessments remain appealable and that failure to appeal is fatal to a refund claim. Interpretation and reasoning: The appellant alleged unilateral change in classification and a breach of statutory provisional-assessment procedure; however, the record indicated the bill had been returned and revised classification submitted by the importer, and discussions took place in the Deputy Commissioner's chamber. The importer paid the enhanced duty under protest and reserved the right to appeal, yet did not file an appeal. The Court treated the provisional assessment as an appealable order; procedural irregularities, whether raised, were matters for appeal and not for direct remedy by refund proceedings. The Tribunal also rejected the argument that certain High Court decisions favoring refund absent an appeal are binding, noting pending higher-court consideration in some instances, and reinforcing that conflicting instructions or manuals cannot override statutory scheme or higher-court precedent. Ratio vs. Obiter: Ratio - Procedural irregularity in provisional assessment does not permit bypassing the appeal remedy; paying duty under protest without taking the available appellate step does not convert the payment into a basis for a direct refund claim. Obiter - Comments on Board manuals and departmental practices are peripheral and do not affect the main holding. Conclusions: Alleged unilateral classification changes or procedural defects in provisional assessment do not sustain a refund claim where the importer did not appeal the provisional/final assessment; the proper course is to challenge assessment through appeal mechanisms provided by the Act. Cross-references and final disposition Where issues of maintainability of refund, appealability of provisional assessments, and procedural propriety overlap, the Court applied the principle that assessment (including provisional assessment) must be challenged by appeal and that refund proceedings cannot substitute for appeal. In consequence, the appellate forum declined to interfere with the order rejecting the refund claim and dismissed the appeal.