2014 (4) TMI 870 - HC - Customs

Limitation Period for Special Additional Customs Duty Refunds Cannot Apply Retrospectively Without Clear Statutory Backing

The HC held that the limitation period introduced by the amending notification for refund claims of Special Additional Customs Duty cannot be applied ... Bar of Limitation – Refund of Special additional customs duty (SAD) - Notification no. 102/2007-Cus – Absence of limitation period in the original Notification - Can period of limitation for preferring refund claims, specified in the amending notification be made applicable with retrospective effect, in absence of a limitation period in the original Notification in respect of goods imported prior to the issue of the amending notification – Held That:- In the absence of specific provision of Section 27 being made applicable in the said notification, the time-limit prescribed in this section would not be automatically applicable to refunds under the notification - With the introduction of the circular and then amended notification (No. 93), the Customs authorities started insisting that such limitation period which was prescribed w.e.f. 01.08.2008 by notification became applicable - There is a body of law that essential legislative policy aspects period of limitation being one such aspect cannot be formulated or prescribed by subordinate legislation. Relying upon Khemka and Co. Private Ltd. v. State of Maharashtra [1975 (2) TMI 91 - SUPREME COURT] - In matters which deal with substantive rights, such as imposition of penalties and other provisions that adversely affect statutory rights, the parent enactment must clearly impose such obligations; subordinate legislation or rules cannot prevail or be made, in such cases - The imposition of a period of limitation for the first time, without statutory amendment, through a notification, therefore could not prevail - This Court holds that the amending notification must be read down to the extent that it imposes a limitation period - Decided in favour of assesse. Issues Involved:1. Applicability of the period of limitation for refund claims under Notification No. 93/2008-Cus.2. Retrospective effect of the amending notification on goods imported prior to its issuance.3. Computation of the refund claim period from the date of payment of duty.4. Interpretation of Section 3(5) of the Customs Tariff Act (CTA) and the applicability of Section 27 of the Customs Act.Detailed Analysis:1. Applicability of the Period of Limitation for Refund Claims Under Notification No. 93/2008-Cus:The court examined whether the period of limitation specified in Notification No. 93/2008-Cus could be applied retrospectively to goods imported before the notification's issuance. The appellant argued that the original Notification No. 102/2007-Cus did not stipulate a time limit for claiming refunds, and thus the amending notification should not impose such a limit retrospectively. The court concluded that the imposition of a limitation period through subordinate legislation, without statutory amendment, could not prevail. The court held that the amending notification must be read down to the extent that it imposes a limitation period.2. Retrospective Effect of the Amending Notification on Goods Imported Prior to Its Issuance:The appellant contended that since the imports and payment of relevant customs duties were made when the original notification was in force, the amending notification should not apply retrospectively. The court agreed, stating that a new law of limitation cannot extinguish a right of action by providing a shorter limitation period. The court cited precedents to support the view that the law of limitation in operation at the time of the commencement of action is applicable, and a new law cannot retrospectively affect existing rights.3. Computation of the Refund Claim Period from the Date of Payment of Duty:The appellant argued that the period of one year should be computed from the date the TR-6 challan was stamped, indicating the receipt of duty payment. The court noted that the right to claim a refund accrues only after the sale of goods, which is a market-driven event. Therefore, starting the limitation period from the date of payment of duty would be inappropriate. The court emphasized that the refund provisions under the Customs Act are inapplicable to the duties levied under Section 3(5) of the CTA, and any limitation period must be introduced by legislation.4. Interpretation of Section 3(5) of the Customs Tariff Act (CTA) and the Applicability of Section 27 of the Customs Act:The court analyzed Section 3(5) of the CTA, which allows for additional duty to counterbalance sales tax, VAT, or other charges on similar goods sold in India. The court noted that the exemption provided in the original notification was conditional upon the subsequent sale of imported goods. The court further examined Section 3(8) of the CTA, which states that the provisions of the Customs Act, including those relating to refunds, apply to the duty chargeable under Section 3(5) 'so far as may be.' The court interpreted this to mean that the refund mechanism applies, but not the period of limitation. The court held that the imposition of a limitation period through the amending notification was invalid without statutory backing.Conclusion:The court held that the amending notification imposing a limitation period for refund claims could not be applied retrospectively and must be read down. The appeal was allowed, and the question of law was answered in favor of the assessee, concluding that the refund claims were not time-barred.