Specific customs classification and mistaken duty payment allowed exemption and refund; limitation ran from discovery of mistake.

Imported tunnel boring machines were held to fall under a specific customs classification rather than the broader project-import heading, so the Project Import Regulations, 1986 did not require contract registration for the exemption under Section 25(1) of the Customs Act, 1962. The refund claim was treated as money paid by mistake where no duty was actually leviable, so Section 27 of the Customs Act did not govern limitation. Instead, the claim was tested on the principle of repayment of money received by mistake and was found to be within time under Article 113 of the Limitation Act, with time running from discovery of the mistake.

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Issues: (i) Whether the import of tunnel boring machines was entitled to exemption and whether the failure to register the project contract under the Project Import Regulations, 1986 defeated the claim; (ii) Whether the claim for refund was barred by limitation under the Customs Act, 1962 or the Limitation Act, 1963.

Issue (i): Whether the import of tunnel boring machines was entitled to exemption and whether the failure to register the project contract under the Project Import Regulations, 1986 defeated the claim.

Analysis: The goods imported were tunnel boring machines, which were specifically described under the relevant customs tariff entry, whereas the project-import heading for drinking water supply projects was a broader and more general description. Where goods fall within a specific description, that classification prevails over a general one. The Project Import Regulations, 1986 applied to assessment under heading 98.01 and required registration of the contract only for goods assessed under that heading. Since the imported machines were held to fall under the specific entry for tunnel boring machines and not under heading 98.01, non-registration of the contract did not disentitle the petitioners from claiming the benefit of the exemption notification issued under Section 25(1) of the Customs Act, 1962.

Conclusion: The petitioners were entitled to the exemption, and the absence of contract registration did not defeat the claim.

Issue (ii): Whether the claim for refund was barred by limitation under the Customs Act, 1962 or the Limitation Act, 1963.

Analysis: The amount had been paid on the premise of customs duty, but the Court treated the payment as money paid by mistake where no duty was actually leviable. In that situation, Section 27 of the Customs Act, 1962 governing refund of duty did not control the claim. The Court applied the principle underlying Section 72 of the Contract Act, 1872 and treated the recipient as under a continuing obligation to repay money received by mistake. On the facts, the mistake was discovered in September 2012, and the writ claim was brought within the period allowed by Article 113 of the Limitation Act, 1963, read with Section 17 of that Act. The claim was therefore not barred by limitation.

Conclusion: The refund claim was within time and was not barred by limitation.

Final Conclusion: The writ petition succeeded and the customs authorities were directed to refund the amount collected in respect of the imported tunnel boring machines.

Ratio Decidendi: Where imported goods are covered by a specific exempting classification and duty was paid by mistake on goods not exigible to duty, the refund is governed by the law relating to money paid by mistake and not by the refund period applicable to overpaid customs duty; limitation runs from discovery of the mistake.

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