2016 (2) TMI 247 - HC - Customs

CBEC cannot modify Customs Act benefits via circulars; Refunds granted, circulars invalidated.

Allen Diesels India Pvt. Ltd. Versus Union of India & Ors.

The court held that the Central Board of Excise and Customs (CBEC) cannot modify benefits granted under a Customs Act notification through circulars. ... Refund of SAD - SAD had been paid, not in cash, but by utilising the DEPB scrip - scope of circular - whether ultra virus to the notification - whether, in the garb of circular issued by the Central Board of Excise and Customs (‘CBEC’) New Delhi, the benefit granted under a notification issued in terms of Section 25(1) of the Customs Act, 1962 (‘Act’) can be modified or amended. - Notification No. 102/2007 - what the circular stated was that refund of the SAD, which was liable to be made upon fulfilment of the conditions of Notification No. 102/2007-Customs, would not be in cash but re-credited to the relevant DEPB scrips which were used for making payment of the SAD. However, even this proposed system of re-crediting DEPB scrip was unable to be given effect to. The Director General of Foreign Trade (‘DGFT’) which issued the DEPB scrips apparently had no mechanism for re-crediting them through the electronic data interchange (‘EDI’) system. Held that:- Although it is sought to be projected that the circulars which are subject matter of the challenge in the present petitions were issued to streamline the procedure and to remove ambiguities, in fact what the circulars seek to amend is Notification No. 102/2007-Customs itself by introducing an additional condition for being entitled to refund, which condition does not find place in Notification No. 102/2007-Customs. Circular Nos. 6/2008, 10/2012 and 18/2013 issued by the CBEC could not have imposed an additional restriction for availing of the exemption in terms of the Notification No. 102/2007-Cus issued under Section 25(1) of the Act. An amendment to a notification issued in exercise of the powers under Section 25 (1) of the Act has to be brought about only by issuing another notification under that provision. Inasmuch as the circulars under challenge seek to impose an additional restriction for grant of refund of the SAD under Notification No. 102/2007-Customs, they are ultra vires of the Act and cannot be legally sustained. - refund to be allowed - Decided in favor of assessee. Issues Involved:1. Whether the benefit granted under a notification issued in terms of Section 25(1) of the Customs Act, 1962 can be modified or amended by a circular issued by the Central Board of Excise and Customs (CBEC).2. The validity of Circular Nos. 6/2008, 10/2012, and 18/2013 issued by the CBEC in relation to the refund of Special Additional Duty (SAD) paid using DEPB scrips.3. The rejection of the Petitioner's refund applications based on the aforementioned circulars.Issue-wise Detailed Analysis:1. Modification of Notification by Circular:The primary issue is whether the CBEC can modify or amend the benefit granted under a notification issued under Section 25(1) of the Customs Act, 1962 through a circular. The court noted that Section 151A of the Act allows the CBEC to issue instructions for uniformity in classification of goods or levy of duty but does not permit amendments to exemption notifications. Such amendments can only be made by issuing another notification under Section 25(1). The court referenced the case of Sandur Micro Circuits Ltd. v. Commissioner of Central Excise, which held that a circular cannot take away the effect of statutorily issued notifications or impose new conditions that restrict the scope of the exemption.2. Validity of CBEC Circulars:The court examined the validity of Circular Nos. 6/2008, 10/2012, and 18/2013, which imposed an additional condition that refunds of SAD paid using DEPB scrips would not be granted in cash. It was observed that these circulars effectively amended Notification No. 102/2007-Customs by introducing a condition not present in the original notification. The court cited previous decisions, including Modi Rubber Ltd. v. Union of India and Pioneer India Electronics (P) Ltd. v. Union of India, which established that administrative circulars cannot impose conditions that are not part of the statutory notification. Therefore, the court declared these circulars ultra vires and invalid as they sought to deny refunds contrary to the terms of the original notification.3. Rejection of Refund Applications:The court addressed the rejection of the Petitioner's refund applications, which were denied based on the aforementioned circulars. The Petitioner had fulfilled all the conditions of Notification No. 102/2007-Customs, and the rejection was solely due to the use of DEPB scrips for paying SAD. The court held that the rejection orders dated 16th May 2014 and 20th May 2014 were bad in law since they relied on invalid circulars. Consequently, the court set aside these orders and directed the Department to grant the refunds as per the Petitioner's applications within four weeks. The court also directed the consideration of the Petitioner's entitlement to interest on the refund amount within the same period.Conclusion:The writ petitions were allowed, and the applications disposed of with no orders as to costs. The court's judgment emphasized that any amendment to an exemption notification must be made through a proper notification under Section 25(1) of the Customs Act, and not through administrative circulars. The invalidation of the CBEC circulars reaffirmed the statutory requirements for granting refunds and upheld the Petitioner's entitlement to the refund of SAD paid using DEPB scrips.