2008 (12) TMI 102 - AT - Customs

Unjust Enrichment in Second-Hand Goods Sales: Judgment Sets Aside Commissioner's Decision

COMMR. OF CUS. (IMPORT), MUMBAI Versus BE OFFICE AUTOMATION PVT. LTD.

COMMR. OF CUS. (IMPORT), MUMBAI Versus BE OFFICE AUTOMATION PVT. LTD. - 2009 (235) E.L.T. 838 (Tri. - Mumbai) Issues Involved:1. Unjust enrichment in refund claims.2. Validity of Chartered Accountant's certificate.3. Applicability of unjust enrichment to second-hand goods.4. Requirement of simultaneous proceedings under Section 28 and Section 129D of the Customs Act, 1962.Detailed Analysis:1. Unjust Enrichment in Refund Claims:The primary issue revolves around whether unjust enrichment is applicable in the cases of refund claims filed by the respondents. The respondents imported reconditioned mainframes of photocopiers, which were found to be old and used, and claimed refunds for redemption fines, personal penalties, and enhanced duties paid. The adjudicating authority sanctioned the refunds based on the Chartered Accountant's certificate and other financial documents, asserting that the excess customs duty and redemption fine were not charged to the Profit and Loss Account but shown as recoverable from the Customs Department.2. Validity of Chartered Accountant's Certificate:The Revenue contended that the adjudicating authority did not properly examine the provisions of unjust enrichment and relied on the Chartered Accountant's certificate without substantiating supporting documents. The Commissioner (Appeals) rejected the Revenue's appeals, stating that the presumption of unjust enrichment under Section 28D of the Customs Act, 1962, would not apply as the goods were second-hand, old, and used. The Revenue argued that the sale price of goods, whether new or old, includes elements of purchase cost, duties, and other expenses, and thus unjust enrichment should apply. Additionally, the veracity of the Chartered Accountant's certificate was questioned since the importers had reported the loss of relevant documents before the certificate was issued.3. Applicability of Unjust Enrichment to Second-Hand Goods:The Commissioner (Appeals) held that unjust enrichment would not apply to second-hand goods as their sale price is determined by factors such as demand, condition, and availability rather than landed cost and duty payment. However, the judgment clarified that goods, whether new or old, have market value containing elements of purchase cost, duties, and other expenses. Therefore, the unjust enrichment provision applies unless proven otherwise with proper documentation.4. Requirement of Simultaneous Proceedings under Section 28 and Section 129D of the Customs Act, 1962:The respondents argued that for recovery of erroneously paid refunds, simultaneous proceedings under Section 28 (demand show cause notice) and Section 129D (to set aside the earlier refund sanction order) of the Customs Act, 1962, are necessary. They cited case laws supporting this requirement. However, the judgment referenced the Karnataka High Court's decision in Dynamatic Technologies Ltd. v. Union of India, which held that recovery of erroneous refunds does not necessitate a show cause notice under Section 28 if the refund is a consequence of an appellate authority's order.Conclusion:The judgment concluded that the Commissioner (Appeals) erred in holding that unjust enrichment does not apply to second-hand goods. It emphasized that the cost of goods, including duties and expenses, is a basic element in determining market value. The Chartered Accountant's certificate was deemed insufficient without supporting documents, especially given the reported loss of relevant records. Consequently, the orders passed by the Commissioner (Appeals) were set aside, and the cases were remanded to the original adjudicating authority for a de novo decision, considering all submissions and case laws cited. The appeals filed by the Revenue were allowed by way of remand.