2017 (11) TMI 1300 - HC - Customs

Court affirms SAD refund ruling, clarifies Customs Act limit doesn't apply. Subordinate legislation cannot set refund limits.

Commissioner of Customs (Import) Versus Gulati Sales Corporation

Commissioner of Customs (Import) Versus Gulati Sales Corporation - 2018 (360) E.L.T. 277 (Del.) Issues Involved:1. Refund of Special Additional Duty (SAD) under Notification No. 102/2007-CUS.2. Applicability of the limitation period under Section 27 of the Customs Act, 1962.3. Interpretation of subordinate legislation imposing a limitation period for refund claims.Issue-wise Detailed Analysis:1. Refund of Special Additional Duty (SAD) under Notification No. 102/2007-CUS:The Commissioner of Customs (Import) challenged the final order dated 2nd January 2017 by the Custom, Excise, and Service Tax Appellate Tribunal (CESTAT), which allowed the appeal by the respondent and directed a refund of Rs. 13,72,436/- under Notification No. 102/2007-CUS dated 14th September 2007. The court noted that the issue was covered by the Delhi High Court's decision in Sony India Private Limited versus Commissioner of Customs, which established that SAD is refundable once the importer shows that the goods have been sold or VAT has been paid.2. Applicability of the limitation period under Section 27 of the Customs Act, 1962:The court examined whether the limitation period specified under Section 27 of the Customs Act applied to refund claims under Notification No. 102/2007-CUS. The judgment in Sony India clarified that the phrase 'so far as may be' in Section 27 indicates that the mechanism for refunds applies but not the period of limitation. The court emphasized that the Customs authorities had not initially understood Section 27 to impose a one-year limitation period on SAD refunds until the introduction of Circular No. 6/2008 and Notification No. 93/2008, which prescribed a one-year period from the date of payment of duty.3. Interpretation of subordinate legislation imposing a limitation period for refund claims:The court discussed the validity of imposing a limitation period through subordinate legislation without a statutory amendment. The judgment in Sony India held that essential legislative policy aspects, such as limitation periods, cannot be formulated by subordinate legislation. The court referenced Khemka and Co. (Agencies) Private Ltd. v. State of Maharashtra, which asserts that substantive rights cannot be affected by subordinate legislation. The court also addressed the decision in Principal Commissioner of Customs versus Riso India Private Limited, clarifying that it did not conflict with Sony India. Riso India dealt with whether interest was payable on delayed refunds of SAD, not the applicability of the limitation period.Conclusion:The court concluded that the impugned order was consistent with the ratio in Sony India, affirming that the limitation period under Section 27 does not apply to SAD refunds. The appeal was dismissed, and no substantial question of law arose. The court reiterated that the purpose of SAD is to ensure the collection of appropriate sales tax or VAT and that it is refundable upon proof of such payment. The Revenue's attempt to argue contrary to its own circulars and understanding was rejected.