2003 (9) TMI 90 - HC - Customs

Petition Dismissed: Customs Refund Claims Must Adhere to Unjust Enrichment Principles u/s 27.

The Ct. dismissed the petition, affirming that refund claims under Section 18 of the Customs Act are subject to Section 27, including unjust enrichment ... Refund - excess amount of duty - Unjust enrichment - Provisional assessment - imports various alcoholic preparations into India - HELD THAT:- Explanation to Section 11B(1) of the Central Excises & Salt Act, 1944, as enacted originally provided that the refund arising on finalisation of provisional assessment will be subject to the limitation prescribed under Section 11B of the Excise Act. That explanation to Section 11(B)(1) was omitted by Act 44 of 1980. As a result, the procedure prescribed u/s 11B was not applicable to the refunds arising on finalisation of the provisional assessments. In view of this lacuna, the Apex Court in the case of Mafatlal Industries [1996 (12) TMI 50 - SUPREME COURT] held that the recoveries or refund arising on finalisation of provisional assessment under Rule 9B are not governed by the provisions of Section 11A or Section 11B of the Central Excise Act. This lacuna in the statute pointed out by the Apex Court in the case of Mafatlal Industries [1996 (12) TMI 50 - SUPREME COURT] has been remedied by the Legislature, by Act 21 of 1998 Clause (eb) has been inserted to the definition of 'relevant date' contained in Section 11B of the Central Excise Act with effect from 1-8-1998. Similarly by Notification No. 458 (E), dated 25-6-1999, Rule 9B of the Central Excise Rules, 1944 has been amended. As a result of these amendments, the refunds arising on finalisation of provisional assessment under Rule 9B is subjected to the procedure established u/s 11B(2) of the Centra1 Excise Act. The amended provisions of Rule 9B has been recently considered by the Apex Court in the case of Commissioner of Central Excise v. T.V.S. Suzuki Ltd.[2003 (8) TMI 42 - SUPREME COURT] and it is held by the Apex Court that the refund claims arising under Rule 9B prior to 25-6-1999 will not be governed by the restrictions in Section 11A and Section 11B of the Central Excise Act. In other words, after 25-6-1999, even the refunds arising under Rule 9B(5) are governed by the provisions of Section 11B of the Central Excise Act. Thus, in view of the above lacuna in the Central Excise Law, the Apex Court in the case of Mafatlal Industries held that the refund arising under Rule 9B is not subjected to Section 11A or Section 11B of the Central Excise Act. There was such lacuna in the provisions contained under the Customs Act. Therefore, the contention of the Petitioners that in view of the judgment of the Apex Court in the case of Mafatlal Industries (supra), the refund arising u/s 18 of the Customs Act cannot be subjected to the provisions of Section 27 of the Customs Act, cannot be accepted. Since refunds arising under Section 18 of the Customs Act has been expressly subjected to the procedure prescribed in Section 27 of the Customs Act, it is not open to the Petitioners to contend that the Parliament in its wisdom thought it fit not to subject the refunds arising on finalisation of provisional assessment within the purview of Section 27 of the Customs Act. In the present case, we have held that the amount paid on provisional assessment represents payment of duty and therefore, refund of that amount even if it is a vested right, it is governed by the principles contained in Section 27 of the Customs Act. Even otherwise, while exercising the Writ jurisdiction, if the Writ Court finds that any direction to refund results in unjust enrichment to the Petitioner, then it is open to the Writ Court to decline to exercise its Writ jurisdiction, even though the Petitioner has a right to obtain refund. This reasoning of ours is supported by the Full Bench decision of this Court in the case of New India Industries v. Union of India [1991 (10) TMI 42 - HIGH COURT OF JUDICATURE AT BOMBAY], as well as the decision of the Apex court in the case of Mafatlal Industries Ltd.. In the present case, admittedly, the Petitioners have passed on the incidence on duty to the customers and have recovered the amount due to them. In this view of the matter, we declined to issue Writ in favour of the Petitioners. Thus, the petition fails and the same is dismissed. However, in the facts and circumstances of the case, there will be no order as to costs. Issues Involved:1. Obligation of Customs Authorities to Refund Excess Amount under Section 18(2) of the Customs Act.2. Applicability of Section 27 of the Customs Act to Refunds Arising from Provisional Assessments.3. Concept of Unjust Enrichment in Refund Claims.4. Limitation Period for Filing Refund Claims under Section 27.5. Vested Right to Refund Prior to Amendment of Section 27.Summary:1. Obligation of Customs Authorities to Refund Excess Amount under Section 18(2) of the Customs Act:The Petitioners argued that the Customs authorities are obliged to refund the excess amount under Section 18(2) of the Customs Act, even if the amount has been recovered from customers. The Court found no merit in this contention, stating that Section 18 merely entitles the assessee to get a refund if the duty finally determined is less than the duty paid provisionally. Section 18 must be read with Section 27, which governs the refund process.2. Applicability of Section 27 of the Customs Act to Refunds Arising from Provisional Assessments:The Petitioners contended that Section 27, which deals with the refund of duty, does not apply to refunds arising under Section 18(2) of the Customs Act. The Court rejected this argument, stating that Section 27 applies to all refunds of duty, including those arising from provisional assessments. The Court emphasized that the refund of duty arising on finalization of the provisional assessment is governed by the limitation prescribed under Section 27.3. Concept of Unjust Enrichment in Refund Claims:The Petitioners argued that the principles of unjust enrichment incorporated in Section 27 with effect from 20-9-1991 do not apply to refunds arising under Section 18(2). The Court held that all claims for refunds under the Customs Act must pass the test of 'unjust enrichment' contained in Section 27. Since the incidence of duty has been passed on to the consumer, no refund can be granted as it would result in unjust enrichment to the Petitioners.4. Limitation Period for Filing Refund Claims under Section 27:The Court noted that Explanation II to Section 27 provides that to obtain a refund of any duty paid provisionally under Section 18, an application for refund must be made within the period of limitation prescribed therein. The limitation period is six months from the date of adjustment of duty after the final assessment for cases other than those involving personal use, government, educational, research, charitable institutions, or hospitals.5. Vested Right to Refund Prior to Amendment of Section 27:The Petitioners claimed that their vested right to a refund accrued before the amendment of Section 27 and should not be affected by the principles of unjust enrichment. The Court dismissed this argument, stating that the first proviso to Section 27 expressly provides that applications for refund made before the commencement of the 1991 amendment shall be dealt with as per the amended provisions of Section 27.Conclusion:The Court dismissed the petition, holding that the refund claims arising under Section 18 of the Customs Act are subject to the provisions of Section 27, including the principles of unjust enrichment. The Petitioners' arguments were found to be without merit, and the Customs authorities were not obliged to refund the amount due under Section 18 without the application of Section 27. The petition was dismissed with no order as to costs.