Refund on protested customs duty upheld where EPCG knitting machine fell within exemption and assessment challenge was not required.

Duty paid under contemporaneous protest was treated as a clear challenge to the assessment, so the refund claim was not barred by limitation. The text also states that a knitting machine imported under the EPCG scheme fell within the scope of Notification No. 29/97-Cus. as judicially interpreted for textile-garment manufacturing machinery, and the narrower administrative view was rejected. Refund could not be denied merely because the bill of entry assessment had not been separately challenged, since the protest showed no acquiescence. On that basis, refund was held admissible on all three issues.

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Issues: (i) whether the refund claim for additional duty of customs was barred by limitation when the duty had been paid under protest; (ii) whether a knitting machine imported under the EPCG scheme was eligible for exemption under Notification No. 29/97-Cus.; and (iii) whether refund could be denied on the ground that the assessment of the bill of entry had not been challenged.

Issue (i): whether the refund claim for additional duty of customs was barred by limitation when the duty had been paid under protest.

Analysis: The record showed contemporaneous letters by the importer expressly disputing the denial of the exemption benefit and asserting entitlement to the additional duty benefit. Those communications constituted a clear protest against assessment without the exemption. In that situation, the refund application could not be treated as a time-barred claim.

Conclusion: The refund claim was not barred by limitation and this issue was decided in favour of the assessee.

Issue (ii): whether a knitting machine imported under the EPCG scheme was eligible for exemption under Notification No. 29/97-Cus.

Analysis: The exemption question was governed by the scope of the notification as interpreted by the Supreme Court in the cited precedent, which recognised that capital goods imported under the EPCG scheme for manufacture of textile garments covered machines required for the manufacturing process, including knitting-related machinery. The restrictive view taken by the authorities that only machines directly used in the final garment-making stage were covered was inconsistent with that ruling.

Conclusion: The knitting machine was eligible for the benefit of the notification and this issue was decided in favour of the assessee.

Issue (iii): whether refund could be denied on the ground that the assessment of the bill of entry had not been challenged.

Analysis: The appellate authority relied on the principle that an unchallenged assessment may bar a refund claim. However, that objection had not been the foundation of the original rejection, and the contemporaneous protest showed that the importer had not acquiesced in the assessment. The refund could therefore not be refused on that ground.

Conclusion: Refund was not liable to be denied on the ground that the assessment had not been separately challenged and this issue was decided in favour of the assessee.

Final Conclusion: The duty-paid protest, the broad coverage of the exemption notification, and the absence of acquiescence together justified grant of refund.

Ratio Decidendi: Where duty is paid under contemporaneous protest and the imported capital goods fall within the scope of the exemption notification as judicially interpreted, refund cannot be rejected either as time-barred or solely because the assessment was not separately challenged.

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