CVD refund granted after CA certificate proves duty burden not passed to buyers under section 28

CESTAT NEW DELHI allowed the appeal regarding CVD refund claim. The appellant submitted a Chartered Accountant certificate proving duty burden was not passed to buyers and showed differential customs duty as receivables in Balance Sheet. Revenue failed to provide evidence contradicting the CA certificate or proving duty was passed on to customers. The legal presumption under section 28 of Customs Act was rebutted. Commissioner (Appeals) merely doubted inclusion of amount in books without seeking clarification from appellant. CESTAT set aside the order directing refund to Consumer Welfare Fund and granted refund with interest to appellant.

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ISSUES PRESENTED and CONSIDERED

The primary issue considered in this judgment was whether the refund amount of Rs. 1,67,79,311/- should be credited to the Consumer Welfare Fund or refunded to the appellant. This involved examining if the appellant had passed the burden of the countervailing duty (CVD) to the buyers, thus invoking the doctrine of unjust enrichment. The secondary issue was whether the refund claim was filed within the prescribed time limit under Section 27 of the Customs Act, 1962.

ISSUE-WISE DETAILED ANALYSIS

1. Unjust Enrichment and Refund to Consumer Welfare Fund

Relevant Legal Framework and Precedents: The legal framework revolves around Section 28D of the Customs Act, which presumes that the incidence of duty has been passed on to the buyer unless proven otherwise. The appellant must rebut this presumption to claim a refund directly instead of the amount being credited to the Consumer Welfare Fund. Precedents such as the Delhi High Court's decision in Principal Commissioner of Customs vs. Telecare Network (India) Pvt. Ltd., and the Madras High Court's decision in Virudhunagar Textile Mills Ltd. were considered, emphasizing the role of Chartered Accountant certificates and financial statements in rebutting the presumption of unjust enrichment.

Court's Interpretation and Reasoning: The Tribunal scrutinized the Chartered Accountant's certificate and the financial statements provided by the appellant. The Tribunal noted that the appellant had shown the excess duty as "Customs Duty Receivable" in their financial statements, indicating that the burden of duty was not passed on to the consumers. The Tribunal also considered the additional certificate dated 31.01.2024, which provided a detailed breakdown of the customs duty receivable, including the disputed refund amount.

Key Evidence and Findings: The evidence included the appellant's financial statements for the year ending 31.03.2016, which showed customs duty receivable as Rs. 17,38,94,156/-. The Chartered Accountant's certificates dated 09.04.2018 and 31.01.2024 corroborated that the excess duty was not passed on to the buyers and was accounted for as receivable. The Tribunal found that the Commissioner (Appeals) erred in dismissing these documents without seeking further clarification from the appellant.

Application of Law to Facts: The Tribunal applied the principles of unjust enrichment, noting that the presumption under Section 28D was effectively rebutted by the appellant through credible evidence, including the Chartered Accountant's certificate and financial statements. The Tribunal emphasized that the burden of proof shifted to the Revenue to demonstrate that the duty was passed on to consumers, which the Revenue failed to do.

Treatment of Competing Arguments: The appellant argued that the Commissioner (Appeals) did not follow the mandatory procedure under Section 128A(3) of the Customs Act and that the findings were contrary to settled law. The department contended that the Chartered Accountant's certificate was insufficient and lacked explicitness. The Tribunal favored the appellant's arguments, highlighting the absence of contrary evidence from the department.

Conclusions: The Tribunal concluded that the appellant successfully rebutted the presumption of unjust enrichment. Therefore, the refund amount should not be credited to the Consumer Welfare Fund but refunded to the appellant.

2. Timeliness of the Refund Claim

Relevant Legal Framework and Precedents: Section 27 of the Customs Act prescribes the time limit for filing refund claims, generally within one year from the date of payment or re-assessment.

Court's Interpretation and Reasoning: The Tribunal agreed with the Assistant Commissioner (Refund) that the refund claim was filed within the prescribed time limit, as the Bills of Entry were re-assessed on 09.02.2018, and the refund application was submitted on 13.03.2018.

Conclusions: The Tribunal upheld the finding that the refund claim was timely and not barred by limitation.

SIGNIFICANT HOLDINGS

The Tribunal's significant holding was that the appellant had successfully rebutted the presumption of unjust enrichment. The Tribunal emphasized that:

"A Certificate issued by a Chartered Accountant, therefore, cannot be lightly brushed aside without there being any cogent evidence to the contrary."

The Tribunal set aside the Commissioner (Appeals)'s order directing the refund amount to be credited to the Consumer Welfare Fund. The appellant was entitled to a refund of the amount with interest, reinforcing the principle that a Chartered Accountant's certificate, consistent with financial statements, can effectively rebut the presumption of duty incidence being passed to buyers. The appeal was allowed, and the order was pronounced on 17.03.2025.

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