2025 (5) TMI 1747 - AT - Central Excise

Customs Duty Reassessment Invalidated: Lack of Reasoned Order Nullifies Assessment Under Section 17(5)

The SC/Tribunal ruled that reassessment of export duty without a speaking order under Section 17(5) of the Customs Act, 1962, renders the assessment ... Refund claim for payment of excess duty - export duty charged on the basis of Wet Metric Tonne (WMT), instead of Dry Metric Tonne (DMT) - without assigning any reason and in terms of Section 17 (5) of the Customs Act, 1962 - HELD THAT:-The assessments of shipping bills have been done under Section 17 (4) of the Act and further Section 17 (5) mandates that if any order is passed under Section 17 (4) of the Act, the proper officer is duty bound to pass a speaking order of re-assessment within 15 days of the order passed under Section 17 (4) of the Act. Admittedly, in the case in hand, no order under Section 17 (5) of the Act has been passed. Thus, the appellant has no reason to challenge the assessment of the shipping bills. Therefore, the reasons for denying the refund to the appellant are not sustainable. Hence, we set aside the impugned order and direct the adjudicating authority/proper officer to pass a speaking order under Section 17 (5) of the Act and thereafter, if any refund claim is maintainable, the same is be decided in accordance with law. In these terms, the appeal is partly allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal are:- Whether the assessment of export duty on the basis of Wet Metric Tonne (WMT) instead of Dry Metric Tonne (DMT), without issuance of a speaking order under Section 17(5) of the Customs Act, 1962, renders the assessment non-final and liable to be questioned by the appellant.- Whether a refund claim for excess export duty paid by the appellant is maintainable when the shipping bills have been assessed finally and no appeal was filed against such assessment.- The legal effect and mandatory nature of the speaking order requirement under Section 17(5) following reassessment under Section 17(4) of the Customs Act, 1962.- The correctness of the rejection of refund claims on the ground of finality of assessment and absence of challenge to the original assessment.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Finality of Assessment in the Absence of a Speaking Order under Section 17(5)Relevant Legal Framework and Precedents: The Customs Act, 1962, Sections 17(4) and 17(5) are central to this issue. Section 17(4) empowers the proper officer to reassess duty if the self-assessment is found incorrect upon verification or otherwise. Section 17(5) mandates that where such reassessment is contrary to the importer/exporter's self-assessment and the importer/exporter does not accept it in writing, the proper officer must pass a speaking order within 15 days of reassessment.Court's Interpretation and Reasoning: The Tribunal emphasized the mandatory nature of Section 17(5) requiring a speaking order on reassessment. It noted that the reassessment of export duty on the basis of WMT instead of DMT was done without assigning any reason and that no speaking order under Section 17(5) was passed by the Adjudicating Authority within the stipulated time.Key Evidence and Findings: It was undisputed that the appellant filed shipping bills with duty payable on DMT, but the Adjudicating Authority demanded duty on WMT without reasons and without passing a speaking order under Section 17(5). The appellant did not challenge the assessment by way of appeal but filed refund claims for excess duty paid.Application of Law to Facts: The Tribunal held that the absence of a speaking order under Section 17(5) means the reassessment is not final and binding. The mandatory requirement under Section 17(5) is a procedural safeguard to ensure transparency and reasoned decision-making. Without such an order, the assessment cannot be regarded as final, and the appellant's refund claim cannot be denied on the ground of finality.Treatment of Competing Arguments: The Revenue argued that the assessment was final as no appeal was filed and hence refund claims were not maintainable. The Tribunal rejected this, holding that finality cannot be presumed where statutory procedural safeguards have not been complied with.Conclusions: The Tribunal concluded that the reassessment without a speaking order under Section 17(5) is not final and the appellant is entitled to have the matter reconsidered with a proper speaking order.Issue 2: Maintainability of Refund Claims after Final AssessmentRelevant Legal Framework and Precedents: Customs law principles generally hold that once an assessment order becomes final and unchallenged, refund claims on that basis may not be maintainable. However, the procedural irregularity of non-issuance of a speaking order under Section 17(5) impacts the finality of the assessment.Court's Interpretation and Reasoning: The Tribunal reasoned that since the assessment was not final due to the lack of a speaking order, the rejection of refund claims on the ground of finality was unsustainable. The appellant's claim for refund of excess duty paid is maintainable if the reassessment is set aside or reconsidered in accordance with law.Key Evidence and Findings: The appellant's refund claims were rejected by the adjudicating authority and the Commissioner (Appeals) solely on the ground that the assessment was final and no appeal was filed. The Tribunal found this reasoning flawed given the procedural lapse under Section 17(5).Application of Law to Facts: The Tribunal applied the procedural safeguards enshrined in Sections 17(4) and 17(5) to hold that the refund claims cannot be denied merely because no appeal was filed against an assessment that was not properly finalized.Treatment of Competing Arguments: The Revenue's reliance on finality of assessment was countered by the appellant's argument on non-compliance with Section 17(5). The Tribunal favored the appellant's position.Conclusions: Refund claims filed by the appellant are maintainable and must be adjudicated upon after the proper speaking order is passed under Section 17(5).Issue 3: Direction to Pass Speaking Order under Section 17(5)Relevant Legal Framework: Section 17(5) of the Customs Act, 1962, requires the proper officer to pass a speaking order within 15 days of reassessment under Section 17(4) if the reassessment is contrary to the importer/exporter's self-assessment and not accepted in writing.Court's Interpretation and Reasoning: The Tribunal underscored the mandatory nature of this provision and held that failure to pass such an order vitiates the reassessment.Key Evidence and Findings: The record showed no speaking order was passed within the stipulated time.Application of Law to Facts: The Tribunal set aside the impugned order rejecting refund claims and directed the proper officer to pass a speaking order under Section 17(5). Only after such order is passed can the refund claim be considered in accordance with law.Conclusions: The Tribunal's order mandates compliance with Section 17(5) prior to adjudication of refund claims.3. SIGNIFICANT HOLDINGS- 'Where any re-assessment done under sub-section (4) is contrary to the self-assessment done by the importer or exporter [...] the proper officer shall pass a speaking order on the re-assessment, within fifteen days from the date of re-assessment of the bill of entry or the shipping bill, as the case may be.'- 'In such circumstances, the appellant has no reason to challenge the assessment of the shipping bills. Therefore, the reasons for denying the refund to the appellant are not sustainable.'- 'We set aside the impugned order and direct the adjudicating authority/proper officer to pass a speaking order under Section 17 (5) of the Act and thereafter, if any refund claim is maintainable, the same is be decided in accordance with law.'- The core principle established is that the mandatory procedural requirement to pass a speaking order under Section 17(5) is essential to render reassessment final and binding. Absence of such order invalidates the finality of assessment and entitles the exporter to maintain refund claims for excess duty paid.- The final determination is that the impugned rejection of refund claims is set aside and the matter remanded for compliance with Section 17(5) and fresh adjudication of refund claims.