2025 (7) TMI 734 - HC - Customs

Chartered accountant certificate sufficient evidence for customs duty refund under Section 27(2) unjust enrichment principles

Principal Commissioner Of Customs (ACC Imports) Versus Nokia India Sales Pvt. Ltd.

Delhi HC upheld CESTAT's decision allowing customs duty refund to respondent company. Court held that chartered accountant certificate provided by company ... Refund of excess Customs Duty paid - excess duty is passed on to its consumers or not - principles of unjust enrichment - HELD THAT:- A perusal of Section 27(2) of the Customs Act, 1962 would show that it is purely within the discretion of the Adjudicating Authority to direct crediting of any refund or interest in part or in whole to the Consumer Welfare Fund. In the present case, the CESTAT has clearly arrived at the conclusion that the chartered account certificate provided by the Respondent company is sufficient. Further, there is no reason why the same should not be accepted, especially, when the Appellant Department did not produce any evidence to the contrary. In the face of the chartered accountant’s certificate and documents that have been submitted by the company, there has to be some evidence to the contrary that would require the Adjudicating Authority to reject the refund. Apart from the documents submitted by the Respondent company along with the chartered accountant’s certificate, there may be no other way to prove that the incidence of duty has not been passed on to the consumer, especially, after a lapse of so many years - it cannot be said that the initial burden has not been discharged by the company. The CESTAT has rightly taken a view which this Court is not inclined to interfere with. The refund is now liable to be granted to the Respondent company. The petitions are disposed of - List for compliance on 10th November, 2025. 1. ISSUES PRESENTED and CONSIDERED- Whether a certificate from a chartered accountant, accompanied by ledger accounts and relevant documents, is sufficient evidence to prove that the incidence of customs duty has not been passed on to consumers by the Respondent company, thereby entitling it to a refund.- Whether the Respondent company discharged the burden of proof required under the Customs Act, 1962, specifically under Sections 27(2), 28C, and 28D, to claim refund of excess customs duty paid.- Whether the Adjudicating Authority was justified in directing the sanctioned refund amount to be credited to the Consumer Welfare Fund instead of directly refunding it to the Respondent company.- The scope and exercise of discretion vested in the Adjudicating Authority under Section 27(2) of the Customs Act, 1962, regarding directing refunds to the Consumer Welfare Fund.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Sufficiency of Chartered Accountant Certificate and Supporting Documents to Prove Non-Passage of Duty Incidence to ConsumersRelevant Legal Framework and Precedents:The Customs Act, 1962, particularly Sections 27(2), 28C, and 28D, govern refund claims and the evidentiary requirements for establishing that the incidence of customs duty has not been passed on to consumers. Section 27(2) empowers the Adjudicating Authority to direct refund amounts to the Consumer Welfare Fund if it finds that the incidence of duty has not been passed on. Sections 28C and 28D prescribe the manner and evidentiary standards for claiming refunds.Precedents relied upon include decisions from Division Benches such as Commissioner of Customs [Chennai-II] v. M/s. Adyar Gate Hotel Ltd. and Principal Commissioner of Customs v. Telecare Network (India) Pvt. Ltd., which recognize the certificate of a chartered accountant as a valid form of proof in such refund claims.Court's Interpretation and Reasoning:The Court observed that the Respondent company submitted a chartered accountant's certificate along with ledger accounts and relevant documents before the Adjudicating Authority. The Appellant Department contested the sufficiency of this evidence, alleging non-submission of ledger accounts and disputing the conclusiveness of the certificate. However, the Court noted that the Department failed to produce any contrary evidence to rebut the certificate's authenticity or the claim that the duty incidence was not passed on.The Court emphasized that after a lapse of several years, the chartered accountant's certificate and accompanying documents might be the only feasible method to establish the non-passage of duty incidence to consumers. The CESTAT had accepted this evidence and found the certificate sufficient, a view the Court upheld.Key Evidence and Findings:The key evidence was the chartered accountant's certificate certifying that the duty incidence was not passed on, supported by ledger accounts and other documents submitted by the Respondent company. The absence of any contradictory evidence from the Appellant Department was crucial.Application of Law to Facts:The Court applied the statutory provisions and relevant precedents to conclude that the Respondent company discharged its burden of proof. The certificate, coupled with supporting documents, was adequate to establish entitlement to refund under the Customs Act.Treatment of Competing Arguments:The Appellant's argument that the certificate alone was insufficient without corroborative evidence was rejected due to the lack of any contrary evidence and the acceptance of such certificates in judicial precedents. The Respondent's submission that the burden was discharged through the certificate and documents was accepted.Conclusion:The Court concluded that the chartered accountant's certificate and supporting documents sufficiently proved the non-passage of duty incidence to consumers, entitling the Respondent to the refund.Issue 2: Discretion of the Adjudicating Authority under Section 27(2) of the Customs Act to Direct Refunds to the Consumer Welfare FundRelevant Legal Framework:Section 27(2) of the Customs Act, 1962, grants discretionary power to the Adjudicating Authority to direct that refund or interest amounts, in whole or part, be credited to the Consumer Welfare Fund instead of being paid to the claimant.Court's Interpretation and Reasoning:The Court acknowledged that the Adjudicating Authority exercised its discretion to direct the sanctioned refund amounts to be credited to the Consumer Welfare Fund. However, the Court observed that the orders lacked detailed reasoning to justify this direction, merely stating the absence of conclusive proof that the duty incidence was passed on.The Court found this reasoning inadequate, especially since the Respondent had submitted a chartered accountant's certificate and documents accepted by the CESTAT and earlier authorities. The Court emphasized that discretion under Section 27(2) should be exercised based on evidence and reasoned analysis.Key Evidence and Findings:The absence of detailed reasoning in the Adjudicating Authority's orders directing refunds to the Consumer Welfare Fund was a significant finding. The Court also noted the lack of evidence contradicting the Respondent's claim.Application of Law to Facts:The Court held that in the absence of contrary evidence, the Adjudicating Authority's discretion to divert refunds to the Consumer Welfare Fund was not justifiably exercised.Treatment of Competing Arguments:The Appellant Department supported the direction to the Consumer Welfare Fund, citing lack of conclusive proof. The Respondent opposed this, asserting entitlement to direct refund. The Court sided with the Respondent, subject to a voluntary contribution.Conclusion:The Court set aside the orders directing refunds to the Consumer Welfare Fund and held that the refund amounts be paid directly to the Respondent company.Issue 3: Burden of Proof on the Respondent Company to Establish Non-Passage of Duty IncidenceRelevant Legal Framework:The burden lies on the claimant to prove that the incidence of duty has not been passed on to consumers to claim refund under the Customs Act. This burden is discharged by producing adequate evidence, including certificates and accounting records.Court's Interpretation and Reasoning:The Court noted that the Respondent company submitted a chartered accountant's certificate and ledger accounts to discharge this burden. The Appellant's contention that the burden was not discharged was rejected due to the absence of any contradictory evidence and the acceptance of the certificate by the CESTAT.Key Evidence and Findings:The certificate and ledger accounts submitted by the Respondent were key. The Appellant failed to produce evidence to rebut the claim.Application of Law to Facts:The Court applied the burden of proof principle and found that the Respondent discharged it adequately.Treatment of Competing Arguments:The Appellant argued insufficient proof; the Respondent argued sufficiency of evidence. The Court sided with the Respondent.Conclusion:The Respondent discharged the burden of proof, entitling it to refund.3. SIGNIFICANT HOLDINGS- 'It is, therefore, not possible to accept the contention raised by the learned authorized representatives appearing for the department that the certificate of the chartered accountant produced by the appellant to substantiate the incidence of duty had not passed on to the buyers should not be accepted because the appellant did not produce any other corroborative evidence as required under sections 28C and 28D of the Customs Act.'- The Court held that the chartered accountant's certificate along with ledger accounts and supporting documents is sufficient evidence to prove that the incidence of customs duty has not been passed on to consumers.- The discretion under Section 27(2) of the Customs Act to direct refunds to the Consumer Welfare Fund must be exercised based on reasoned analysis and evidence; mere absence of conclusive proof without contrary evidence is insufficient to justify such direction.- The Court concluded that the refund amounts sanctioned should be paid directly to the Respondent company, subject to a voluntary contribution of Rs. 25 lakhs to the Consumer Welfare Fund and Rs. 10 lakhs to the Delhi High Court Bar Association.- The Court affirmed that the Respondent company had discharged the burden of proof required for claiming refund under the Customs Act.