2025 (8) TMI 512 - HC - Customs

Matter remanded for fresh appeal on 1% handling charges in customs duty under section 2(22) of Customs Act

HC remanded the matter to the Commissioner (Appeals) with liberty to the respondent to file grounds of appeal against the Adjudicating Authority's order ... Seeking refund of excess customs duty paid on account of imposition of 1% handling charges by the Customs Authorities at the time of import of goods - retrospective effect of N/N. 91/2017 - non-furnishing of documents from which value of the goods was ascertainable - refund of the duty paid in DEPB scrips in cash - HELD THAT:- It appears that, the respondent has not challenged the said order. Rather, the respondent has filed an appeal under Section 129A of the Act before the Tribunal impugning the order dated 15.11.2018 of the Commissioner (Appeals). Appropriate should have been for the respondent to have challenged the order dated 26.02.2019 before the Commissioner (Appeals). It appears that, the aspect of Adjudicating Authority passing the order dated 26.02.2019 was not brought to the notice of the Tribunal for the reasons best known to the parties. The objection of respondent to the additional substantial questions of law is that, question of modifications of assessment was not urged before the lower authorities and also such grounds need to be rejected being contrary to the established legal norms and principles of fair adjudication. In any case what is also important to be noted is that, after Commissioner (Appeals) passed the order and during the pendency of the appeal before the Tribunal, the Adjudicating Authority has passed an order dated 26.02.2019, whereby the Adjudicating Authority has dismissed the appeal by relying upon notification dated 26.09.2017 to hold that till 25.09.2017, 1% handling charges are includable on assessable value of goods - before that date, 1% handling charges shall be added to CIF value. The Adjudicating Authority has also rejected the claim by relying upon Section 27 of the Act to hold that, no documents or other evidence(s) have been filed to show the duty in relation to refund claim has not been passed on by the respondent to any other person. The Tribunal while allowing the appeal vide the impugned order, did not had the benefit of the order of the Adjudicating Authority dated 26.02.2019 as the same was not placed before it. It was also not the case of the respondent that it had filed an appeal against the same. Till such time the said order (dated 26.02.2019) is set aside, it continues to hold the field. So, any determination of claim for refund, more specifically in respect of payment of customs duty by including 1% handling charges. The contract in the case in hand being a CIF contract which includes cost of the goods, insurance and transportation to the port of destination, it may obligate the buyer to be responsible for customs, unloading of goods etc., and if value of the goods and services are not ascertainable, surely 1% handling charges shall be chargeable and the judgment of the Supreme Court in Wipro Ltd. [2015 (4) TMI 643 - SUPREME COURT] shall be applicable in the manner the Supreme Court has read down the provision. The matter is remanded back to the Commissioner (Appeals) by granting liberty to the respondent to file its grounds of appeal against the order dated 26.02.2019 and upon such filing, the Commissioner (Appeals) shall consider the issue of justifiability of claim for refund when the customs duty to the extent of 1% handling charges has been deposited through self-assessment keeping in view the applicability of the judgment in the case of Mafatlal Industries Ltd. [1996 (12) TMI 50 - SUPREME COURT] and Wipro Ltd. (as the case may be) in the facts of this case and proceed in accordance with law. Appeal disposed off by way of remand. ISSUES: Whether the Customs, Excise and Service Tax Appellate Tribunal (Tribunal) was correct in holding that Notification No. 91/2017 is retrospective in effect.Whether the Tribunal correctly applied the Supreme Court's judgment in Wipro Ltd. regarding the illegality of imposing customs duty on adhoc 1% handling charges when the respondent failed to furnish documents evidencing ascertainable value of goods.Whether refund of customs duty paid through Duty Entitlement Pass Book (DEPB) scrips can be granted in cash.Whether the Commissioner (Appeals) has jurisdiction to remand the matter for de novo adjudication beyond the grounds specified under Section 128A(3)(b) of the Customs Act, 1962.Whether the refund sanctioning authority has jurisdiction to grant refund after finalization of self-assessment of bills of entry without any modification or challenge to the assessment.Whether the Tribunal's order allowing refund without modification of self-assessment amounts to revising or reviewing the original concluded assessment without jurisdiction.Whether amendment of bills of entry under Section 149 of the Customs Act can be made at any time without limitation after clearance of goods.Whether interest on refund beyond three months under Section 27A of the Customs Act is payable.Whether the appeal is maintainable before the High Court despite monetary limits prescribed by CBIC instructions. RULINGS / HOLDINGS: The Tribunal erred in holding that Notification No. 91/2017 is retrospective without considering the subsequent order of the Adjudicating Authority dated 26.02.2019, which upheld the inclusion of 1% handling charges in assessable value for the relevant period. The matter requires reconsideration in light of that order.The Tribunal's broad reading of the Supreme Court's judgment in Wipro Ltd. that imposition of customs duty on adhoc 1% handling charges is 'bad in law' in all circumstances is incorrect; the Supreme Court held that the adhoc charge applies only when actual charges are not ascertainable. Since the respondent paid duty voluntarily without challenge, the refund claim is not sustainable without modification of self-assessment.Refund of customs duty paid through DEPB scrips can be made in cash as the scrips are freely tradable and treated as equivalent to cash payment; no provision exists for re-crediting scrips on refund.The Commissioner (Appeals) has limited power to remand matters only under Section 128A(3)(b) of the Act, specifically when an order is passed without following principles of natural justice or other enumerated grounds. In the present case, remand was ordered on grounds of violation of natural justice, which is permissible.The refund sanctioning authority has no jurisdiction to grant refund by overriding or revising a concluded self-assessment without modification or re-assessment under the Act; refund proceedings under Section 27 are not a substitute for reassessment.The Tribunal's order allowing refund without modification of self-assessment effectively amounts to unauthorized review or revision of the original assessment and is without jurisdiction.Section 149 does not permit amendment of bills of entry at any time without limitation; amendments must be made within a reasonable time after clearance or deposit of goods, subject to provisos.Interest beyond three months on refund under Section 27A is not automatically payable; the Tribunal erred in not addressing this issue adequately.The appeal is maintainable before the High Court despite monetary limits prescribed by CBIC instructions, as refund issues of legal and recurring nature are exempted from such limits. RATIONALE: The Court applied the statutory provisions of the Customs Act, 1962, particularly Sections 17 (self-assessment), 27 (refund), 27A (interest on refund), 128 (appeals), 128A (procedure in appeals), and 149 (amendment of bills of entry).Precedent judgments relied upon include the Supreme Court decisions in Wipro Ltd. (on handling charges and customs valuation), Mafatlal Industries Ltd. (on refund claims and concluded assessments), ITC Ltd. (on refund jurisdiction and self-assessment), and Priya Blue Industries Ltd. (on refund and assessment modification).The Court emphasized that refund proceedings under Section 27 are distinct from assessment or reassessment proceedings and cannot be used to revise or review a finalized self-assessment without statutory authority.The Court noted the principle that the Commissioner (Appeals) has limited remand powers strictly confined to grounds specified in Section 128A(3)(b) and that remand orders must be justified accordingly.The Court recognized that the Tribunal misinterpreted the Supreme Court's ruling in Wipro Ltd. by treating the adhoc 1% handling charge as always invalid, ignoring the conditional application when actual charges are ascertainable.The Court underscored the necessity for documentary evidence proving that the duty claimed for refund was paid and not passed on to others, as required under Section 27, which was not satisfactorily furnished.The Court observed that the refund claim was premature and procedurally defective as the respondent did not challenge or modify the self-assessment before seeking refund, thus lacking jurisdiction for refund sanctioning authority to grant relief.The Court allowed framing of additional substantial questions of law related to jurisdiction and finality of self-assessment, invoking Section 130 of the Act to address issues not determined by the Tribunal.The Court remanded the matter to the Commissioner (Appeals) for fresh adjudication considering the order dated 26.02.2019 and applicable Supreme Court precedents, with directions to decide within a stipulated timeframe and to consider all relevant legal provisions and documentary evidence.