2025 (9) TMI 145 - HC - Customs

Petition allowed: Board Circular No.37/2018 not binding; appeal held maintainable, matter remitted for rehearing on duty drawback

M/s. AIM Worldwide Pvt Ltd., rep. by its Proprietor. Versus The Commissioner of Customs & Central Excise (Appeals), The Assistant Commissioner of Customs, Tuticorin

M/s. AIM Worldwide Pvt Ltd., rep. by its Proprietor. Versus The Commissioner of Customs & Central Excise (Appeals), The Assistant Commissioner of Customs, ... ISSUES PRESENTED AND CONSIDERED 1. Whether an appeal filed beyond sixty days from communication of an order/decision under the Customs Act is maintainable in view of the limitation suspension/extension announced during the Covid-19 period by the Supreme Court. 2. Whether an alleged departmental communication/letter rejecting a refund claim, which determines the rights of the claimant, is a decision or order appealable under Section 128(1) of the Customs Act. 3. Whether a Circular issued by the Board (Circular No.37/2018-Customs) is binding on the Commissioner (Appeals) and can be the sole basis for rejecting an appeal, in light of the proviso to the Board-instructions provision (Section 151A of the Customs Act / corresponding provision in the earlier statute). 4. Whether the Appellate Authority was obliged to require a speaking/reasoned order and to follow principles of natural justice before rejecting a refund claim and/or relying on a Board Circular. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Limitation and Covid-19 extension Legal framework: Section 128(1) of the Customs Act prescribes a 60-day period for appeal to the Commissioner (Appeals) from the date of communication of the decision or order. Precedent treatment: The Court applied the Supreme Court's order addressing limitation during the Covid-19 pandemic, which effectively created a 90-day window from 01.03.2022 for matters whose limitation expired between 15.03.2020 and 28.02.2022. Interpretation and reasoning: The Appellate Authority found the appeal filed on 04.02.2022 to be within the extended limitation period as per the Supreme Court's order; the Court accepts this application of the pandemic-relief order to render the appeal within time. Ratio vs. Obiter: Ratio - the pandemic relief order supplants ordinary limitation computation for the specified period; therefore the appeal cannot be dismissed solely as time-barred if it falls within the benefit. Conclusion: The appeal was properly regarded as filed within time under the Covid-19 limitation extension and cannot be rejected on the ground of delay. Issue 2 - Nature of the departmental communication: communication vs. appealable order Legal framework: Appealability under Section 128(1) depends on existence of a 'decision or order' communicated under the Act. Precedent treatment: The Court considered the substance of the communication rather than its label; administrative communications that determine rights can amount to orders for appealability purposes. Interpretation and reasoning: The impugned letter replied to the refund application, refused the refund claim on substantive grounds and stated 'Your request for refund of IGST stands disposed of accordingly.' The Court held that any communication which determines the rights of a party is an order. The appellants therefore could legitimately treat the communication as an appealable order and pursue appeal under Section 128(1). Ratio vs. Obiter: Ratio - a departmental communication that disposes of a claim and determines rights is an order within the meaning of the Act and is appealable to the Commissioner (Appeals). Conclusion: The letter in question was correctly regarded as an order determining rights and hence appealable; the Appellate Authority erred in treating it as a non-appealable mere communication. Issue 3 - Binding effect of Board Circulars on the Appellate Authority Legal framework: Section 151A of the Customs Act empowers the Board to issue instructions to officers of customs for uniformity but contains a proviso that such instructions shall not interfere with the discretion of the Commissioner (Appeals) in the exercise of appellate functions. Precedent treatment: The Court relied on settled law that Board circulars bind field formations but do not bind appellate authorities where the proviso preserves appellate discretion. Interpretation and reasoning: The impugned communication relied exclusively on Circular No.37/2018 to refuse IGST refund after initial drawback benefit. The Court observed that while departmental officers must follow Board instructions, the proviso prevents those instructions from controlling the Commissioner (Appeals)'s discretion. Consequently, reliance solely on the Circular to sustain rejection of the claim or to preclude appellate consideration was improper. Ratio vs. Obiter: Ratio - Board circulars are not binding on the Commissioner (Appeals) to the extent that they would fetter appellate discretion; an appellate authority must exercise independent judgment and is not obliged to follow the Circular if contrary to proper appellate exercise. Conclusion: The Appellate Authority (or the rejecting officer) was not entitled to shut down appellate consideration by invoking the Circular; rejection on that sole ground was unjustified. Issue 4 - Requirement for a speaking/reasoned order and adherence to natural justice; remand for fresh adjudication Legal framework: Principles of natural justice and requirement for a reasoned order apply to adjudicatory acts affecting rights; administrative disposal of refund claims requires a proper order rather than an off-hand communication. Precedent treatment: The Court emphasised established administrative law norms requiring speaking orders and opportunity to be heard where rights are determined. Interpretation and reasoning: The Assistant Commissioner issued a letter advising that the jurisdictional GST authority is competent and citing the Circular; the Court found that the refund application had not been disposed of by a reasoned adjudication complying with natural justice. The appellants retained the right to seek a speaking order; the Appellate Authority should not have dismissed the appeal on the premise that the original communication was not an order without considering that the communication in effect disposed of the claim. Ratio vs. Obiter: Ratio - where a departmental action determines rights, the authority must pass a reasoned order after following principles of natural justice; absence of such an order requires remand for fresh adjudication. Conclusion: The impugned appellate rejection was set aside and the matter remitted to the Appellate Authority to pass a reasoned order within a stipulated period (three months), uninfluenced by the Board Circular and after applying the principles of natural justice. Interrelationship and operative outcome Cross-reference: Issues 2 and 3 are interlinked - the characterization of the departmental communication as an order (Issue 2) affects appealability and the scope for appellate review notwithstanding a Board Circular (Issue 3). Issue 4 follows from these: because the communication in substance disposed of rights and was predicated on a Circular not binding on the Appellate Authority, the proper remedy is remand for a reasoned decision. Final legal conclusion (ratio): The communication that disposed of the refund claim was an appealable order; the Commissioner (Appeals) must exercise independent appellate discretion and is not bound by Board Circulars to the extent they would fetter that discretion; in absence of a reasoned adjudication complying with natural justice, the matter must be remitted for fresh decision uninfluenced by the Circular, within a specified time frame.