2025 (11) TMI 313 - AT - Customs

Respondents entitled to refund of excess IGST where ITC reversed before adjudication and no unjust enrichment

CESTAT held that the respondents were entitled to the refund of excess IGST. Although they had not reversed excess ITC when filing the claim, the ITC was ... Refund claim of excess IGST paid - Respondents while filing the refund claim have not reversed the ITC taken by them in respect of the excess IGST paid - orders have been passed without ascertaining the issue of unjust enrichment as the certificate of the Chartered Accountant produced by the Respondents before the Original Authority was not conclusive proof to establish that burden of excess duty paid has not been passed on to their customers - HELD THAT:- It is found that there is not dispute with regards to the reversal of the excess ITC of IGST paid by the Respondents. Revenue has only raised ground that the Respondent had not reversed the excess ITC at the time of filing the refund claim but has done so subsequently. There are no merits in the said claim for the reason that the said amount was reversed by the Respondents before the matter was adjudicated by the Original Authority, and the original authority has taken the note of such reversal while allowing the refund claims. Unjust enrichment - passing on the excess duty paid - HELD THAT:- From the perusal of the CA certificate it is clear that in respect of excess duty of customs paid the same is reflected in the books of account of the Appellant as been recoverable from the customs and burden of excess duty has not been passed on to the buyers or any other persons either as such or as part of cost or as expenses. These observations made in the certificate of Chartered Accountant clearly establish that burden of excess duty paid was not based on either by way of including in the expenses/costs. In case of Apple India Pvt. Ltd. [2013 (8) TMI 165 - CESTAT BANGALORE] Bangalore bench has observed that 'the CA’s certificate produced by the appellant fulfills the requirements and is sufficient to come to the conclusion that appellants are eligible for the refund.' There are no merits in these appeals - appeals dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether refunds of excess IGST paid on import (following reassessment and subsequent allowance of appeals setting aside reassessment) can be sanctioned to the claimant-importer where the claimant produced a Chartered Accountant (CA) certificate stating that the incidence of the excess duty has not been passed on to any other person. 2. Whether the departmental authorities (original refund sanctioning authority and the first appellate authority) were obliged to undertake additional enquiry into the issue of unjust enrichment - including scrutiny of audited balance sheets and other financial records - before allowing the refund, particularly where reversal of input tax credit (ITC) on excess IGST was effected by the claimant only after filing the refund claim but prior to adjudication. 3. Whether a CA certificate certifying non-passing-on of duty (and showing the disputed duty as receivable in books) can be treated as sufficient evidence to rebut the presumption of passing-on/unjust enrichment in refund claims, in light of statutory provisions and Board Circulars. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Lawfulness of sanctioning refunds of excess IGST where reassessment was subsequently set aside and a CA certificate was produced Legal framework: Section 27 (and proviso to sub-section (2)) of the Customs Act, 1962 governs refund and the applicability of unjust enrichment test; statutory presumption of passing-on exists (rebuttable). Board Circulars (e.g., Circular No. 07/2008-Customs and antecedent circulars) prescribe documentary/material scrutiny and acceptance criteria for CA/auditor certificates in refund/unjust enrichment contexts. Precedent treatment: The Tribunal relied on earlier Tribunal and High Court decisions (Apple India Tri.-Bang; Karnataka High Court; Telecare/CESTAT-Delhi and Delhi High Court decisions) which accepted CA/auditor certificates and accounting treatment (treating disputed duty as receivable) as sufficient to rebut the presumption of passing-on, where there is no contrary material from Revenue. Interpretation and reasoning: The Tribunal observed that reassessment orders were set aside in earlier appeals, creating a clear factual matrix of excess payment due to incorrect reassessment. The claimant had subsequently reversed the excess ITC prior to adjudication and produced a CA certificate stating (i) the excess duty is shown in books as receivable from Customs, and (ii) the burden was not passed on to buyers either directly or indirectly. The original adjudicating authority examined these materials and quantified the refundable cash component. The Tribunal found no cogent material produced by Revenue to controvert the CA certificate or the accounting treatment; therefore, the CA certificate and corroborative accounting entries were sufficient to meet the statutory requirement to rebut the presumption of passing-on. Ratio vs. Obiter: Ratio - Where reassessment is set aside and claimant produces a CA certificate corroborated by accounting treatment showing the disputed duty as receivable, and where excess ITC has been reversed before adjudication, such evidence is sufficient to rebut the presumption of passing-on and justify refund of excess IGST. Obiter - Observations on the Board Circulars' policy and reproach to routine departmental appeals are persuasive but ancillary to the finding. Conclusions: Refund sanction was lawful; the CA certificate and accounting entries sufficiently established absence of passing-on; therefore, allowance of refund was justified and appeals by Revenue on this ground were dismissed. Issue 2 - Extent of enquiry required by authorities into unjust enrichment (necessity and timing of scrutiny of reversal of ITC and audited records) Legal framework: Section 27(1A) and provisos; Board's administrative instructions require the adjudicating officers to examine audited balance sheets, financial records and CA certificates to decide unjust enrichment; burden of proof lies on claimant to rebut presumption. Precedent treatment: Decisions cited accept that the statutory presumption is rebuttable by suitable evidence (auditor/CA certificate and corresponding accounting entries), and the authorities should accept certificates from CAs/auditors who are familiar with the company's accounts (statutory auditors preferred but not strictly mandatory if certificate aligns with accounts). Interpretation and reasoning: The Tribunal found that although the claimant did not reverse ITC at the instant of filing the refund claim, the reversal was effected before adjudication and was recorded in the original order. The Tribunal held that the authorities did examine the CA certificate and accounting records as required; no further mandatory or separate pre-adjudication enquiry was necessary in the absence of contradictory material from Revenue. The Tribunal emphasized that Revenue failed to produce any cogent documentary evidence to displace the CA certificate or show that duty was passed on. Ratio vs. Obiter: Ratio - If claimant reverses ITC before adjudication and produces a CA certificate supported by accounting entries, the authorities satisfy the requirement to examine unjust enrichment; absent contrary materials, further enquiry need not be mechanically undertaken. Obiter - Reproach against 'routine and mechanical' departmental appeals without substantive contrary evidence. Conclusions: The authorities fulfilled the requisite inquiry; reversal of ITC prior to adjudication and CA certificate sufficed; Revenue's contention that further enquiry under Section 128(a)(3) was mandatory in these facts was not upheld. Issue 3 - Admissibility and evidentiary weight of Chartered Accountant certificate and accounting treatment in rebutting presumption of passing-on Legal framework: Principle that burden of proof to rebut statutory presumption lies on claimant; evidentiary rules on burden (conceptually analogous to Sections 101/103 Indian Evidence Act) apply in substance; Board Circulars delineate the character and acceptance of CA/auditor certificates for unjust enrichment claims. Precedent treatment: Tribunal and appellate decisions accepted CA/auditor certificates as adequate where auditors are familiar with accounts and certificate is consistent with balance sheet/financial statements (Apple India; Karnataka HC; Telecare/CESTAT-Delhi and Delhi HC). The Board Circulars encourage acceptance where the certificate is from a CA who audits the claimant's accounts under Companies Act/Tax Acts, but strict statutory auditor status is not an absolute prerequisite if certificate aligns with accounting records. Interpretation and reasoning: The Tribunal examined the CA certificate's contents: (i) goods were not sold as such and were used in manufacture; (ii) excess duty shown as receivable in books; (iii) burden not passed on. The Tribunal found these assertions corroborated by the account treatment and prior orders quantifying refund. In absence of any documentary refutation by Revenue, the CA certificate was held to be admissible and sufficient to rebut the presumption of passing-on. Ratio vs. Obiter: Ratio - A CA certificate that is consistent with the claimant's books (showing disputed duty as receivable and not treated as cost) constitutes acceptable evidence to rebut the presumption of passing-on and sustains refund; absence of contrary evidence from Revenue is decisive. Obiter - Commentary on preference for statutory auditors under Board Circulars and on prudence of departmental scrutiny. Conclusions: The CA certificate, when corroborated by accounting entries and not contradicted by Revenue, carries sufficient evidentiary weight to establish absence of unjust enrichment and justify refund; Revenue's reliance on general principles of burden and on-time reversal of ITC did not displace the claimant's evidence. Overall Disposition The Tribunal found no merit in the departmental appeals; refunds sanctioned by the original authority (after acceptance of CA certificate and accounting evidence, and noting reversal of excess ITC before adjudication) were upheld. Appeals by Revenue were dismissed.