2025 (11) TMI 391 - HC - Customs

Petition allowed: Double duty payment of Rs.78,55,766 refundable; not time-barred under Section 27(1B) and Article 265

Messrs Macro Polymers Private Ltd. & Anr. Versus Union Of India & Anr.

HC allowed the petition and quashed the impugned order that had rejected the petitioner's refund claim for double payment of duty. The court held the ... Rejection of claim of the petitioner for refund of the double payment of duty deposited through Challan TR-6 - rejection on the ground of time limitation - fulfilment of condition of Advance Authorization in terms of the exemption notification - HELD THAT:- In view of the analysis made in the decision in case of Gujarat State Police Housing Corporation Ltd [2024 (1) TMI 1409 - GUJARAT HIGH COURT] referred to and relied upon in case of Messars Aalidhra Texcraft Engineers and Anr. [2025 (1) TMI 50 - GUJARAT HIGH COURT] which is squarely applicable to the facts of the present case more particularly, when the petitioner has deposited Rs. 78,55,766/- twice, it would not be covered by the provision of section 27 of the Act and no limitation would apply as the same is required to be refunded by the respondent-authority and could not have been rejected on the ground of limitation under section 27(1B) of the Act in view of the provision of Article 265 of the Constitution of India. The impugned Order-in-Original dated 26.11.2024 passed by respondent No. 2-Assistant Commissioner (Refund) is therefore, quashed and set aside. The respondents are directed issue refund order for the amount of Rs. 78,55,766/- deposited by the petitioner within a period of 08 weeks from the date of receipt of copy of this order. Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a refund claim for amount paid twice (manual challan and later electronic challan pursuant to re-assessment) is barred by the one-year limitation under Section 27(1B) of the Customs Act, 1962. 2. Whether double payment made pursuant to directions of the Supreme Court and in the absence of an issued departmental procedure (CBIC circular issued on same date or after payment) amounts to a tax paid 'under the Act' so as to attract the limitation provisions, or whether it is a payment made without authority of law requiring refund notwithstanding statutory limitation (Article 265 of the Constitution). 3. What is the relevant date for computing limitation for refund claims in cases of reassessment and/or payments made under mistake of law - date of payment, date of re-assessment, or date of judicial direction - and whether the Cosmo Films directions and ensuing CBIC circular affect computation of limitation or entitlement to refund. 4. Whether interest is payable on a refunded sum where double payment was made voluntarily in the circumstances described. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of Section 27(1B) limitation to refund of double payment Legal framework: Section 27 of the Customs Act prescribes a one-year limitation for filing refund claims, with sub-clauses specifying computation from dates such as issue of special orders, judicial directions, or re-assessment. The Court also considered comparable limitation provisions under GST/CGST and Central Excise statutes and the general law on refund of amounts paid under mistake (Limitation Act principles). Precedent treatment: The Court reviewed and relied upon a line of authorities (High Court and Supreme Court decisions) holding that where amounts are paid under a mistake of law or are paid/collected without authority of law, the strict statutory limitation may not apply; the period for seeking relief may run from the date the mistake was discovered (Salonah Tea, ITC, Doaba/related pronouncements, and several High Court decisions). The Court treated these precedents as followed and applicable, specifically those that distinguish refund of amounts not truly 'duty' from ordinary refund claims under the relevant statutory scheme. Interpretation and reasoning: The Court accepted that the petitioner paid the same IGST amount twice - once by manual challan prior to issuance/circulation of the CBIC procedural circular and once by electronic challan after re-assessment. The Court held that such double payment is not proper taxation retained by the State; it is in substance a payment made without authority (or a mistaken payment/self-assessment in circumstances where statutory position was unsettled). The Court reasoned that permitting the Revenue to retain the second payment would amount to collection without authority and would offend Article 265. Given the admitted double payment, the statutory limitation under Section 27(1B) cannot be mechanically applied to deny refund where the payment retained is not a tax properly due. The Court relied on decisions which held that limitation for mistaken payments begins when the mistake was or could with reasonable diligence be discovered (three-year measure under Limitation Act and relevant equitable principles), and that the bar in a specific refund provision does not oust the court's discretionary remedial power where retention is without authority of law. Ratio vs. Obiter: Ratio - Section 27(1B) limitation cannot be applied to deny refund where the sum retained represents a double payment or payment without authority, and the entitlement to refund is governed by Article 265 and principles recognizing that limitation for mistakes runs from discovery. Obiter - detailed citations of earlier decisions and full discussion of GST/CGST explanation-date provisions are supportive but ancillary. Conclusions: Section 27(1B) did not bar refund of the double-paid amount in these facts; the adjudicating authority erred in rejecting claim solely on limitation grounds. Issue 2 - Nature of payment (tax under statute vs payment without authority) and effect of Article 265 Legal framework: Article 265 prohibits levy or collection of tax except by authority of law. Where an amount is collected or retained without statutory authority, constitutional principles and case law require refund unless there has been unreasonable delay or prejudice to third parties. Precedent treatment: The Court relied on established authorities holding that payments made under mistake of law or payments which were not exigible by statute cannot be retained by the Revenue and may be refunded notwithstanding statutory refund schemes (Salonah Tea, ITC, Swastik Sanitarywares, Joshi Technologies, Karnataka and other High Court decisions). These precedents were followed and applied to the facts. Interpretation and reasoning: The Court found that the double payment resulted from the interim legal landscape (Supreme Court directions and absence of a clearly communicated cash-payment procedure at the relevant time). The admitted duplication meant the second payment was not a lawful tax liability to be retained; retention would be contrary to Article 265. The Court therefore treated the claim as one for recovery of money retained without authority rather than a routine refund claim governed exclusively by the statutory refund limitation. Ratio vs. Obiter: Ratio - double payment/mistaken payment that amounts to retention without statutory authority must be refunded; Article 265 underpins entitlement. Obiter - remarks on policy considerations and examples from other statutes were explanatory. Conclusions: The double payment is not to be treated as a tax properly due that the State may retain; the petitioner is entitled to refund under constitutional and equitable principles regardless of the strict application of Section 27 in these circumstances. Issue 3 - Relevant date for limitation and effect of judicial directions / CBIC circular Legal framework: Section 27 and corresponding CGST/Section 54 constructs identify multiple possible 'relevant dates' (payment date, date of re-assessment, date of judicial direction). Limitation law (Limitation Act, Section 17) governs accrual where mistake is involved: limitation runs from discovery of mistake or when with reasonable diligence it could have been discovered. Precedent treatment: The Court followed authorities holding that where legal position is unsettled and amounts were paid under mistake or in compliance with judicial directions, the relevant date for limitation may be the date of discovery/reassessment/judicial communication rather than the earlier payment date; the period may be tolled where confusion persisted and the taxpayer acted within reasonable time after clarity was provided. Interpretation and reasoning: The Court noted the petitioner paid manually to adhere to the six-week window indicated by the Supreme Court and paid again electronically after re-assessment pursuant to the CBIC circular. Given the uncertainty and the procedural lacuna when the manual payment was made, the Court concluded that the limitation computation cannot defeat a refund claim where double payment arose from the transitional circumstances and where the taxpayer acted promptly once direction/procedure crystallized. The Court therefore declined to treat the manual payment as conclusively fixing the limitation bar so as to preclude refund of the duplicate payment made later. Ratio vs. Obiter: Ratio - in transitional or uncertain legal contexts, limitation for refund of mistaken/double payments must be interpreted in light of when the mistake could reasonably be discovered and the taxpayer's compliance with judicial directions; reassessment and judicial directions may control computation. Obiter - detailed mapping to CGST explanation clauses was explanatory. Conclusions: The petitioner's conduct and the sequence (manual payment to meet a judicially prescribed window, later electronic payment after reassessment in accordance with circular) put the duplicate payment within the ambit of refundable sums; limitation could not be used to defeat refund in the factual matrix before the Court. Issue 4 - Entitlement to interest on refund Legal framework: Interest on refunds is governed by statutory provisions and equitable considerations; entitlement may be affected by voluntariness of payment and conduct of the claimant. Precedent treatment: The Court considered precedents where interest was denied where payment was voluntarily made or where refund was granted in exercise of discretionary jurisdiction without statutory mandate for interest. Interpretation and reasoning: Although refund was ordered, the Court found that the petitioner had voluntarily deposited the amount twice (to comply with perceived time limit) and that interest was not warranted in the circumstances. The Court balanced the equities and exercised discretion to grant refund without interest. Ratio vs. Obiter: Ratio - refund ordered but interest denied where duplicate voluntary payment was made in the transitional context described. Obiter - general remarks on interest principles. Conclusions: Refund to be made without interest; adjudicating authority to issue refund order within eight weeks (as directed by the Court). Final Disposition (Court's Conclusion) The Court quashed and set aside the impugned Order-in-Original rejecting the refund. The matter was remanded to the adjudicating authority to process and issue the refund order for the duplicate payment of Rs. 78,55,766/- within eight weeks, without allowance of interest, on the stated reasoning that Section 27(1B) could not bar refund where the Revenue admits double payment and retention would amount to collection without authority contrary to Article 265. No order as to costs.