Section 28D creates rebuttable presumption of unjust enrichment; CA certificate under CBEC circular can rebut for 4% SAD refund

Karnataka HC held that Section 28D creates a rebuttable presumption of unjust enrichment which may be discharged by a Chartered Accountant's certificate in terms of CBEC circulars for refund of 4% SAD; the circulars prescribe the CA certificate as the means to rebut the presumption. The Court accepted the assessee's position on the substantial legal questions and ruled against the Revenue, dismissing the appeal.

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1. ISSUES PRESENTED AND CONSIDERED

1. Whether a Chartered Accountant's certificate certifying that the burden of 4% Special Additional Duty (SAD) has not been passed on to buyers suffices to rebut the statutory presumption under Section 28D of the Customs Act, 1962.

2. Whether the prescribed authority may insist on ledger abstracts, audited balance sheets or other documents beyond the scope of the Board's circulars to satisfy the unjust enrichment condition for refund of 4% SAD.

3. Whether failure to comply precisely with para 2(b) of Notification No. 102/2007 and related procedural requirements justifies denial of refund when a CA certificate as contemplated in the Board's circulars is produced.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Legal framework:

Section 28D creates a rebuttable statutory presumption that the incidence of duty has been passed on to the buyer; the onus lies on the claimant to prove the contrary to obtain refund of 4% SAD.

Precedent Treatment:

The Court relied upon its prior decision holding that an auditor/Chartered Accountant report certifying non-passing of burden, where it explains pricing consideration, can rebut the presumption.

Interpretation and reasoning:

There is no specific statutory method prescribed in Section 28D for rebuttal; the Central Board's circulars (Circulars dated 28.04.2008, 13.10.2008 and 08.07.2010) prescribe that a certificate from the statutory auditor/Chartered Accountant who certifies the importer's annual accounts suffices to satisfy unjust enrichment requirements. The circulars clarify the category of acceptable CA (one who certifies under Companies Act, ST/VAT Act or Income Tax Act) and explicitly state that production of audited balance sheet and profit & loss account need not be insisted upon in normal course when a CA certificate and self-declaration are produced.

Ratio vs. Obiter:

Ratio - The Court's holding that a CA certificate, as contemplated by the Board's circulars, discharges the onus under Section 28D and rebuts the presumption of passing on duty; this is binding within the decision's scope. Observational/supporting remarks about the lack of statutory prescription for method of rebuttal are obiter to the extent they discuss policy considerations.

Conclusions:

The Court affirmed that the CA certificate prescribed by the Board's circulars is sufficient to rebut the presumption under Section 28D and thereby entitles the claimant to refund of 4% SAD where such certificate is produced in the form contemplated by the circulars.

Issue 2 - Legal framework:

The Board's circulars set out procedural guidance for verifying unjust enrichment in refund claims: acceptance of CA certification, specification of acceptable certifying CAs, and dispensation from insisting on audited financial statements in routine cases.

Precedent Treatment:

The Tribunal's reliance on the prior judgment that accepted CA certificates (if supported by material on price formation) is followed by the Court.

Interpretation and reasoning:

The circulars represent the administrative mechanism to operationalize Section 28D's rebuttal. Circular No.6/2008 permitted a CA certificate and a self-declaration instead of exhaustive transactional documents; Circular No.16/2008 clarified that only CAs who certify under Companies Act/ST/VAT/Income Tax Act are acceptable; Circular No.18/2010 confirmed there is no need routinely to insist on audited balance sheet and P&L for the current year if a CA certificate and self-declaration are furnished. Consequently, field formations cannot insist on ledger abstracts, balance sheets or additional documents beyond the identified list in the normal course.

Ratio vs. Obiter:

Ratio - Administrative instructions in the circulars limit the documents that may be required to discharge unjust enrichment scrutiny; thus, insisting on further documents contrary to circulars is not warranted. Observations about the voluminous nature of transactions and policy convenience are ancillary.

Conclusions:

The prescribed authority erred if it refused to accept a certificate that conforms to the circulars' prescriptions and demanded additional ledger abstracts or audited statements as a precondition; the CA certificate and self-declaration specified by the circulars suffice in the normal course to satisfy unjust enrichment scrutiny for refund of 4% SAD.

Issue 3 - Legal framework:

Notification conditions (including para 2(b)) and the circulars together govern entitlement and procedural compliance for refund under the notification read with Section 28D and the Board's guidance.

Precedent Treatment:

The Court adhered to its earlier approach that evaluated the sufficiency of CA certification under the circulars rather than imposing stricter documentary thresholds not contemplated by the Board.

Interpretation and reasoning:

Where the circulars expressly prescribe that a CA certificate from an eligible certifying CA and a self-declaration constitute fulfillment of the unjust enrichment condition, procedural irregularities alleged by Revenue based on expectations beyond those prescriptions cannot sustain denial of refund. The Court observed that Section 28D imposes the presumption but does not mandate specific documentary formats; the circulars fill that administrative gap and limit what may be required by the field formations.

Ratio vs. Obiter:

Ratio - The Court concluded that compliance with the circulars' requirements satisfies the notification's unjust enrichment condition; alleged procedural irregularities not grounded in the circulars do not justify withholding refund. Remarks on the scope of para 2(b) or broader procedural rigor without specific statutory support are obiter.

Conclusions:

The Tribunal's acceptance of the CA certificate in conformity with the Board's circulars was correct; procedural objections rooted in demands for documents beyond those prescribed do not invalidate entitlement where the certificate meets circular specifications.

Final Disposition

The Court dismissed the appeal, answered the substantial questions of law in favour of the refund claimant and against the Revenue, and declined to interfere with the Tribunal's order directing refund of 4% SAD where the claimant produced the Chartered Accountant certificate as contemplated by the Board's circulars; no order as to costs.

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