2025 (12) TMI 960 - HC - Customs

Refund of Infrastructure Cess on imported golf carts to follow re-assessment under Notification No. 1/2016

HC allowed the writ petition, holding that the imported golf carts were squarely covered by the exemption from Infrastructure Cess under Notification No. ... Seeking direction to re-assess the Bill of Entries - grant of refund of the amounts of Customs Duties paid in excess towards ‘Infra Cess’ to the Petitioner - import of golf carts which were exempted from payment of ‘Infra Cess’ in terms of /N 1/2016-Infrastructure Cess dated 1st March, 2016 - HELD THAT:- In the decision of M/s ITC Ltd. vs. C.C.E. Kolkata-IV [2019 (9) TMI 802 - SUPREME COURT (LB)], the Supreme Court has categorially held that the refund cannot be directly issued but can only be done after the re-assessment is completed. The Petitioner’s goods were covered by the exemption, the benefit of the notification ought to have been extended and the amount cannot be held back - For the said purpose, let the Bill of Entries be re-assessed within two months and after completing re-assessment, in terms of the Notification 1/2016-Infrastructure Cess dated 1st March, 2016, the refund be issued to the Petitioner. Petition disposed off. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the imported electrically operated golf carts were eligible for exemption from Infrastructure Cess under Notification 1/2016-Infrastructure Cess dated 1st March, 2016. 1.2 Whether refund of excess Customs duty paid towards Infrastructure Cess could be granted without reassessment of the relevant Bills of Entry, in light of the law laid down on refund following self-assessment. 1.3 Whether, in the facts of an unrebutted allegation of a technical glitch in the EDI system that prevented claiming exemption, the Court ought to direct reassessment of the Bills of Entry and consequential refund. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Eligibility of imported golf carts for exemption from Infrastructure Cess under Notification 1/2016 Legal framework 2.1 The Court considered Notification 1/2016-Infrastructure Cess dated 1st March, 2016 issued under section 5A(1) of the Central Excise Act, 1944 read with clause 159 of the Finance Bill, 2016. The Notification exempts, inter alia, goods falling under heading 8703 described as 'Electrically operated vehicles, including three wheeled electric motor vehicles' from Infrastructure Cess at the rate 'Nil', with an Explanation defining 'electrically operated vehicles' as vehicles run solely on electrical energy derived from an external source or batteries fitted to such vehicles. Interpretation and reasoning 2.2 The Court noted the Petitioner's case that the imported goods were electrically operated golf carts falling within the description of 'electrically operated vehicles' under heading 8703 and therefore squarely covered by Sl. No. 4 of the Notification, rendering them exempt from Infrastructure Cess. 2.3 The Department did not dispute, either in its communications or in the counter affidavit, that the goods imported were electrically operated golf carts or that such goods fall under the exempted category in the Notification. 2.4 The Court observed that there was no response in the counter affidavit to the specific assertion of the Petitioner regarding eligibility for exemption and the occurrence of a technical glitch in the EDI system at the time of filing the Bills of Entry. Conclusions 2.5 The Court held that the Petitioner's imported goods were clearly covered by the exemption in Notification 1/2016-Infrastructure Cess and that the benefit of the Notification ought to have been extended; consequently, the amount representing Infra Cess could not be legitimately withheld. Issue 2: Necessity of reassessment of Bills of Entry as a precondition to refund of excess duty Legal framework 2.6 The Court relied on the decision of the Supreme Court interpreting the scheme of refund under Section 27 of the Customs Act in the context of self-assessment. The Supreme Court held that a refund claim cannot be entertained unless the order of assessment or self-assessment is first modified in accordance with law in appropriate proceedings, and that Section 27 does not empower the authority to set aside self-assessment and reassess duty for processing refund claims; any person aggrieved by an order, including self-assessment, must seek modification under Section 128 or other relevant provisions. Interpretation and reasoning 2.7 The Department's stand, as reflected in its communication dated 12th January, 2017, was that the refund claim was premature because the concerned Bill of Entry had been finally assessed and duty paid accordingly; if aggrieved by the assessment, the importer was required either to lodge a protest and seek reassessment or to file an appeal before the Commissioner (Appeals). On this basis, the refund claim was returned. 2.8 The Court accepted the legal position that refund cannot be directly sanctioned where the duty has been paid on the basis of an existing assessment or self-assessment, and that reassessment or modification of that assessment is a legal precondition before refund can be granted. 2.9 At the same time, the Court noted that the Department had not addressed or refuted the Petitioner's specific plea that the excess duty arose solely due to a technical glitch in the EDI system that prevented the exemption from being availed at the time of filing the Bills of Entry, despite the goods being exempt under the Notification. Conclusions 2.10 The Court held that, in conformity with the law declared by the Supreme Court, refund could not be directly ordered without reassessment of the relevant Bills of Entry; reassessment was a necessary antecedent step. Issue 3: Direction for reassessment of Bills of Entry and consequential refund in light of unrebutted technical glitch Interpretation and reasoning 2.11 The Petitioner explained in its contemporaneous letter that due to technical problems in the EDI system, the Infra Cess exemption under Notification 1/2016 could not be captured for the relevant items, leading to a higher assessment and payment of excess duty; repeated attempts at reassessment through the system failed due to the technical error, and the goods were cleared on urgent basis with the assurance that refund could be sought later. 2.12 The Court observed that in the counter affidavit, there was no response to the specific allegation of a technical glitch in the EDI system affecting the assessment, nor was there any denial that the goods were exempt under the Notification. 2.13 In this factual context, and applying the legal requirement that reassessment must precede refund, the Court considered it appropriate to itself direct reassessment of the concerned Bills of Entry so that the benefit of the exemption could be fully realized and the excess duty refunded. Conclusions 2.14 The Court directed that the concerned Bills of Entry be re-assessed within two months in accordance with Notification 1/2016-Infrastructure Cess dated 1st March, 2016. 2.15 The Court further directed that, upon such reassessment, refund of the excess amount of Customs duty paid towards Infra Cess be issued to the Petitioner. 2.16 The petition was disposed of with these directions, and all pending applications were also disposed of.