Receipt of discount / rebate due to defective machinery imported - claim of refund of customs duty

[Ashish Gupta]

Sir, In the year of 2009 we had imported one plant amounting Rs. 17 Crores. We had paid custom duty on the said value at the time of import of Plant. The plant has installed in our factory but due to some technical issues it is not running in full capacity till time and modification in design/structure etc is going on. On taking up this matter strongly with the supplier, the supplier has given us rebate of 10% amount i.e. Rs 1.70 crores. We have received said remittance through banking rout in dollars. Now we want to apply for refund of custom duty on the said rebate amount because now the value of plant has decreased by 10% and we have paid custom duty on the full value of plant. Kindly let us know how we should go for refund and under which section.

[Guest]

You do not get any refund in case the plant was finally assessed. The transaction value in terms of Section 14 of the Customs Act, 1962 is that which was paid by you to the seller and the evidence by way of invoice produced along with the bill of entry at the time of import of goods. Though the matter is not free from doubt, refund can be claimed under Section 27 along with the evidence of the receipt of the rebate; and also that you had not passed on the burden of the duties paid by you to the ultimate customer; and the refund claim is to be filed in the Import Department where your bills of entry were assessed, within 6 months of the date of payment of duties under the bills of entry under which you imported the said plant.

[DEV KUMAR KOTHARI]

In addition to reply by Mr.napolean bonaparte, I add that in this case the principal of unjust enrichment will not apply for the reason that the duty is on input capital goods and not on goods sold, therefore, primafacie there will not be case of duty passed over to customers. In case refund is not allowed by authorities, then one can approach the High Court by way of writ petition for direction to refund of mistakenly exces assessed and paid duty.

AI Summary

Customs duty refund under Section 27 when post-import rebate reduces transaction value, subject to proof and timely filing. Importer paid customs duty on the invoice value of imported capital plant and later received a supplier rebate for defects. A refund may be claimed under Section 27 by producing evidence of the rebate and that the duty was not passed on, filed in the Import Department that assessed the bills of entry within six months of duty payment. Unjust enrichment is unlikely to preclude refund because duty was on capital inputs. If authorities refuse relief, a writ petition to the High Court is a possible remedy.