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Commissioner Of Customs, New Delhi v. Aman Medical Products
Factual and Procedural Background
The respondent filed five bills of entry dated 22-5-2002, 22-5-2002, 23-5-2002, 1-6-2002 and 1-7-2002 for clearance of cannulae for injection needles and paid the duty assessed. Subsequently the respondent claimed a refund of the alleged excess duty on the ground that, by mistake, it had not claimed the benefit of Notification No. 6/2002 (C.E.) dated 1-3-2003.
By letter dated 27-1-2003 the Deputy Commissioner of Customs (Refund) rejected the refund claim on the ground that the bills of entry had been assessed finally and that the proper course for the respondent was to challenge the assessment order by way of appeal; accordingly the refund claim without preferring an appeal was held not to be maintainable. The Deputy Commissioner relied on the decision in CCE, Kanpur v. Flock (India) Pvt. Ltd. [2000 (120) E.L.T 285 (S.C)].
The respondent appealed to the Commissioner (Appeals). By order dated 28-1-2005 the Commissioner (Appeals) set aside the Deputy Commissioner's order and remanded the matter to him to decide the refund claim on merits, observing that a refund claim can be filed directly without necessarily following the appeal route. The Revenue appealed that order, leading to the present judgment in which the impugned order of the Commissioner (Appeals) was set aside and the appeal allowed.
Legal Issues Presented
- Whether a claim for refund of duty is maintainable without first challenging an assessment by way of appeal where duty was paid on bills of entry and no separate formal speaking adjudication order was passed.
- Whether the filing of a bill of entry and payment of duty on the basis of particulars in that bill can be treated as an "order of assessment" for the purposes of Section 27 of the Customs Act, thereby requiring an appeal before a refund claim can be entertained.
Arguments of the Parties
Appellant (Revenue)
- The Deputy Commissioner (Refund) held that because the bills of entry had been assessed finally, the respondent's correct remedy was to challenge the assessment by way of appeal; a refund claim without preferring an appeal was not maintainable. The Deputy Commissioner relied on the Supreme Court decision in CCE, Kanpur v. Flock (India) Pvt. Ltd.
- In the present appeal the Revenue contended that the Commissioner (Appeals) was not justified in setting aside the Deputy Commissioner's order and remanding the matter for decision on merits, because the law (as laid down in Flock and Priya Blue) precludes using a refund claim to challenge an assessment that could have been appealed.
Respondent
- Counsel for the respondent, Shri J.M. Sharma, submitted that the ratio of Flock and Priya Blue applies where a formal assessment order has been passed but no appeal is preferred; in the instant case there was no formal assessment order. The respondent had only filed bills of entry and paid duty assessed on them; in the absence of any adjudication no appealable order had come into existence which could have been appealed against.
- The respondent's substantive claim was that it was entitled to exemption under Notification No. 6/2002-C.E., dated 1-3-2003, and paid duty in ignorance of that notification; therefore it sought refund of the amount paid.
Commissioner (Appeals)
- The Commissioner (Appeals) took the view that a refund claim can be filed against an assessment order directly without necessarily having to pursue the appeal route, and accordingly set aside the Deputy Commissioner's order and remanded the matter for decision on merits.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| CCE, Kanpur v. Flock (India) Pvt. Ltd. [2000 (120) E.L.T 285 (S.C.)] | The Supreme Court held that where an adjudicating authority has passed an order which is appealable and the party aggrieved does not file an appeal, that party cannot subsequently challenge the correctness of the adjudication by filing a claim for refund; allowing such a course would render the statutory appeal provisions redundant and introduce uncertainty into levy and collection of duty. | The court applied this ratio to conclude that a refund claim cannot be used to question an assessment that could have been challenged by appeal; the present case was held to be covered by that ratio. |
| Priya Blue Industries Ltd. v. Commissioner of Customs (Preventive) [2004 (172) E.L.T 145 (S.C.)] | The Supreme Court rejected the submission that a refund claim could be entertained without an appeal against an assessment. It held a refund claim is not an appeal proceeding; the officer considering a refund claim cannot sit in appeal over an assessment nor review an assessment order. The words "in pursuance of an Order of Assessment" indicate who may claim refund, not that a refund can be claimed even though the assessment stands unmodified. | The court relied on and followed the reasoning in Priya Blue to reject the respondent's contention that absence of a "formal assessment order" meant a refund claim could be maintained without appeal; the facts of the instant case were treated as similar to Priya Blue and used to support setting aside the Commissioner (Appeals)' remand. |
Court's Reasoning and Analysis
The court began by identifying the substantive basis of the respondent's refund claim: entitlement to exemption under Notification No. 6/2002-C.E., which the respondent alleged it failed to claim when paying duty. The court considered whether the absence of a "formal assessment order" meant the respondent could avoid the appeal requirement and press a refund claim directly.
The court analysed the sequence of events and the conduct of the respondent: the respondent filed bills of entry, paid the duty assessed and did not claim the exemption at the time. The court observed that had the respondent claimed the exemption (or insisted on a formal assessment), a speaking adjudication order would have been passed. The respondent's failure to claim exemption meant it could not later contend that there was no adjudication or appealable order. The court noted the maxim that a person cannot be allowed to take benefit from his own conduct.
In interpreting Section 27 of the Customs Act, the court referred to the Priya Blue decision which explained that the phrase "in pursuance of an order of assessment" identifies who may file a refund claim (a person who has paid duty pursuant to an order of assessment or borne by him) and does not mean that a refund can be maintained while an assessment order stands unmodified. The court also observed that the term "assessment" has different shades of meaning and, for levy purposes, includes the assessment of tax on the basis of particulars in the bill of entry.
The court emphasised that an officer considering a refund claim cannot sit in appeal over an assessment made by a competent officer or review an assessment order; permitting a refund claim to substitute for the statutory appeal remedy would render the adjudication and appeal provisions nugatory and introduce uncertainty into the levy and collection regime. The court found the facts of the present case to be analogous to Priya Blue and Flock, noting that here the respondent paid the duty without even protesting, and thus could not claim refund without first availing the statutory appeal remedy.
On that basis the court concluded that the Commissioner (Appeals) erred in directing the Deputy Commissioner to decide the refund claim on merits and that the case was covered by the earlier Supreme Court ratios which preclude entertaining a refund claim that seeks to challenge an assessment which could have been appealed.
Holding and Implications
Holding: The court set aside the impugned order of the Commissioner (Appeals) dated 28-1-2005 and allowed the Revenue's appeal. The appeal is allowed and the impugned order of the Commissioner (Appeals) dated 28-1-2005 is set aside.
Implications:
- Direct effect on the parties: The remand by the Commissioner (Appeals) to decide the refund claim on merits has been quashed; the Deputy Commissioner's original view that the refund claim was not maintainable without pursuing the statutory appeal remedy stands as affirmed by this judgment.
- Legal consequence: The court held this case to be governed by the existing Supreme Court precedents (Flock and Priya Blue) which disallow using a refund claim to challenge an assessment that could have been appealed. The opinion does not purport to create a new precedent; rather it applies established ratio.
S.N Jha, President:— This appeal by the Revenue is directed against the order of the Commissioner of Customs (Appeals) dated 28-1-2005 setting aside the order of the Deputy Commissioner of Customs (Refund) dated 27-1-2003 and remanding the matter for decision on merits. By the said order dated 27-1-2003 the refund claim of the respondent had been rejected on the ground that the respondent did not challenge the assessment by way of appeal, therefore, the refund claim was not maintainable.
2. Brief facts of the case are that the respondent filed five bills of entry dated 22-5-2002, 22-5-2002, 23-5-2002, 1-6-2002 and 1-7-2002 for clearance of canuula for injection needles and paid the duty assessed. They later filed claim for refund of the excess duty on the ground that by mistake they could not claim the benefit of Notification No. 6/2002 (C.E) dated 1-3-2003. By letter dated 27-1-2003, the Deputy Commissioner (Refund) informed the respondent that since the bills of entry had been assessed finally, the proper course would be to approach the appellate authority against assessment order and the refund claim without preferring appeal was not maintainable. The Deputy Commissioner referred to the decision in CCE, Kanpur v. Flock (India) Pvt. Ltd. [2000 (120) E.L.T 285 (S.C)]. On appeal by the respondent the Commissioner (Appeals) took the view that a refund claim can be filed against assessment order directly without necessarily having to follow the appeal route. Observing that the lower authority ought to have gone into merits of the case and passed reasoned order, he set aside the order of the Deputy Commissioner and remanded the matter to him for decision on merit, as stated above.
3. In CCE, Kanpur v. Flock (India) Pvt. Ltd. (supra), the Supreme Court observed as under:—
“……in a case where an adjudicating authority has passed an order which is appealable under the statute and the party aggrieved did not choose to exercise the statutory right of filing an appeal, it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that the adjudicating authority had committed an error in passing his order. If this position is accepted then the provisions for adjudication in the Act and the Rules, the provision for appeal in the Act and the Rules will lose their relevance and the entire exercise will be rendered redundant. This position in our view, will run counter to the scheme of the Act and will introduce an element of uncertainty in the entire process of levy and collection of excise duty. Such a position cannot, be countenanced.”
4. A similar view was expressed by the Apex Court in Priya Blue Indus tries Ltd. v. Commissioner of Customs (Preventive) [2004 (172) E.L.T 145 (S.C)] wherein submissions to the contrary on behalf of the assessee were rejected in these words:—
“5………It has been strenuously submitted that the words ‘in pursuance of an Order of Assessment’ necessarily imply that a claim for refund can be made without challenging the Assessment in an Appeal. It is submitted that if the assessment is not correct, a party could file a claim for refund and the correctness of the Assessment Order can be examined whilst considering the claim for refund. It was submitted that the wording of Section 27, particularly, the provisions regarding filing of a claim for refund within the period of 1 year or 6 months also showed that a claim for refund could be made even though no Appeal had been filed against the Assessment Order. It was submitted that if a claim for refund could only be made after an Appeal was filed by the party, then the provisions regarding filing of a claim within 1 year or 6 months would become redundant as the Appeal proceedings would never be over within that period. It was submitted that in the claim for refund the party could take up the contention that the Order of Assessment as not correct and could claim refund on that basis even without filing an Appeal.
6. We are unable to accept this submission. Just such a contention has been negatived by this Court in Flock (India)'s case (supra). Once an Order of Assessment is passed the duty would be payable as per that order. Unless that order of assessment has been reviewed under Section 28 and/or modified in an Appeal that Order stands. So long as the Order of Assessment Stands the duty would be payable as per that Order of Assessment. A refund claim is not an Appeal proceeding. The Officer considering a refund claim cannot sit in Appeal over an assessment made by a Competent Officer. The Officer considering the refund claim cannot also review an assessment order.
8. The words “in pursuance of an Order of Assessment” only indicate the party/person who can make a claim for refund. In other words, they enable a person who has paid duty in pursuance of an Order of Assessment to claim refund. These words do not lead to the conclusion that without the Order of Assessment having been modified in Appeal or reviewed a claim for refund can be maintained.”
5. Shri J.M Sharma appearing for the respondent did not attempt to make any submission to the contrary. He, however, submitted that the ratio of the decisions in Flock (India) Pvt. Ltd. and Priya Blue Industries Ltd. can be applied where a formal assessment order has been passed but no appeal is preferred against it. In the instant case no formal assessment order was passed and therefore, the respondent could not be non-suited on the ground that it did not prefer appeal against assessment of duty. The respondent had simply filed bills of entry and paid duty assessed on them; in the absence of any adjudication no appealable order can be said to have come in existence which could be appealed against.
6. Before dealing with the question as to whether the refund claim was maintainable or not it may be stated that the substance of the refund claim was that the respondent was entitled to exemption under Notification No. 6/2002-C.E., dated 1-3-2003. According to the respondent, it paid duty in ignorance of the notification and was, therefore, entitled to the refund of the amount. The relevance of the submission that there was no adjudication in the instant case has to be considered in this background. It is clear that had the respondent claimed the benefit of exemption under the said notification, or insisted on a formal assessment order, a speaking adjudication order would have been passed. If the respondent did not claim exemption i.e the benefit which according to the respondent, it was entitled to under the notification, it cannot later contend that there was no adjudication and no speaking appealable order was passed. A person cannot be allowed to take benefit of his own conduct.
7. Section 27 of the Customs Act which deals with claim for refund lays down that any person claiming refund of any duty and interest, if any, paid on such duty - (i) paid by him in pursuance of an order of assessment or (ii) borne by him, may make an application for refund of such duty and interest, if any. As seen above, in the case of Priya Blue Industries Ltd., submission was made that the expression “in pursuance of an order of assessment” necessarily implies that a payment of duty must be pursuant to an assessment order. The submission was rejected observing that the words “in pursuance of an order of assessment” only indicate the party/person who can make a claim for refund. Where the party files bills of entry and pays duty assessed thereon, it cannot be said that there was no assessment or assessment order.
8. The term ‘assessment’ has different shades of meaning and in the context of levy of Revenue, it is understood in the sense of assessing taxes or levying taxes. As per the Black's Law Dictionary (6th Edition) the term ‘assess’ (in connection with taxation of property) means -“…….to calculate the rate and amount of taxes”.
9. The bill of entry is filed for the purpose of clearance of goods on payment of applicable duty and where duty is assessed on the basis of particulars contained in the bill of entry, it cannot be said that there was no assessment of duty. It is open to the person to claim exemption from duty at that point of time, contest the claim of the Revenue and take the matter to its logical end. Where he does not claim exemption and contest the matter he has no option but to pay the duty and thereafter if so advised, challenge assessment by way of appeal. Simply because a formal speaking order was not passed, assessing the amount of duty, it cannot be said that there was no order of assessment which could be challenged by way of appeal. From the facts stated in para 2 of the judgment in Priya Blue Industries Ltd. case it would appear that the amount of duty had been assessed on the bill of entry which was paid under protest. The person then filed claim for refund on the ground that the duty had wrongly been levied. The refund claim was rejected. Appeals therefrom were also rejected by the Commissioner (Appeals) and the Tribunal following the decision in Flock (In dia) Pvt. Ltd. case.
10. The facts of the present case are similar to those of Priya Blue Industries Ltd. As a matter of fact, the respondent paid the duty without even raising protest. We fail to understand as to how without challenging the assessment by way of appeal it could claim refund of the alleged excess amount. If such claim were to be entertained it would follow that the refund authority having coordinate jurisdiction with the adjudicating authority may go behind the assessment made by the coordinating authority. As observed in Flock (India) Pvt. Ltd. this would make the provisions for adjudication, appeal etc. redundant. This will run contrary to the scheme of the Act, and the entire process of levy of collection of duty will become uncertain.
11. In the above premises, we find no substance in the submissions advanced on behalf of the respondent. We are finally of the view that the case is covered by the ratio of the decision in Flock (India) Pvt. Ltd. and Priya Blue Industries Ltd. and the learned Commissioner (Appeals) was, therefore, not justified in directing the Deputy Commissioner to decide the refund claim on merit.
12. The impugned order of Commissioner (Appeals) dated 28-1-2005 is accordingly set aside and the appeal is allowed.
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