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Structured Summary of the Opinion (Order per P. Karthikeyan, Member (T))

Factual and Procedural Background

This appeal was filed by the Revenue against an order of the Commissioner (Appeals) which set aside the order of the Assistant Commissioner of Central Excise, Nellore, and allowed a refund claim by the respondents for Rs. 29,52,968 as excess export duty paid.

The respondents, M/s. Sameera Trading Company, exported 53,900 MT of iron ore fines under Shipping Bill No. 64/08-09 dated 9-8-2008. They paid export duty of Rs. 3,74,43,899 on 11-8-2008 and an additional Rs. 2,08,408 following a chemical test that determined Fe content and moisture content.

The Assistant Commissioner assessed the duty liability by treating the FOB value as the transaction value for the purposes of duty computation and rejected the respondents' refund claim on the ground that the assessment recorded on the shipping bill had not been challenged. The Assistant Commissioner relied on the Supreme Court decision in Collector of Central Excise, Kanpur v. Flock India Pvt. Ltd. and on a Tribunal decision in Super Cassettes Industries Ltd. v. Commissioner of Customs, Kolkata.

On 10-11-2008, CBEC issued Circular No. 18/2008 indicating that, until 31-12-2008, the existing practice of computing export duty by treating FOB as cum-duty price and working backwards could be continued and pending cases finalised accordingly. Following that circular, the respondents filed a refund claim treating FOB as a cum-duty price.

The Commissioner (Appeals) allowed the refund claim, holding that the error in assessment could be corrected under Section 154 of the Customs Act and by reassessing the shipping bills under Section 17(4) of the Act. The Revenue appealed to the Tribunal, seeking to overturn that decision.

Legal Issues Presented

  1. Whether a refund claim for excess export duty can be entertained where the original assessment (on the shipping bill) treating the FOB value as transaction value was not the subject of an appeal by the exporter.
  2. Whether an assessing authority can correct an erroneous assessment that resulted in excess duty being collected by invoking Section 154 of the Customs Act (correction of clerical or accidental errors) and, if so, whether such correction permits grant of a refund without the assessee having challenged the assessment.
  3. Whether the CBEC Circular No. 18/2008 (10-11-2008) and the long-standing practice of treating FOB as cum-duty price support the respondents' entitlement to refund after reassessment.

Arguments of the Parties

Appellant (Revenue) - Main Arguments

  • The respondents paid export duty on the FOB value of consignments without registering any endorsement or protest; therefore they cannot later challenge those assessments and claim refund.
  • Relying on the Supreme Court decision in Collector of Central Excise, Kanpur v. Flock India Pvt. Ltd., if an order which is appealable under the statute is not challenged by filing an appeal, the order cannot subsequently be questioned in a refund proceeding.
  • The Tribunal decision in Super Cassettes Industries Ltd. v. Commissioner of Customs, Kolkata supports the position that refund claims are not maintainable where the assessment order recorded on the Bill of Entry (or shipping bill) was not challenged and has become final.
  • The Commissioner (Appeals) ought to have followed Tribunal decisions such as Commissioner of Customs, New Delhi v. Aman Medical Products; Mac & Megha Agro Equipments (P) Ltd. v. Commissioner of Customs, Cochin; and Kerala Horticulture Development Programme v. CC, Cochin.
  • The Supreme Court decision in Priya Blue Industries Ltd. v. Commissioner of Customs (Preventive) was relied upon to contend that the phrase "in pursuance of an Order of Assessment" allows a person who has paid duty pursuant to an assessment order to claim refund, but does not permit a refund claim to substitute for an appeal or modification of the assessment order.
  • Because there was no endorsement on the shipping bills/TR6 challan that duty payment was 'under protest', the assessment became final and the Commissioner (Appeals) could not correctly modify the assessment by treating the value as cum-duty value.

Respondents (M/s. Sameera Trading Company) - Main Points as Recounted in the Opinion

  • The respondents filed a refund claim after CBEC Circular No. 18/2008 clarified the continuing practice of treating the FOB price as cum-duty price and working backwards, and therefore they sought refund of excess duty paid in accordance with that clarification.
  • The respondents contended that filing the refund claim itself amounted to a challenge to the assessment order (this contention was noted and expressly rejected by the Tribunal in light of Flock India).
  • The respondents maintained that the export duty had been wrongly computed by the original authority by treating FOB as the transaction value and that the proper course was to correct that error and allow the refund under Section 154 and by reassessing under Section 17(4) of the Act.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Collector of Central Excise, Kanpur v. Flock India Pvt. Ltd. (Supreme Court) Where an adjudicating authority passes an order which is appealable and the aggrieved party does not file the statutory appeal, it is not open to the party later to question that order by filing a claim for refund on the ground of error in the original order. The Court acknowledged the ratio and accepted that it applies to refund claims under the Customs Act as well, but held that this principle does not override other statutory provisions (notably Section 154) which permit correction of clerical or accidental errors.
Priya Blue Industries Ltd. v. Commissioner of Customs (Preventive) (Supreme Court) The words "in pursuance of an Order of Assessment" indicate who can claim refund but do not imply that a refund claim can be maintained without modification of the assessment order by appeal or review. Relied upon by Revenue; the Court considered the principle but concluded that Section 154 and related Tribunal decisions permit correction of errors leading to refund in appropriate cases.
Super Cassettes Industries Ltd. v. Commissioner of Customs, Kolkata (CESTAT, Delhi) Refund claims are not maintainable where the assessment recorded on the Bill of Entry (or shipping bill) was not challenged and has become final. Relied on by the Assistant Commissioner and Revenue; the Tribunal noted the decision but concluded that the position must be examined alongside the corrective power under Section 154 and other Tribunal authorities that allow correction of erroneous assessments.
I.P. Rings Ltd. v. Commissioner (Tribunal, Chennai) Authority for reassessing and correcting erroneous assessment and directing reassessment under Section 17(4) after allowing amendment under Section 149. Cited by the Commissioner (Appeals) and treated as supporting the corrective approach adopted in the impugned order (reassessment/allowing refund where assessment contained mistake).
Senka Carbon Pvt. Ltd. v. Commissioner of Customs, Chennai (Tribunal, Chennai) If the assessing officer commits a mistake in assessing duty, the mistake should be corrected and any excess collected pursuant to the wrong assessment should be refunded; importer need not challenge the assessment to obtain refund. Relied on by the Commissioner (Appeals); the Tribunal in the present matter considered this principle persuasive in allowing correction and refund under Section 154.
Birla Jute Manufacturing Company Ltd. v. Commissioner of Customs, Calcutta (Tribunal) Cited in support of the proposition that erroneous assessments leading to excess collection can be corrected. Relied upon by the Commissioner (Appeals) and noted by the Tribunal as part of authorities supporting correction of assessments and refund.
VST Industries Ltd. v. Commissioner of Customs, Mumbai (CESTAT, Mumbai) Section 154 empowers authorities to correct clerical or accidental errors and authorities can take note of slips/omissions and correct them; lack of applicant's invocation of Section 154 does not preclude correction. Cited in support of remanding matters to adjudicating authority for fresh adjudication and consideration of Section 154 when excess duty results from mistake in calculation.
Commissioner of Customs, New Delhi v. Hero Honda Motors Ltd. (CESTAT, Delhi) Where error arises from an accidental slip or omission leading to mistake in calculation, the authority should correct the mistake under Section 154 and the person should not be denied remedy merely because no appeal was preferred against the assessment order. Used to demonstrate the Tribunal's consistent view that Supreme Court decisions relied on by Revenue cannot be applied in cases covered by Section 154 where refund is a logical consequence of correction of clerical/accidental error.
M/s. Aditya Birla Nuvo Ltd. (CESTAT, Bangalore) Where excess duty was paid owing to a mistake in calculation, appellants were entitled to claim reassessment in terms of their refund application; remand to original authority allowed. Cited as part of a line of Tribunal decisions allowing reassessment and refund where excess duty resulted from error.
Karnataka Power Corporation Ltd. v. Commissioner (Supreme Court) Cited in the context of Tribunal's reliance in related cases (exact principle as used in those cases is not elaborated in the provided opinion). Mentioned as one of the authorities followed in parallel Tribunal decisions; the present Tribunal considered the broader judicial trend favoring correction of errors under statutory provisions.
Jindal Vijayanagar Steels Ltd. v. Commissioner (Tribunal) Cited in related Tribunal jurisprudence dealing with reassessment and correction of errors (exact principle as used is not elaborated in the provided opinion). Mentioned as part of the jurisprudential backdrop; the Tribunal treated the overall trend of authorities as supportive of allowing correction and refund in appropriate cases.
Commissioner of Customs, New Delhi v. Aman Medical Products; Mac & Megha Agro Equipments (P) Ltd. v. Commissioner of Customs, Cochin; Kerala Horticulture Development Programme v. CC, Cochin (Tribunal decisions) These Tribunal decisions were cited by the Revenue as authorities that the Commissioner ought to have followed (specific principles as relied on by Revenue are not elaborated in the provided opinion). Identified by Revenue as persuasive but the Tribunal did not treat these as displacing the corrective approach under Section 154 and the line of authorities upholding correction of mistakes.

Court's Reasoning and Analysis

The Tribunal proceeded by first examining the factual matrix and the statutory framework relied upon by the parties.

Key steps in the Tribunal's analysis (as reflected in the opinion):

  1. Factual assessment: The Tribunal noted the chronology — export of 53,900 MT on 9-8-2008, payment of duty on 11-8-2008, subsequent chemical testing of samples leading to additional payment, and CBEC Circular No. 18/2008 issued on 10-11-2008 clarifying that the then-existing practice of treating FOB as cum-duty price and working backwards could be continued till 31-12-2008 and pending cases finalised accordingly.
  2. Finding of error by original authority: The Tribunal held that the Assistant Commissioner had assessed the shipping bill contrary to the statutory provisions and practice — by treating the FOB value as the transaction value rather than treating the FOB as a cum-duty price and working backwards where appropriate. The Tribunal regarded this as a mistaken computation of duty liability.
  3. On applicability of Flock India: The Tribunal acknowledged the clear principle in Flock India that an appealable order not challenged by the aggrieved party will generally not be open to challenge later in a refund proceeding. The Tribunal accepted that the ratio applies to Customs Act refund claims as well, but emphasized that Section 27 (refund provision) does not override other sections of the Act.
  4. Role of Section 154: The Tribunal placed central weight on Section 154 of the Customs Act (text reproduced in the opinion), which empowers correction at any time of clerical or arithmetical mistakes or errors arising from accidental slip or omission in any decision or order passed under the Act. The Tribunal construed Section 154 as enabling the assessing authority to correct errors leading to excess collection of duty.
  5. Support from Tribunal precedents: The Tribunal reviewed a series of Tribunal decisions (Senka Carbon, VST Industries, Hero Honda, IP Rings, Aditya Birla Nuvo and others) which had applied Section 154 or analogous reasoning to allow reassessment, correction and refund where excess duty resulted from assessing officer's mistake. Those decisions emphasised that the assessing authority has competence to correct such errors and that the assessee need not always be penalized for not filing a separate appeal where Section 154 correction is appropriate.
  6. Conclusion on corrective power and refund claim: In the present facts, the Tribunal concluded that the assessing officer erred in computing export duty by treating FOB as transaction value; that the respondents' claim for excess duty (treating FOB as cum-duty price) was in accordance with law following the CBEC clarification; and that the error could properly be corrected by invoking Section 154 and by reassessing the shipping bills under Section 17(4) of the Act. The Commissioner (Appeals)'s decision to allow the refund was therefore upheld as consistent with the statutory corrective power and the line of Tribunal authorities.

Holding and Implications

Holding:

The appeal filed by the Revenue is rejected.

Implications (direct effect on the parties):

  • The impugned order of the Commissioner (Appeals), which set aside the Assistant Commissioner's order and allowed the respondents' refund claim for excess export duty, is sustained by the Tribunal.
  • The Tribunal accepted that the assessing authority had committed an error in computation and that such error was within the competence of the authority to correct under Section 154 of the Customs Act and to reassess under Section 17(4); accordingly the respondents' refund claim stands allowed as per the impugned order.

Broader precedent implications: The opinion treats the impugned order as consistent with a line of Tribunal and Supreme Court authorities concerning correction of mistakes and refund claims; the opinion does not indicate that it is announcing a novel principle beyond applying Section 154 and the cited authorities.

Pronounced on: 19-5-2010

    Commissioner Of Customs, Guntur v. Sameera Trading Company

    [Order per : P. Karthikeyan, Member (T).]. - This is an appeal filed by Revenue. Vide the impugned order, the Commissioner (Appeals) set aside the order of the Assistant Commissioner of Central Excise, Nellore and allowed the refund claim filed by the respondents for an amount of Rs. 29,52,968/- being excess export duty paid by it.

    2. The appeal raises the following grounds :

    (i) the respondents had paid export duty on the FOB value of the consignments without registering any protest. Therefore they cannot claim that they were aggrieved by the assessments treating the FOB value as transaction value.
    (ii) In the case of Collector of Central Excise, Kanpur v. Flock India Pvt. Ltd. [ (S.C.)] the Apex Court held that if the order which is appealable under the Act is not challenged, then the order is not liable to be questioned and the matter is not to be reopened in a proceeding for refund.
    (iii) The appellant Revenue relies on the decision of the Tribunal in the case of Super Cassettes Industries Ltd. v. Commissioner of Customs, Kolkata [ (Tri. Del.)] wherein it was held that the refund claim of the appellants was not legally maintainable as they had not challenged the assessment order recorded on the Bill of Entry vide which they paid duty without protest. That assessment order had become final. The above order of the CESTAT attained finality as appeal filed against the said order was rejected by the Apex Court as reported in .
    (iv) Further, it is submitted that the Commissioner ought to have followed the decisions of Tribunal in the case of (i) Commissioner of Customs, New Delhi v. Aman Medical Products [ (Tri. - Del.)] (ii) Mac & Megha Agro Equipments (P) Ltd. v. Commissioner of Customs, Cochin [ (Tri. Bang.)] and (iii) Kerala Horticulture Development Programme v. CC, Cochin [ [(Tri. Bang.)].
    (v) The Commissioner ought to have examined the issue in the light of decision of Supreme Court in the case of Priya Blue Industries Ltd. v. Commissioner of Customs (Preventive) [ (S.C.)]. In para 8 of the decision, on the issue of order of assessment, the Hon’ble Court held as follows :-
    “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.”
    (v) In view of the fact that there was no endorsement on the shipping bills/TR6 challan to the effect that the duty payment was ‘under protest’ for the purpose of treating the value as cum-duty value, the order of assessment had become final. Since the above assessment was not challenged by the assessee, the order of the Commissioner (Appeals) modifying the assessment, by treating the value as cum-duty value was not correct, in view of the ratio of Hon’ble Apex Court’s judgment in Priya Blue case. In this connection, the assessee’s contention that filing the refund claim itself was a challenge to the assessment order was not tenable in view of judgment of the Apex Court in the case of Flock India Pvt. Ltd. (supra).

    3. We have heard both sides.

    4. We have carefully perused the case records and considered the rival submissions. The facts of the case are that the respondents, M/s. Sameera Trading Company have exported 53,900 MTs of Iron Ore fines under shipping bill No. 64/08-09 dared 9-8-08. They paid export duty of Rs. 3,74,43,899/- on 11-8-08. Further, the exporter paid an additional amount of Rs. 2,08,408/- following chemical test of the sample for determining the Fe content and moisture content in the Ore. The Assistant Commissioner had assessed the duty liability on the export consignments taking FOB value as transaction value material for payment of duty. On 10-11-08, CBEC issued a Circular indicating that a policy decision had been taken that till 31-12-08, the existing practice of computation of export duty and cess by taking the FOB value as cum-duty price may be continued and directed to finalize all the pending cases accordingly. The respondents accordingly filed refund claim for the excess duty paid considering the FOB value as cum-duty value. After due process of law, the Assistant Commissioner rejected the refund claim on the ground that the respondents had not challenged the assessment on the shipping bill. In taking such a decision, he followed the Apex Court judgment in the case of Collector of Central Excise, Kanpur v. Flock India Pvt. Ltd. [ (S.C.)] and decision of the Tribunal in the case of Super Cassettes Industries Ltd. v. Commissioner of Customs, Kolkatta [ (Tri. -Del)]. He also observed that re-assessment of the shipping bill under Section 17(4) of the Customs Act, 1962 (the Act) ordered on the shipping bill was for the limited purpose of revising liability following the ascertainment of exact Fe content and moisture content in the Ore. He also observed that Circular cited by the respondents did not apply to the assessments already finalized.

    5. We find that the impugned order relied on the following case laws to allow the appeal filed before him :

    (i)      IP Rings Ltd v. CE (AIR), Chennai - (Tri. Chennai)
    (ii)    Senka Carbon Pvt. Ltd. v. CC, Chennai [ (Tri. - Chennai)]
    (iii)   Birla Jute Manufacturing Company Ltd. v. CC, Calcutta [ (Tribunal)
    The Commissioner found that the refund claim could not be rejected for the reason that order of assessment was not challenged and that, that omission could be corrected under Section 154 of the Act.

    6. We find that the Original authority had assessed the impugned shipping bill contrary to the legal provisions. In the Circular No. 18/2008, dated 10-11-2008 issued by CBEC, it was clarified that by taking the FOB price declared by the exporter as cum-duty price and working backwards from the FOB price to determine the value for assessment was a practice followed for the last more than three decades. This practice was consistent with the statutory provisions. In the light of the above clarification, the original authority wrongly assessed the export duty on the impugned consignments taking the FOB value as transaction value. The excess duty claimed by the respondents considering the FOB price as cum-duty price is in accordance with law and the original authority should have allowed the refund. Vide the impugned order, the Commissioner noted the legal position in this regard and observed that the error could be corrected invoking provisions of Section 154 of the Act and by reassessing the shipping bills under Section 17(4) of the Act.

    6.1 We find that the Apex Court observed as follows in Flock India Pvt. Ltd. case (supra) :

    “Coming to the question that is raised there is little scope for doubt that 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.”
    The above judgment was concerned with the provisions relating to refund under the Central Excise Act. The ratio applies to refund claims under the Customs Act as well. However, Section 27 dealing with refund, etc. does not override the provisions of other Sections of the Act.

    6.2 Section 154 of the Act reads as under :

    “Correction of clerical errors, etc. - Clerical or arithmetical mistakes in any decision or order passed by the Central Government, the Board or any officer of customs under this Act, or errors arising therein from any accidental slip or omission may, at any time, be corrected by the Central Government, the Board or such officer of customs or the successor in office of such officer, as the case may be.”

    7. We find that it was the onus of the assessing officer to correctly quantify the duty liability on the export consignment. He had committed an error in computing the export duty considering the FOB value as transaction value. It was with in his competence to correct the error invoking Section 154 of the Act as held by the Commissioner (Appeals).

    7.1 In Senka Carbon Pvt. Ltd. v. C.C., Chennai [ (Tri. Chennai)] the Tribunal held as follows :

    “2........ Once the imported goods were correctly declared in the Bills of Entry, it was the duty of the proper officer of customs to assess the duty due. Therefore, if the assessing officer committed a mistake, the same should be corrected and if any excess amount was collected pursuant to wrong assessment, that amount should be refunded. There was no need for the importer to challenge the assessment to obtain the refund of the excess amount paid.”
    In VST Industries Ltd. v. Commissioner of Customs, Mumbai [ (Tri. - Mumbai) = (Tribunal)] case, the facts were that the appellant had paid excess duty by adopting the FOB value as transaction value instead of C & F value. The claim for refund of duty paid on excess freight was denied by the authorities following the decision of the Apex Court in the case of Collector v. Flock India Pvt. Ltd. [ (S.C.)] and Priya Blue Industries Ltd. v. Commissioner [ (S.C.)]. The Tribunal observed as follows while allowing the appeal filed by the assessee :
    “4. A bare perusal of the above provisions makes it clear that no obligation has been cast on the appellant to make an application under the said section. The authorities mentioned therein are themselves competent to take note of any accidental slip or omission and correct thereafter at any time. Thus, the above provisions give enough power to the authorities mentioned therein without any limitation for carrying out the necessary corrections. Therefore, to say that the appellant has failed to move an application under Section 154 may not be legally correct. I, therefore, consider it necessary to remand the matter to the adjudicating authority for fresh adjudication and to pass a fresh speaking order in the matter after taking into consideration the provision of Section 154 of the Customs Act, 1952, particularly when the provisions of this section have not been considered in the aforementioned decisions of the Hon’ble Supreme Court.”
    In another case of rejection of claim for refund of excess duty paid by the appellants, in M/s. Aditya Birla Nuvo Ltd. [ (Tri. Bang.) = (Tri)] case, following the ratio of the judgments of the Apex Court in Flock India Pvt. Ltd. (supra) and Priya Blue Industries Ltd (supra), the Tribunal held that the appellants were entitled to claim reassessment in terms of their refund application. The appeal was allowed by remand to the original authority. The Tribunal had followed the decisions in the case of Karnataka Power Corporation Ltd. v. Commissioner [ (S.C.)] and Jindal Vijayanagar Steels Ltd. v. Commissioner [ (Tribunal) = 2008 (11) S.T.R.108 (Tribunal)]. We also note that in this case excess amount of duty was paid owing to a mistake in the calculation of the duty. The Tribunal in the case of Commissioner of Customs, New Delhi v. Hero Honda Motors Ltd. [ (Tri. - Del.)] allowed the appeal filed by the assessee with the following findings :
    “11.  Section 154 of the Customs Act reads as under :-
    “Section 154. Correction of clerical errors, etc. - Clerical or arithmetical mistakes in any decision or order passed by the Central Government, the Board or any officer of customs under this Act. or errors arising therein from any accidental slip or omission may, at any time, be corrected by the Central Government, the Board or such officer of customs or the successor in office of such officer, as the case may be”.
    On a plain reading it is manifest that not only clerical or arithmetical mistake in any decision or order, but errors arising from any accidental slip or omission may, at any time, be corrected by the concerned authority. In the facts of the case, briefly noted above, we are satisfied that the mention of serial No. 281 instead of serial No. 337 was an accidental slip on the part of the respondent leading to mistake in the calculation of duty and the respondent should not be denied the benefit of the remedy under Section 154. We are of the view that the decisions of Supreme Court relied upon on behalf of the Revenue cannot be applied in cases covered by Section 154 of the Act and where refund is the logical consequence of correction of some clerical or accidental error under Section 154, the person should not be denied the benefit merely because he did not prefer appeal against the assessment order. What benefit he is actually entitled to, as a consequence, is to be considered by the Proper Officer.”
    In another decision of the Tribunal in the case of I.P. Rings Ltd. v. Commissioner [ (Tri.)] cited by the respondents, the Tribunal in a similar case of erroneous assessment and collection of higher amount of duty, directed the assessing officer to reassess the Bill of Entry under Section 17(4) of the Act after allowing the assessee to amend the Bill of Entry under Section 149 of the Act.

    8. We find that the impugned order is consistent with a plethora of the judicial authorities, a few of which are discussed above. In the circumstances, we find no merit in the appeal filed by the Revenue and reject the same.

    (Pronounced in the court on  19-5-2010)

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    Commissioner Of Customs, Guntur v. Sameera Trading Company
    (May 19, 2010)