Legal principle

Adhoc 1% handling charges are chargeable to customs duty where the actual charges are not ascertainable, and a Section 27 refund claim must be examined against an unchallenged assessment and the Mafatlal/Wipro principles rather than treated as automatically refundable.

Court decision

The High Court set aside the impugned Tribunal order dated 31.05.2019 and remanded the matter to the Commissioner (Appeals), granting Agrotech liberty to file grounds of appeal against the Adjudicating Authority's order dated 26.02.2019 within six weeks; the Commissioner (Appeals) is to decide, within three months after that period, the justifiability of the refund claim in light of Mafatlal Industries Ltd. and Wipro Ltd. (as applicable), the scope/effect of the notification dated 26.09.2017, and the Section 27 issues. Both appeals were disposed of, effectively vindicating the Customs' challenge and leaving Agrotech's interest claim ungranted at this stage.

Facts

M/s M.K. Agrotech imported crude sunflower oil (HSN 15121110) from Ukraine and other countries on CIF basis and cleared the goods on payment of customs duty that included adhoc 1% handling charges. It filed a refund application under Section 27 of the Customs Act, 1962 seeking refund of the excess duty attributable to the 1% handling charges. After a deficiency memo and a show-cause notice dated 24.04.2018, the refund claim was rejected on the grounds that duty was paid through duty entitlement scrips and not cash, that Notification 91/2017 dated 26.09.2017 (excluding the 1% charges from valuation) was prospective, and that documents evidencing payment and non-passing of incidence were not furnished. The Commissioner (Appeals) remanded for de novo adjudication, but the CESTAT, relying on Wipro Ltd. v. Assistant Collector of Customs, set aside that order and directed the original authority to verify documents and sanction the refund without interest. The Customs challenged the Tribunal's order (CSTA 12/2020) and Agrotech appealed seeking interest (CSTA 8/2021).

Key provisions

• Section 27, Customs Act, 1962 — Claim of refund duty
• Section 130, Customs Act, 1962 —  Appeal to High Court
• Section 14, Customs Act, 1962 — Valuation of goods
• Section 130A(3), Customs Act, 1962 — Application to High Court
• Rule 10(2), Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Cost and services