Legal principle

Where the imported goods are incapable of being sold or passed on and there is no consumer or end-user, an order diverting the refund to the Consumer Welfare Fund for failure to rebut the unjust-enrichment presumption, without adverting to that contention, is vitiated and must be set aside.

Court decision

The petition was partly allowed in favour of ONGC: the Court held the authority's decision to deposit the refund into the Consumer Welfare Fund vitiated, deprecated, quashed and set it aside, because the impugned order was absolutely silent on ONGC's contention that the machinery could not be passed on to any consumer or end-user. Rather than itself ordering refund with interest, the Court remanded the aspect of refund with interest to the authority to decide within 30 days, without insisting on any further material, based on material already submitted and with liberty to ONGC to produce any material, and payment of refund with appropriate interest admissible under law. The stay request by the respondents was rejected.

Facts

ONGC had contracted in 1986 with Messrs Tecno Export, Moscow for a turnkey hydrocarbon exploration project (seismic survey and drilling of 26 exploratory wells in the North Cambay Basin), under which the contractor imported equipment and material in sixteen consignments at Kandla Port, cleared provisionally against ITC bonds with duty paid on merit rates. After essentiality certificates for concessional rates were received, refund claims for excess duty were lodged on 12.09.1989 (five bills of entry) and 14–15.09.1989 (eleven bills of entry). Following prolonged correspondence and remands, the competent authority's final assessment order dated 23.01.2017 allowed the benefit of exemption Notifications 197/76-Cus and 515/86-Cus read with 25/87-Cus and directed ONGC to file a fresh refund claim under Section 27 to be decided per the principles of unjust enrichment. ONGC claimed Rs.22,44,88,330.71 (duty of Rs.5,41,82,641.08 plus interest of Rs.17,03,05,689.63); the department repeatedly sought documents (communications dated 21.11.2017 and 16.07.2018), and by order dated 29.11.2019 held ONGC entitled to refund but, for want of documentary evidence that the duty burden was not passed on to consumers/end-users, credited Rs.5,41,82,641 to the Consumer Welfare Fund under Section 27(2) and rejected the interest claim.

Key provisions

• Section 27, Customs Act, 1962 — Claim of refund duty
• Section 28C, Customs Act, 1962 — Price of goods to indicate the amount of duty paid thereon
• Section 18, Customs Act, 1962 — Provisional assessment of duty
• Section 28(2), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 1(1b)(c), Customs Act, 1962 — Short title extent and commencement
• Section 28D, Customs Act, 1962 — Presumption that incidence of duty has been passed on to the buyer
• Section 2, Customs Act, 1962 — Definitions