Legal principle

A refund claim under Section 27 of the Customs Act, 1962 cannot be entertained unless the order of assessment or self-assessment is first modified in accordance with law through appropriate proceedings, because refund proceedings are execution-like and the refund authority cannot reassess or correct an assessment.

Court decision

The Supreme Court allowed the Revenue's appeals, holding that applications for refund were not maintainable unless the order of assessment or self-assessment was first modified in accordance with law by taking recourse to appropriate proceedings (such as an appeal under Section 128); it upheld the Tribunal's orders and set aside the contrary judgments of the Delhi and Madras High Courts, with parties to bear their own costs.

Facts

ITC Ltd manufactured paper from conventional and unconventional raw materials and mistakenly availed exemption (Notification No.67/95-CE) on waste paper/broke used in paper cleared at nil rate under Notification No.6/2000-CE; after a Superintendent's letter it stopped availing the exemption from May 2001, paid duty, and filed a refund claim of Rs.28,73,120 for July 2001–March 2002 under section 11B of the Central Excise Act, 1944. The departmental assessment committee, Commissioner (Appeals) and Tribunal rejected the claim, leading to appeals. Connected customs matters included Micromax, which imported mobile handsets paying 6% CVD under Section 3(1) of the Customs Tariff Act, 1975 on self-assessed bills of entry and claimed a refund of Rs.35.89 crores under Section 27, rejected by the Assistant Commissioner (Refunds) as not maintainable absent evidence of excess payment and because the bills of entry stood assessed; in Aman Medical, a refund claim on finally assessed bills of entry for imported cannula was rejected by the Deputy Commissioner. The Union of India also appealed High Court rulings (Delhi and Madras) that allowed refund applications without any appeal against the assessed bills of entry.

Key provisions

• Section 27, Customs Act, 1962 — Claim of refund duty
• Section 128, Customs Act, 1962 — Appeal to Commissioner (Appeals)
• Section 17, Customs Act, 1962 — Assessment of duty
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 47, Customs Act, 1962 — Clearance of goods for home consumption
• Section 3(1), Customs Tariff Act, 1975 — Levy of additional duty equal to excise duty, sales tax, local taxes and other charges