The Kerala High Court has directed the import duty refund to importer on the grounds that the goods were never cleared for home consumption but were re-exported.
The bench of Justice A.K. Jayasankaran Nambiar and Justice K. V. Jayakumar has observed that the redemption fine paid was in lieu of confiscation and only to enable the importer to reclaim the goods imported for the purpose of re-export. Thus, the direction of the Appellate Tribunal to refund the import duty paid by the importer, under circumstances where the goods were never cleared for home consumption but were re-exported in their entirety, cannot be found fault with.
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Background – Import Duty Refund To Importer
The respondent/assessee had filed a Bill of Entry dated 26.10.2010 for clearance of 84 metric tons of light melting scrap. The assessee also paid import duty without waiting for the ‘out of customs charge’ endorsement on the Bill of Entry filed by him.
When the goods arrived at the port, an inspection by the customs authorities revealed that the consignment contained in all four containers was hazardous waste materials which were prohibited for import under the Hazardous Waste (Management, Handling and Trans boundary Movement) Rules, 2008. The customs authorities therefore found that it was a case of misdeclaration of the hazardous waste that was imported, as light melting scrap.
On being intimated of the inspection report, the assessee importer sought the permission of the Customs authorities to re-export the entire cargo. The department accordingly permitted him to re-export the cargo subject to payment of redemption fine of Rs.1,50,000 and a penalty of Rs.75,000. It is not in dispute that the Redemption Fine and Penalty were paid by the assessee and the imported consignment was re-exported.
The importer filed a refund application claiming refund of Rs.2,28,027 that he had remitted towards import duty. The goods were not cleared for home consumption and did not leave the customs area till they were eventually re-exported. It is also not in dispute that the application for refund filed by the importer was within the time permitted under the Customs Act.
The refund application of the importer was however rejected by the original authority as also the First Appellate Authority, and this led the importer to approach the Appellate Tribunal through the appeal.
The Appellate Tribunal on a consideration of the issue found that the provisions of Section 26A of the Customs Act, that deals with refund of import duty in certain cases, did not really get attracted on the facts of the instant case since the goods were never cleared for home consumption by the importer.
The Tribunal also found that the importer had already paid the redemption fine and penalty and hence, the duty amount paid, which became payable only in the event of actual clearance of the imported goods for home consumption, had to be returned to the importer.
The Tribunal also found that the doctrine of unjust enrichment would not be attracted on the facts of the instant case since there was no possibility of the importer having absorbed the import duty into the cost of any product that he had sold within the domestic tariff area since the goods had not been cleared for home consumption in the first place.
The Tribunal therefore allowed the appeal and directed the appellant herein to refund the duty amount together with interest under Section 27A of the Customs Act.
Conclusion – Import Duty Refund To Importer
The court noted that there was no clearance for home consumption of goods that had been imported. The imported goods were re-exported immediately after their import and without being cleared for home consumption. The taxable event for the levy of import duty did not materialise, and on a re-export of the said goods, there remained no justification for the Customs Department to retain any amount paid towards import duty.
The court dismissed the appeal of the department and ruled in the favour of the importer.
Read More: No Service Tax Demand Can Be Confirmed Under Head Not Alleged In Show Cause Notice: CESTAT
Case Details
Case Title: Commissioner Of Customs Versus M/S. Hadeed Steels Pvt. Ltd
Case No.: CUS.APPEAL NO. 27 OF 2018
Date: 08/11/2024
Counsel For Appellant: Sreelal N. Warrier
