The Honourable Mr v. M/s. Jraj Exports (P) Ltd

In the High Court of Judicature at MadrasDated : 21.7.2007Coram :The Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mr.Justice P.P.S.JANARTHANA RAJAC.M.A. No.1541 of 2007The Commissioner of Customs (Exports)Custom HouseChennai 1.. AppellantVs1. M/s. Jraj Exports (P) Ltd.,50-A B.S.S.NagarTiruppur 641 602.2. The Customs, Excise & Service TaxAppellate Tribunal,South Zonal BenchShastri Bhawan Annexe1 Floor, 26, Hadddows RoadChennai 6... RespondentsCivil Miscellaneous Appeal filed u/s 130 of the Customs Act 1962against the Final Order No.445 of 2006 dated 26.5.2006 on the file ofthe Customs, Excise And Service Tax Appellate Tribunal, South ZonalBench, Chennai. For Appellant : Mr.K.Ravichandrabaabu Senior Central Govt. Standing Counsel JUDGMENT(Judgment of the Court was delivered by K.RAVIRAJA PANDIAN,J)The above appeal is filed under Section 130 of the Customs Act1962, against the Final Order No. 445 of 2006 dated 26.5.2006 made by theCustoms, Excise And Service Tax Appellate Tribunal, South Zonal Bench,Chennai. The question of law formulated for entertainment of the appealis as follows. https://hcservices.ecourts.gov.in/hcservices/ "Whether it is correct in Law for thelearned CESTAT to hold that Bank Guarantee is asecurity in lieu of duty even after enforcingthe same and appropriated towards the duty bythe Department ?"2. The first respondent in this appeal had imported capitalgoods under EPCG Licence No.2142049 dated 1.7.1998 with the condition tofulfill the export obligation imposed against the above EPCG licencewithin the prescribed time limit. The first respondent failed to submitthe Export Obligation Discharge Certificate from the appropriateauthority, even after the expiry of the prescribed time. Hence, theappellant had invoked the Bank guarantee furnished for the properperformance of the condition attached to the EPCG licence in a sum ofRs.5,54,046/- and the amount was realised by the appellant. Subsequently,the respondent filed the refund application on 29.11.2004 for refund ofthe amount so realised by invocation of the bank guarantee on the groundthat the Export Obligation was fulfilled by the first respondent. Tothat effect, the first respondent also submitted the DischargeCertificate from the licensing authorities. That request for refund ofthe amount has been rejected by the Deputy Commissioner of Customs(Refund) on the ground that as per the provisions of Section 27(1)(b) ofthe Customs Act a person claiming refund of any duty or interest if anypaid on such duty would make an application for refund of such duty andinterest paid on such duty to the Assistant Commissioner or DeputyCommissioner before the expiry of six months from the date of payment ofsuch duty. In the case on hand, the amount was realised on 27.3.2004.The refund application was received on 29.11.2004. Hence the refundcould not be made. The first respondent filed an appeal before theCommissioner of Customs (Appeals), who by his order dated 7.10.2005in C.Cus.646/2005 allowed the appeal. The Department carried the matteron further appeal to the Customs, Excise, Service Tax Appellate Tribunal.The appeal was dismissed by its order dated 26.5.2006. The correctness ofthe said order is now canvassed before this Court.3. We heard the arguments of the learned counsel for theappellant. 4. From the facts narrated above, it is a case where theappellant's request for refund of the bank guarantee wrongly encashed wasrejected on the ground that the claim is time barred. The case of theappellant has to be rejected on two grounds, firstly on facts. It isevident from the records that the bank guarantee was invoked and the https://hcservices.ecourts.gov.in/hcservices/ amount was credited to the Customs Treasury on 1.4.2004. The firstrespondent produced the Export Obligation discharge certificate obtainedfrom the Director General of Foreign Trade on 16.4.2004, based on whichthe appellant duly cancelled the bond and the Bank guarantee during themonth of August 2004. When the department accepted the fulfillment ofexport obligation and the export obligation discharge certificate issuedby the Director General of Foreign Trade, there is no need either toinvoke the bank guarantee or retain the amount, which has already beencredited in the department account on invocation of the bank guarantee andthe technical plea that the refund of the amount cannot be granted as theclaim made is barred by limitation under Section 27(1)(b) of theCustoms Act also cannot be legally sustainable. The furnishing of bankguarantee in order to fulfill the export obligation cannot be regarded as"payment of duty " which the first respondent is liable to pay. TheSupreme Court in the case of OSWAL AGRO MILLS LTD., AND ANOTHER VS. ASSTT.COLLECTOR OF CENTRAL EXCISE (1994 (2) SCC 546) held that furnishing ofbank guarantee pursuant to an order of the court is not equivalent topayment of excise duty. For the purposes of securing the revenue in theevent of revenue succeeding in the proceedings before a Court, the Courtas a condition of staying the demand for the disputed tax or duty,imposes a condition that the assessee shall provide a bank guarantee forthe full amount of such tax or duty or part thereof. The bank guaranteeis security for the revenue that in the event the revenue succeeds itsdues will be recoverable being backed by the guarantee of a bank. Theamount of the disputed tax or duty that is secured by a bank guaranteecannot therefore, be held to be paid to the revenue. Thus, as per theSupreme Court Judgment , the bank guarantee given for due performance ofthe export obligation cannot be regarded that the first respondent paidthe amount which they would have paid in the circumstances of non-performance of the export obligation. Hence the reason stated that thedemand was made beyond the period prescribed under Section 27(1)(b) ofthe Customs Act has to be rejected. 5. Learned counsel for the appellant relied on the often quotedjudgment in MAFATLAL INDUSTRIES LTD., AND OTHERS VS. UNION OF INDIA ANDOTHERS(1997 (5) SCC 536) in order to contend that the refund should beordered only in accordance with the provisions of the statute. Hereagain, there is a fallacy in the argument of the counsel for theappellant in the sense that the Supreme Court in that case hasformulated only the procedure to be followed while applying for refund ofthe tax already paid and making the order for refund of the amount paid .Even paragraph 115 of the judgment and the above said provisions of theAct with which reliance has been made by the learned counsel for theappellant is not furthering the case of the appellant. As already said https://hcservices.ecourts.gov.in/hcservices/ the entire case in that case was concentrated about the procedure to befollowed, while making the refund of tax or duty already paid . In thiscase, we have already come to the conclusion that the bank guaranteefurnished cannot be considered as duty paid and it is only security tosafeguard the interest of the revenue. 6. For the above said reasoning, we are of the view that theappellant has not made out any case for admission and the appeal isdismissed. No costs.Krr/Sd/Asst. Registrar/true copy/Sub Asst.RegistrarTo1. The Commissioner of Customs (Exports)Custom HouseChennai 12. The Customs, Excise & Service TaxAppellate Tribunal,South Zonal BenchShastri Bhawan Annexe1 Floor, 26, Hadddows RoadChennai 6.+ One cc to Mr. K. Ravichanandrabaabu, SCCG SR 44664JRG (co)sg 18/8/07C.M.A. No.1541 of 2007Dated : 21.7.2007