Export Duty Refund: Limitation Begins When the Refund Right Crystallises

A Refund Dispute Where the Date of Payment Was Not the Decisive Date

Refund disputes under indirect tax laws often turn less on whether tax was paid in excess and more on when the statutory period for claiming a refund begins. Ordinarily, the date of payment assumes considerable importance. But what happens where the amount subsequently found to have been paid in excess was never properly reflected in the original assessment, and its excess character was established only through a later departmental reassessment?

The Chennai Bench of the CESTAT has examined this important question in M/s JSW Steel Ltd. v. Commissioner of Customs, Chennai, 2026-VIL-1580-CESTAT-CHE-CU, Customs Appeal Nos. 41996 and 41997 of 2016, decided on 04.09.2026. The Tribunal held that, on the peculiar facts before it, the cause of action for refund arose only when the excess export duty was ascertained through reassessment on 21.09.2015, and not when the amount had originally been paid in 2008.

The judgment is significant for another reason. While granting relief to the exporter, the Tribunal did not accept the broader proposition that Section 27 could simply be avoided by describing the payment as one made under a mistake of law or without authority of law. Thus, the judgment simultaneously protects a legitimate refund and preserves the discipline of the statutory refund mechanism.

How the Dispute Began - Export Duty Paid on the FOB Price

JSW Steel Ltd. exported "Non-Alloy Steel Slabs Export Prime Steel" under ITC HS 72071290 through four Shipping Bills in June and July 2008. Export duty was leviable at 15% ad valorem under Notification No. 66/2008-Cus. dated 10.05.2008. JSW paid export duty at 15% by taking the FOB price of the exported steel products as the basis for computation.

Thereafter, CBEC issued Circular No. 18/2008-Cus. dated 10.11.2008. The Circular clarified that, up to 31.12.2008, the existing practice of computing export duty and cesses by treating the FOB price as the cum-duty price could continue. From 01.01.2009, however, the method of computation was to change, and the transaction value under Section 14 was to be taken as the FOB price for calculation of export duty.

JSW claimed that, in light of this clarification, it had paid export duty in excess. It accordingly filed a refund application on 30.01.2009 for Rs. 1,61,96,066. That application ultimately led to prolonged proceedings lasting several years and, eventually, to the present decision.

The Refund Travelled Through More Than One Round of Litigation

The refund claim was initially rejected as time-barred by the Order-in-Original dated 05.11.2009. The Commissioner (Appeals), however, allowed JSW's appeal on 03.05.2010, inter alia, holding that Section 27 was not applicable. Revenue carried the matter to the Tribunal. By Final Order dated 19.03.2014, the Tribunal found that the Commissioner (Appeals) had proceeded on incorrect facts and remanded the matter to the Original Authority for reconsideration, keeping all issues open.

In the remand proceedings, an important development occurred. The Customs Export Department recomputed the appropriate export duty and issued a Note dated 21.09.2015. The Original Authority treated this correction as a reassessment and concluded that Section 27(1B)(c) applied. On that basis, a refund of Rs. 1,61,96,066 was sanctioned by Order-in-Original No. 44746/2016. A Chartered Accountant's certificate dated 13.10.2015 was also produced for examining unjust enrichment.

Revenue again appealed. Its central objection was straightforward: limitation should have been calculated from the original date of payment of export duty, rather than from the subsequent re-quantification on 21.09.2015. JSW, on the other hand, appealed against the failure to grant interest on the sanctioned refund. The Commissioner (Appeals) accepted Revenue's case, rejected JSW's appeal, and held the refund to be time-barred.

This brought both questions - refund and interest - before the CESTAT.

The Real Question - When Did the Right to Refund Actually Arise?

At the heart of the dispute was a deceptively simple question. Should limitation be reckoned from the date JSW paid the amount in 2008, or from the date the Department itself subsequently determined, through reassessment, that part of that payment was excess?

JSW argued that the excess amount was neither recorded in the Shipping Bills nor reflected in the Let Export Orders. According to JSW, until the assessment was rectified, there was no crystallised basis on which the refund could arise. The Shipping Bills were ultimately rectified through the Note dated 21.09.2015 issued by the Customs Export Department. Section 2(2), as then applicable, expressly included reassessment within the meaning of "assessment".

Revenue disputed this approach. It contended that the Note dated 21.09.2015 could not be treated as reassessment and that the case was not one of provisional assessment under Section 18, so as to attract Section 27(1B)(c). According to Revenue, the Commissioner (Appeals) had correctly applied limitation from the date of the original payment.

Not Everything Paid in 2008 Had Been Assessed in 2008

The Tribunal's analysis on this aspect is particularly important. It did not fully accept JSW's broad contention that there had been no assessment whatsoever when the goods were exported. Section 51, as it then stood, contemplated export clearance after the proper officer was satisfied that the assessed duty had been paid. Since Let Export Orders had been granted after payment, it could not simply be said that the Shipping Bills were wholly unassessed.

But the Tribunal drew a crucial distinction between the duty liability as a whole and the additional amount actually paid in excess. The amount indicated by the EDI system on the cum-duty basis could be treated as the amount considered in the assessment process. However, the additional amount paid through challan over and above that figure did not appear in the Shipping Bills, the Let Export Orders, or any other contemporaneous assessment record. There was nothing to show that the proper officer had examined or assessed that additional amount.

The excess character of that additional payment emerged only when the Export Department issued its Note dated 21.09.2015. This factual distinction became the foundation of the Tribunal's ultimate conclusion.

Reassessment Created the Cause of Action for Refund

Section 2(2) of the Customs Act, as applicable to the relevant period, defined "assessment" to include reassessment. The Note dated 21.09.2015 recomputed the duty in accordance with the Board's Circular and pursuant to the Tribunal's earlier remand. It was therefore treated as a reassessment for the purposes of Section 27(1B)(c).

This consequence was important. The excess amount of Rs. 1,61,96,066 was ascertained only through this exercise. The cause of action for seeking its refund therefore arose, at the earliest, on 21.09.2015. The refund application dated 30.01.2009, read with JSW's subsequent request dated 24.11.2009 to correct the Shipping Bills, could not be rejected as time-barred merely because it was filed before the reassessment ultimately quantified the excess.

This reasoning is the central principle emerging from the judgment: where the excess amount is ascertained only through a subsequent reassessment, limitation cannot be mechanically reckoned from an earlier payment without examining when the right to refund actually crystallised.

A Refund Filed Before Reassessment Cannot Become Time-Barred Before the Right Crystallises

The Tribunal drew support from Commissioner of Customs (Import) v. Indian Farmers Fertiliser Co-Op. Ltd., 2009 (243) E.L.T. 687 (Bom.) - 2009-VIL-277-BOM-CU. The principle emerging from that decision was that until the assessment order is rectified, the question of refund does not arise; consequently, a refund claim made before such rectification cannot be rejected as time-barred merely because of its earlier filing.

The Tribunal also found support in Keshari Steels v. Collector of Customs, Bombay, 2000 (115) E.L.T. 320 (Bom.) - 1996-VIL-11-BOM-CU, affirmed in 2000 (121) E.L.T. A139 (S.C.) - 1997-VIL-120-SC-CU, and Principal Commissioner of Customs, New Delhi v. Lava International Ltd., 2023 (3) TMI 25-CESTAT New Delhi - 2023-VIL-192-CESTAT-DEL-CU.

The reasoning therefore did not dispense with Section 27. Instead, it determined the appropriate point from which Section 27 had to operate in the peculiar factual setting.

Why the Supreme Court's ITC Ltd. Principle Did Not Defeat the Refund

An important obstacle in customs refund litigation is the Supreme Court's ruling in ITC Ltd. v. Commissioner of Central Excise, Kolkata-IV, 2019 (368) E.L.T. 216 (S.C.) - 2019-VIL-32-SC-CU. Broadly, a refund authority cannot use refund proceedings to reopen a final and unchallenged assessment.

The Tribunal explained why that principle did not defeat JSW's claim. The excess amount in question had never formed part of the original assessment. Further, the correction was not a unilateral recomputation attempted by the exporter at the refund stage. It was undertaken by the Department's own Export Group pursuant to the Tribunal's remand.

The distinction is legally significant. There is a material difference between using a refund application to challenge a completed assessment and seeking a refund after the Department itself has reassessed the transaction and identified an amount as excess.

Mistake of Law Does Not Automatically Take the Claim Outside Section 27

JSW also raised an alternative contention. It argued that the excess payment had been made in error and that limitation should therefore be governed by Section 17 of the Limitation Act, 1963, running from the discovery of the mistake. It further relied upon Article 265 of the Constitution, contending that an amount collected without authority of law did not partake of the character of "duty" and therefore fell outside Section 27.

The Tribunal did not accept these broader propositions. It relied upon the Nine-Judge Bench decision in Mafatlal Industries Ltd. v. Union of India, 1996 INSC 1514 : (1997) 5 SCC 536 : 1997 (89) E.L.T. 247 (S.C.) - 1996-VIL-01-SC-CE. A refund founded upon misconstruction, misapplication or incorrect interpretation of a statutory provision, rule or notification has to travel through the statutory refund mechanism. The general law cannot ordinarily be invoked to create an alternative limitation regime bypassing a self-contained statutory provision.

This part of the judgment gives the ruling its balance. The taxpayer succeeded within Section 27, not outside it. The Tribunal adjusted the relevant limitation analysis to the actual reassessment and cause of action; it did not permit the statutory refund framework itself to be discarded.

The "Mistake Discovered Later" Argument Also Failed on Facts

There was another difficulty with JSW's mistake-of-law argument. The EDI system itself had indicated the FOB value as the cum-duty price when the Shipping Bills were filed in June-July 2008. That was precisely the method subsequently confirmed by the Circular for the period up to 31.12.2008.

The Tribunal therefore found it difficult to accept that JSW discovered only later what was already apparent from the EDI system at the time of export. JSW's assertion that the higher duty had been paid at the verbal insistence of Revenue was also unsupported by contemporaneous correspondence, endorsement, memo, or other documentary material. The burden of proving both the mistake and the date of its discovery had not been discharged.

This is an important practical reminder: a plea of mistake cannot rest merely on a later assertion. Contemporaneous evidence remains critical.

Article 265 Is Important - But It Is Not an Automatic Escape from the Refund Machinery

The Tribunal also carefully addressed the constitutional argument. Article 265 mandates that no tax shall be levied or collected except by authority of law. However, Mafatlal Industries does not permit every payment alleged to have resulted from a wrong interpretation of law to be taken outside the statutory refund machinery simply by invoking Article 265.

The Tribunal referred to Escorts Ltd. v. Union of India, 1998 (97) E.L.T. 211 (S.C.) - 1994-VIL-24-SC-CU, noting that a specific statutory limitation provision such as Section 27 displaces the general law. The Tribunal therefore declined to treat Article 265 or Section 17 of the Limitation Act as an independent route to avoid Section 27 on the facts before it.

This distinction should not be overlooked when relying on the judgment. The ratio is not that limitation becomes irrelevant whenever duty has been paid in excess. The ratio rests on the later reassessment and ascertainment of the excess amount within the statutory framework.

Refund of Rs. 1.62 Crore Restored - Unjust Enrichment Was No Longer in Dispute

Once the Tribunal concluded that the refund was not time-barred, the principal controversy stood resolved. It also noted that the Original Authority had separately examined and accepted the Chartered Accountant's certificate dated 13.10.2015 on unjust enrichment. The Commissioner (Appeals) had not disturbed that finding, having rejected the refund solely on limitation grounds, and no argument was advanced before the Tribunal warranting interference with it.

Accordingly, Order-in-Original No. 44746/2016, sanctioning the refund of Rs. 1,61,96,066, was restored, and the contrary order of the Commissioner (Appeals) was set aside.

The principal refund dispute thus ended in favour of the exporter. But one further question remained: from what date should interest be paid?

Interest on Refund - Ranbaxy Applied, but with an Important Factual Adjustment

JSW relied on the Supreme Court decision in Ranbaxy Laboratories Ltd. v. Union of India, 2011 (273) E.L.T. 3 (S.C.) - 2011-VIL-02-SC-CE. That judgment, while interpreting Section 11BB of the Central Excise Act pari materia, held that interest on delayed refund ordinarily runs from the expiry of three months from the date of receipt of the refund application, rather than from the later date of the order sanctioning the refund. The pendency of appellate proceedings does not, by itself, postpone the liability to interest.

However, the Tribunal recognised that a mechanical application of that rule would produce an anomalous result in the present case. The refund application had been filed on 30.01.2009, whereas the existence and quantum of the refundable excess were not ascertained until reassessment on 21.09.2015.

Before 21.09.2015, there was no ascertainable sum of Rs. 1,61,96,066 that the Department could have refunded. The delay arose from the necessity for and completion of reassessment, rather than from the Department's failure to pay an already quantified refund.

The Same Cause of Action Cannot Have Two Contradictory Clocks

The Tribunal's reasoning on interest is particularly persuasive. If 21.09.2015 were treated as the date when the cause of action crystallised for limitation purposes, it would be internally inconsistent to revert to 30.01.2009 for calculating interest on the same refund.

Otherwise, as the Tribunal effectively reasoned, the same refund application would be treated as premature for determining the cause of action and overdue for determining interest. The Tribunal declined to introduce such inconsistency.

Interest under Section 27A was therefore directed to be paid on Rs. 1,61,96,066 from 22.12.2015, being the date immediately following the expiry of three months from 21.09.2015, until the date of actual refund, at the notified rate. export duty refund.

Refund Limitation Must Follow the Cause of Action

The judgment does not mean that every subsequent quantification of excess duty extends limitation. Its reasoning rests on the particular facts, namely that the excess payment was not part of the contemporaneous assessment and was subsequently ascertained through departmental reassessment.

The broader principle is that limitation must be examined with reference to the event that gives rise to the enforceable refund claim. At the same time, Mafatlal Industries remains the controlling boundary - a taxpayer cannot ordinarily bypass the statutory refund mechanism by describing the payment as made under mistake or without authority of law. The claim must succeed within the statutory refund framework, not outside it.

Author's Note - Relevance in GST Refund Litigation

Although rendered under the Customs Act, the judgment has persuasive relevance under GST. Section 54 of the CGST Act contains its own limitation framework and prescribes "relevant dates"; therefore, the ruling cannot be mechanically applied to GST refunds. Nevertheless, where refund entitlement crystallises through a subsequent appellate order, rectification, or other statutory determination, the relevant statutory trigger must be carefully examined rather than limitation being mechanically reckoned from the original payment.

The broader lesson is balanced: statutory refund provisions and limitation cannot ordinarily be bypassed by invoking mistake of law or Article 265, but limitation must also be applied with reference to the statutory event from which the right to refund actually arises.