2004 (97) ECC 456 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(A)

Shri V.K. Agrawal, Member (T) and Shri P.S. Bajaj, Member (J)

Lucas TVS Ltd.

Versus

CC, Chennai

Appeal No. C/288 to 290/2004-NB(A)

[Arising out of Order-in-Appeal No. C3/382-394/R/2003 dated 31.12.2003 passed by the Commissioner of Customs (Appeals), Chennai]

Final Order No. 820-22/2004-NB(A), dt. 5.8.2004, Certified on 20.8.2004

Customs Act, 1962

Section 27 -- Whether time limit specified under the provision is applicable to the refund of the amount realized by the Revenue by encashing the bank guarantee given by them? Held (No). The Export obligation had been fulfilled by the Appellants much before the time limit, therefore, there was no need to encash the bank guarantee. The time limit specified in Section 27 of the Customs Act is not applicable to the refund of the amount realized by the Government by enforcing the bank guarantee as this does not represent any duty under the Customs Act.

[Para 5]

Appeals allowed

PRESENT :

Shri R. Parthasarthy, Adv. for the appellant.

Shri R.C. Sankhla, SDR for the respondent.

Cases Cited :

1. Oswal Agro Mills v. Asstt. Commissioner of Central Excise, 1994 (46) ECC 155 (SC) [Para 3]

2. Pace Marketing Specialities Ltd. v. CCE, Ghaziabad, 2003 (90) ECC 500 (Tri-Del.) [Para 3]

3. Whirlpool of India Ltd. v. CC, Nava Sheva, 2001 (127) ELT 239 (Tri.-Mum.)......... [Para 3]

Per : V.K. Agrawal

In these 3 appeals filed by M/s. Lucas TVS Ltd. the issue involved is whether the time limit specified in Section 27 of the Customs Act is applicable to the refund of the amount realized by the Revenue by encashing the bank guarantee given by them.

2. Shri R. Parthasarthy, learned Advocate, submitted that the Appellants imported the goods under 3 EPCG licences and availed of benefit of exemption from duty under Notification No. 110/95-Cus dated 5.6.95 on executing the required Bond and bank guarantee; that the capital goods imported by them were installed in their factory and the export obligation which was to be completed by them by 2000-01 was completed by 1996 itself; that they had submitted to the Customs Department documents evidencing fulfilment of export obligation; that the Department issued the show cause notices demanding proportionate duty for non-fulfilment of pro rata export obligation; that they submitted their reply that the export obligation had been completed 100% in the first year itself; that however, the Customs Department encashed the bank guarantees in August 2001; that meanwhile the Appellants had requested the licensing authority to issue the certificates of discharge of export obligation which were issued only in August 2002; that subsequently they filed refund claim in respect of amount realized by the Revenue by encashing the bank guarantee on 21.4.2003; that the refund claim had been rejected by the Adjudicating Authority on the ground that the refund applications were filed beyond the period of 6 months from the date of encashment of the bank guarantee and as such refund claims are time barred; that the Commissioner (Appeals) also under the impugned Order has rejected their appeals holding that the refund claim filed by them is hit by time limit provided under Section 27 of the Customs Act.

3. The learned Advocate, further, submitted that encashment of bank guarantee was not pursuant of any order of the assessment of duty, and therefore, encashment of bank guarantee was not payment of duty for the purpose of Section 27 of the Customs Act; that consequently the time limit specified therein is not applicable; that they had fulfilled the export obligation within one year from the date of import of capital goods and this fact had also been communicated by them to the Customs Department; that if the licensing authority had taken the time in issuing the discharge certificate, the blame cannot be placed on them; that it has been held by the Supreme Court in the case of Oswal Agro Mills v. Asstt. Commissioner of Central Excise, 1994 (46) ECC 155 (SC) : 1994 (70) ELT 48 (SC), that furnishing of bank guarantee for disputed Excise duty is not equivalent to payment of the amount of Excise duty and that the Supreme Court has held that bank guarantee is given for the purpose of securing the Revenue in the event of Revenue succeeds in proceeding before the Court; that bank guarantee is the security for Revenue, that in the event the Revenue succeeds its dues will be recoverable, being backed by the guarantee of a bank. He also relied upon the decision of the Tribunal in the case of Pace Marketing Specialities Ltd. v. CCE, Ghaziabad, 2003 (90) ECC 500 (Tri-Del.) : 2003 (157) ELT 36 (Tri-Del.) wherein it has been held that the view taken by the authorities below that "time was to be computed from the date of encashment of bank guarantee for claiming the refund amount, in our view, is erroneous and contrary to the settled law." Reliance has also been placed on the decision in the case of Whirlpool of India Ltd. v. CC, Nhava Sheva, 2001 (127) ELT 239 (Tri.-Mum.). Finally the learned Advocate submitted that as the payment realized through encashment of bank guarantee is not the duty the Appellants will not be eligible for the interest provided under the Customs Act on account of delayed payment; that they are not, therefore, claiming any interest in the present matters.

4. Shri R.C. Sankhla, learned SDR reiterated the findings as contained in the impugned Order.

5. We have considered the submissions of both the sides. Notification No. 110/95 dated 5.6.95 exempts capital goods partially from the Customs duty, if the goods imported are covered by a valid licence issued under the Export Promotion Capital Goods Scheme subject to the conditions, inter alia, that the importer executes a bond with surety/security binding himself to fulfil export obligation within a period of 3 years from the date of issue of the licence; that it has not been disputed by the Revenue that the Appellants had discharged their export obligation much before the time; that only what they had not produced was the discharge certificate which was to be issued by the licencing authority i.e. Director General Foreign Trade. In view of these facts it cannot be claimed by the Revenue that when they encashed the bank guarantee on account of non-production of discharge certificate by the Appellants they were realizing the import duty from the Appellants as the Appellants had already fulfilled the export obligation. The amount realized by the Revenue by encashing the bank guarantee is thus not duty. Consequently the provisions of Section 27 of the Customs Act providing time limit of 6 months for submission of refund claim will not be applicable as Section 27 deals with the refund of duty and interest only. This was the judgment of the Supreme Court in the case of Oswal Agro Mills Ltd. wherein it has been held by the Supreme Court that "the amount of the disputed tax or duty that is secured by a bank guarantee cannot, therefore, be held to be paid to the Revenue. There is no question of its refund, and Section 11B is not attracted." The Tribunal also in the case of Whirlpool of India Ltd. (supra) held that the bank guarantee has been encashed as the Appellants therein could not produce certificate of adoption of environment friendly technology from the Ministry of Environment & Forest and after receipt of the necessary certificate they had filed claim for refund of the amount encashed enforcing the bank guarantee. The Asst. Commissioner had dismissed their refund claim on the ground of it being barred by limitation, having been filed 6 months after the date of payment of duty. The Appellate Tribunal allowed the appeal holding inter alia that the issue of the certificate was not in the Appellants' hands. They were to be issued by another organ of Government of India, and if there was delay in issuing the certificate it does not mean that the importer is to be punished. In the present matter also the bank guarantee has been furnished as a security with the bond for the purpose of fulfilling the export obligation. The Export obligation had been fulfilled by the Appellants much before the time limit, therefore, there was no need to encash the bank guarantee. Accordingly we hold that the time limit specified in Section 27 of the Customs Act is not applicable to the refund of the amount realized by the Government by enforcing the bank guarantee as this does not represent any duty under the Customs Act. We, therefore, allow all the 3 appeals.

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