The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the one-year limitation period for claiming a refund arising from the finalisation of a provisional customs assessment begins from the date on which the final assessment order is communicated to the importer, and not merely from the date on which the order is passed.
The Bench of Ajayan T.V. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that it would be incongruous to hold that the limitation period for seeking a remedy begins to run even before the order giving rise to that remedy is communicated to the affected person.
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“Limitation of one year under Section 27(1B)(c), for a refund of duty paid provisionally under Section 18, runs from the date the order finalising the assessment is communicated to the person entitled to the refund and not from the bare date on which it is passed,” the CESTAT held.
The appellant/assessee had imported non-coking coal under a Bill of Entry dated October 17, 2013. The Bill of Entry was assessed provisionally due to the non-availability of original documents and a test report.
After the importer submitted the necessary documents, the Assistant Commissioner of Customs, Nagapattinam, finalised the assessment through an Order-in-Original dated April 30, 2014.
The finalisation order determined that the company had paid excess customs duty of ₹75,50,539 at the provisional assessment stage and ordered a refund of that amount.
The company submitted its refund application on May 13, 2015, which was received by the Customs Department on May 15, 2015. The application was initially returned through a deficiency memorandum and was subsequently resubmitted on June 4, 2015. The resubmitted claim was received by the Department on June 9, 2015.
The Department treated the refund application as having been filed beyond the prescribed limitation period. It calculated the one-year period from April 30, 2014—the date on which the provisional assessment was finalised.
A show cause notice was consequently issued to the company on July 6, 2015.
The company contended that the finalisation order was communicated to it only on June 10, 2014. It produced the relevant postal cover bearing the seal and stamp of the postal authorities as evidence of the date of receipt.
Despite this contention, the adjudicating authority rejected the refund claim through an order dated September 2, 2015. It held that under Section 27(1B)(c) of the Customs Act, 1962, the one-year limitation period had to be computed from the date of adjustment of duty following the final assessment.
According to the adjudicating authority, even if the initial filing date of May 13 or May 15, 2015 was accepted, the claim remained beyond one year from April 30, 2014.
The Commissioner (Appeals) overturned the rejection and directed the lower authority to consider the refund claim.
The appellate authority held that, under Section 153 of the Customs Act, an order is required to be communicated in the legally prescribed manner. The relevant date for pursuing a remedial measure would be the date on which the order was communicated to the affected person.
It noted that the Department had failed to produce evidence showing that the finalisation order had been dispatched and delivered earlier. On the other hand, the company produced a postal cover in support of its assertion that the order had been received on June 10, 2014.
The Revenue challenged this decision before the CESTAT.
Before the Tribunal, the Customs Department argued that the order dated April 30, 2014 itself determined the excess duty paid and adjusted the duty liability.
It contended that Section 27(1B)(c) expressly provides that the limitation period must be computed from the date of adjustment of duty after final assessment. Therefore, the date of the finalisation order, and not its subsequent communication, should govern the computation of limitation.
The bench questioned whether the postal cover produced by the company had actually contained the disputed finalisation order. It argued that the cover could have related to some other correspondence issued by the Assistant Commissioner.
The company responded that the Department had failed to produce any evidence establishing that the finalisation order had been delivered before June 10, 2014.
Rejecting the Revenue’s interpretation, the Tribunal relied upon the Supreme Court’s ruling in Collector of Central Excise, Madras v. M.M. Rubber & Co.
The CESTAT explained that the Supreme Court had drawn a distinction between limitation governing the exercise of suo motu powers by a statutory authority and limitation applicable to a person seeking a remedy against an order.
Where a statutory authority exercises its own power, limitation may run from the date on which the order is made because the authority cannot claim ignorance of its own decision. However, where an affected person is required to pursue a remedy, actual or constructive knowledge of the order is essential before limitation can begin.
The Tribunal held that a refund application under Section 27 of the Customs Act falls within the latter category. The importer is not the author of the final assessment order and cannot reasonably be required to act before that order is brought to its notice.
The Bench also relied on the decision of the Gujarat High Court in Principal Commissioner of Customs, Ahmedabad v. GAIL (India) Ltd.
In that case, the High Court had upheld the proposition that communication of an order finalising a provisional assessment is a condition precedent for filing a refund claim within one year under Section 27(1B)(c).
The High Court had further held that merely uploading an assessment order on the Department’s portal would not, by itself, satisfy the requirement of communication.
CESTAT noted that no contrary ruling of the jurisdictional High Court or the Tribunal had been placed before it. It therefore concluded that the controversy was no longer open for reconsideration.
The Tribunal further held that the Department must prove actual communication of the order and cannot rely merely upon its purported dispatch.
Referring to Section 153 of the Customs Act, the Bench observed that an order must be tendered directly or sent through one of the prescribed modes, including registered post, speed post or courier with acknowledgement due.
Reliance was placed on the Larger Bench ruling in Margra Industries Ltd. v. Commissioner of Customs, New Delhi, which held that dispatch by post without proof of delivery does not constitute sufficient compliance with the prescribed service requirements.
The CESTAT also referred to the Madras High Court’s ruling in Schiller Healthcare India Pvt. Ltd. v. Assistant Commissioner of Customs, where an order was set aside after the Department failed to produce an acknowledgement establishing service through registered post.
“The burden to prove that an order that adversely affects an assessee has been served on him as per the prescribed method is always on the Revenue,” the Tribunal observed.
The Bench clarified that this principle applies equally to an order finalising a provisional assessment. Section 153 refers broadly to an “order or decision” and does not restrict its service requirements only to adjudication orders.
The Tribunal found that the Department had produced no evidence showing that the finalisation order was sent to the company by registered post, speed post or any other mode prescribed under Section 153.
There was also no evidence that the order had been delivered on any date earlier than June 10, 2014.
In contrast, the company had produced the postal cover bearing the seal and stamp of the postal authorities. The first appellate authority had accepted this evidence as establishing receipt on June 10, 2014.
The Revenue’s suggestion that the cover might have contained some other correspondence was rejected as a bare and unsupported assumption. The Department had not produced any evidence showing what other communication, if any, had been sent to the company around that date.
The Tribunal found that the one-year period expired on June 10, 2015.
Accordingly, the Tribunal upheld the Commissioner (Appeals)’ finding that the refund application was not barred by limitation and dismissed the Revenue’s appeal. It also held that the respondent would be entitled to consequential relief in accordance with law.
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