The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has remanded a customs duty refund dispute involving the Steel Authority of India Limited (SAIL) to the Commissioner (Appeals), holding that the central issue is whether the company had specifically sought consideration of its refund claim under Section 27 of the Customs Act instead of Section 26A.
The bench of R. Muralidhar (Judicial Member) ruled that unless SAIL establishes that such a plea was raised before the appellate authority, it cannot seek adjudication under Section 27 at the Tribunal stage.
The appeal arose from SAIL’s attempt to recover customs duty of ₹5.65 lakh paid on imported radio remote control devices procured from Frankfurt, Germany, for use in blast furnace operations. According to the company, the equipment was intended to operate manipulators, drill machines and clay pushing barrels in blast furnace cast houses, where the devices were expected to improve operational efficiency, precision and safety.
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In August 2020, SAIL filed a Bill of Entry for importing the radio remote control devices and paid customs duty amounting to ₹5,65,417. However, customs authorities found that the imported devices operated on specified radio frequencies requiring Equipment Type Approval (ETA) from the Wireless Planning and Coordination (WPC) Wing of the Ministry of Communications before they could be cleared for home consumption.
To obtain the WPC approval, SAIL required a product test report from the overseas supplier. Despite repeated requests, the foreign supplier failed to furnish the necessary report, making it impossible for SAIL to secure the required licence. Consequently, customs authorities did not permit clearance of the goods, and they remained warehoused under customs control.
Unable to obtain the mandatory approval, SAIL decided to return the goods to the foreign supplier. The company obtained permission for re-export, paid a customs penalty of ₹10,000 and storage charges exceeding ₹6 lakh to the Airports Authority of India, and eventually re-exported the goods in September 2021 without ever clearing them for home consumption.
Following the re-export, SAIL applied for a refund of the customs duty already paid, arguing that since the goods never crossed the customs barrier for home consumption, no customs duty was legally payable.
The refund application was initially rejected by the adjudicating authority in November 2023. The authority relied upon the second proviso to Section 26A(1) of the Customs Act, holding that refund was barred because the goods had been imported without the requisite WPC authorisation and the importer had paid fine and penalty before being permitted to re-export the goods. The Commissioner (Appeals) subsequently affirmed the rejection, prompting SAIL to approach the Tribunal.
SAIL argued that the amount paid was not “customs duty” in the legal sense because the taxable event of import had never occurred. The company contended that customs duty becomes payable only when imported goods cross the customs barrier and are cleared for home consumption.
Since the goods remained under customs control throughout and were ultimately re-exported, SAIL maintained that they never became part of the mass of goods in India. Consequently, the amount deposited with customs was merely a deposit or money paid under mistake, which the Government was legally bound to refund.
The company relied upon the Supreme Court’s decision in Kiran Spinning Mills v. Collector of Customs, which held that, in the case of warehoused goods, the taxable event occurs only when the goods cross the customs barrier for home consumption. SAIL also relied on Tribunal precedents involving similar circumstances where imported goods were re-exported without home consumption and refunds were allowed.
SAIL further argued that Section 26A was inapplicable because that provision applies only where duty has been paid on goods cleared for home consumption. Since its goods were never so cleared, the company contended that its claim ought to have been examined under Section 27 of the Customs Act instead.
The Department opposed the appeal, contending that SAIL itself had shifted its stand during the proceedings by seeking relief under Section 26A after initially filing the refund claim under Section 27. According to the Revenue, once the refund was processed and decided under Section 26A, the company could not subsequently ask the Tribunal to adjudicate the matter under a different statutory provision.
The bench observed that the adjudicating authority had examined the refund solely under Section 26A because SAIL had altered its position during the proceedings. The Tribunal held that it could not directly decide the matter under Section 27 unless it was first established that SAIL had specifically urged the Commissioner (Appeals) to consider the refund under that provision.
The Tribunal noted that although SAIL claimed to have raised this plea before the Commissioner (Appeals), it failed to produce its memorandum of appeal or written submissions despite being specifically directed to do so. In the absence of documentary proof, the Tribunal held that it was inappropriate to examine the applicability of Section 27 for the first time in the appellate proceedings before CESTAT.
In the interest of justice, the Tribunal remanded the matter to the Commissioner (Appeals) with specific directions.
It directed the Commissioner (Appeals) to verify whether SAIL had, in fact, pleaded that its refund claim should be considered under Section 27. If documentary evidence establishes that such a plea was made, the Commissioner must decide the refund afresh on merits under Section 27 of the Customs Act.
However, if SAIL fails to establish that it had raised the Section 27 plea before the Commissioner (Appeals), the authority has been directed to determine the matter solely under Section 26A without considering the applicability of Section 27. Accordingly, the appeal was disposed of by way of remand.
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