CESTAT Mumbai Slams Customs For Missing Records, Calls It Contrary To 'Viksit Bharat @2047' Vision

On 21 July, the Mumbai Customs, Excise and Service Tax Appellate Tribunal (CESTAT) criticised the Customs Department for rejecting a refund claim merely because it was unable to trace its own records, observing that such administrative failure is inconsistent with the vision of “Viksit Bharat @2047”.

A Single Member Bench of Technical Member M.M. Parthiban made the observation while allowing an appeal filed by John Miranda and directing the Customs Department to refund Rs. 3 lakh deposited during investigation after finding that the amount was never appropriated and the underlying duty demand had subsequently been set aside. It observed:

“The present factual matrix of case, clearly point out the picture that the officers of the Customs department cannot even ascertain the payment made by a tax payer/person towards duty liability, by verification in their own Commissionerate office... Such a situation in customs department... cannot be said to be in tandem with the call of the nation is marching towards Viksit Bharat @2047 vision…”

The appellant had deposited Rs. 3 lakh through a demand draft in 2008 during a Directorate of Revenue Intelligence (DRI) investigation into alleged undervaluation of imported electronic goods. Although the department acknowledged that a total amount of Rs. 6 lakh had been deposited, it rejected the appellant's refund claim on the ground that the original challan was unavailable and the payment could not be conclusively verified from departmental records.

The Commissioner (Appeals) upheld the rejection, holding that the appellant had failed to establish the payment as the challan was not produced and that the department was not required to obtain records from the DRI or its own cash section.

Setting aside the departmental orders, the Tribunal found sufficient evidence to establish that the demand drafts were handed over to the DRI and that the amount was credited to the Government account. It noted that the department itself had acknowledged entries relating to the payment in its Central Board of Revenue records and that the appellant had unsuccessfully sought copies of the challan from the Customs authorities.

It criticised the approach adopted by the refund authorities, observing that they refused to verify records available within the department while rejecting the refund claim for want of those very records. It further observed that the Government has repeatedly emphasised the need to break departmental silos and improve coordination among different wings of administration.

The Bench also noted that, in the present case, the Customs authorities failed to coordinate even within their own Commissionerate to verify a taxpayer's payment despite the availability of departmental records. It also noted that the Rs. 3 lakh deposited by the appellant was neither proposed for appropriation in the show cause notice nor appropriated in the adjudication order. Further, it observed that in separate appellate proceedings, it had already set aside the duty demand against the appellant, making the deposit refundable under the Customs Act.

Referring to the CBIC circular governing refund of deposits made during investigation, the Tribunal observed that Commissionerates are required to maintain proper records of such deposits to facilitate verification while processing refund claims. It held that denying a refund merely because the department could not locate its own records was legally unsustainable.

Accordingly, the CESTAT set aside the orders of the lower authorities, allowed the appeal and directed the Customs Department to refund Rs. 3 lakh to the appellant without undue delay.

Appearances for the Appellant: Shri D.H. Nadkarni, Advocate

Appearances for the Respondent (Commissioner of Customs, Import-II): Shri Krishna Murari Azad, Authorized Representative