CESTAT Delhi Denies Nikon ₹7.32 Crore Refund, Holds Claim Pre-Exemption Decision Is Not Maintainable

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi on 6 April, held that a refund claim filed before final adjudication of the underlying exemption dispute is not maintainable, even where duty has been paid under protest.

A Bench comprising President Justice Dilip Gupta and Technical Member P.V. Subba Rao dismissed the appeal filed by Nikon India Private Limited and upheld rejection of its refund claim.

The Tribunal held:

“The facts of the present case are almost similar to the facts of the case before the Supreme Court in Dena Snuff. The issue is as to whether the appellant could have filed refund claim even before the issue as whether the appellant could claim exemption from payment of basic customs duty was settled by the Tribunal on 14.06.2024 when the Larger Bench of the Tribunal answered the reference. In terms of the judgment of the Supreme Court in Dena Snuff, the cause of action had not arisen to the appellant when the refund application was filed as the appellant had filed the refund application on 21.07.2015. The refund application was, therefore, liable to be rejected for this reason.”

The dispute arose in 2014 when customs authorities denied Nikon the benefit of exemption from Basic Customs Duty under Notification No. 25/2005-Cus on imported digital cameras. The company paid duty under protest and sought a speaking order under Section 17(5) of the Customs Act, 1962.

Despite repeated requests, no speaking order was issued for a considerable period. Facing delay and limitation concerns, Nikon filed a refund claim in July 2015 for duty paid between December 2014 and February 2015.

The Department rejected the claim on the ground that the Bills of Entry had not been re-assessed. The exemption dispute, meanwhile, continued through prolonged litigation.

In 2024, a Larger Bench of the Tribunal ultimately held that digital cameras were eligible for exemption, and Nikon succeeded on merits in subsequent proceedings.

The appellant argued that the later decision effectively amounted to re-assessment of the Bills of Entry and cured the defect in its refund claim. It contended that once exemption was granted, the rejection of refund could not survive.

However, the Tribunal rejected this contention and held that subsequent success on merits cannot validate a premature refund claim. It ruled that the cause of action for refund arises only after final determination of the dispute, not while the issue remains pending.

Relying on the Supreme Court's ruling in Dena Snuff (P) Ltd. vs. Commissioner of Central Excise, Chandigarh [2003 (157) E.L.T. 500 (SC)], the Tribunal held that Nikon's refund application filed in 2015 was premature and not maintainable.

It further held that appellate relief does not “relate back” to the date of assessment, and refund eligibility must be examined based on the legal position prevailing on the date of filing. It clarified that payment under protest does not remove the requirement of final adjudication before seeking refund.

On the issue of departmental practice, the Bench observed:

“It is usually the practice of the department to keep issuing show cause notices for subsequent periods without a cause of action…These, so called 'protective demands', i.e., show cause notices issued without cause of action will be equally covered by the judgment of the Supreme Court in Dena Snuff and even if the cause of action arises subsequently, the show cause notice cannot be issued at a time when there was no cause of action."

Accordingly, the Tribunal dismissed the appeal and upheld rejection of Nikon India's refund claim.

For Appellant: V. Lakshmikumaran, Anjali Gupta and Ashwani Bhatia, Advocates

For Respondent: P.R.V. Ramanan, Special Counsel and Rakesh Kumar, Authorized Representative