CESTAT Chennai Allows JSW Steel ₹1.62 Crore Refund After Excess Export Duty Remained Unassessed Until 2015

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) at Chennai has allowed JSW Steel Ltd.'s claim for a ₹1.62 crore refund of excess export duty.

It held that the limitation period could not be counted from the date of the original payment when the excess amount was identified only upon reassessment in 2015.

The bench comprising Judicial Member Ajayan T.V. and Technical Member Vasa Seshagiri Rao observed that the additional amount paid by JSW Steel was never reflected in the shipping bills, Let Export Orders or any other contemporaneous assessment record.

The excess duty came to light through a note issued by the Customs Export Department on September 21, 2015, which recomputed the duty.

“The cause of action therefore arose, at the earliest, on 21.09.2015,” the tribunal ruled. It held that the September 21, 2015 note amounted to a reassessment under Section 27(1B)(c) of the Customs Act.

The refund claim, therefore, could not be treated as time-barred.

The case concerned JSW Steel's export of non-alloy steel slabs in June and July 2008. The shipping bills did not record export duty as assessed. JSW Steel nevertheless paid export duty at 15% of the FOB value of the exported steel.

The issue arose from the method used to calculate export duty at the time. A November 10, 2008 circular of the Central Board of Excise and Customs clarified that, until December 31, 2008, the existing practice of treating the FOB price as the cum-duty price could continue.

It also stated that from January 1, 2009, export duty would be calculated using the transaction value under Section 14 of the Customs Act.

JSW Steel claimed that it had consequently paid more export duty than was actually payable. It sought a refund of ₹1,61,96,066 on January 30, 2009.

The original authority initially rejected the refund as time-barred. After further proceedings, the matter was reconsidered.

The original authority ultimately sanctioned the ₹1,61,96,066 refund after the Export Department re-quantified the duty.

The Commissioner (Appeals), however, overturned that decision. The appellate authority held that the refund claim was subject to the limitation period under Section 27 of the Customs Act.

It also held that the relevant date was the date on which the export duty had been paid.

CESTAT disagreed with that approach insofar as it concerned the excess amount paid over the duty figure reflected by the EDI system.

The tribunal clarified that it was not accepting JSW Steel's broader argument that no assessment had taken place at all. The Let Export Orders had been granted only after payment was made.

The EDI system had also indicated a duty figure. This indicated that the proper officer had treated some duty figure as payable.

What had not been assessed was the additional amount paid by JSW Steel over and above the figure indicated by the EDI system. That excess amount was not recorded in the shipping bills, Let Export Orders or any other contemporaneous assessment record.

The tribunal therefore distinguished between the duty figure that had been treated as payable and the additional amount that was later found to be excess.

Under Section 27 of the Customs Act, a person seeking a refund of customs duty generally has to make the claim within the statutory limitation period. Section 27(1B)(c) deals with cases where duty has been reassessed.

In this case, CESTAT held that the September 21, 2015 note was such a reassessment. It had recomputed the duty in accordance with the 2008 circular and the tribunal's earlier directions.

The tribunal relied on the Bombay High Court's decision in Commissioner of Customs (Import) v. Indian Farmers Fertiliser Co-Op. Ltd. In that case, it was held that until an assessment is rectified, the question of refund does not arise.

JSW Steel's refund application had been filed before the assessment was rectified. CESTAT therefore held that it could not be treated as time-barred.

CESTAT also considered JSW Steel's alternative argument that the limitation period should run from the date on which it allegedly discovered a mistake in the payment of duty. The tribunal rejected this argument.

Relying on the Supreme Court's ruling in Mafatlal Industries Ltd. v. Union of India, the tribunal held that a refund claim based on an alleged misinterpretation or misapplication of law must ordinarily be pursued under the specific refund mechanism in Section 27.

The general limitation rule under Section 17 of the Limitation Act could not be used to bypass that statutory mechanism.

The tribunal also found that JSW Steel had not established that it discovered a mistake only in 2009. The EDI system had already shown the FOB value as the cum-duty price when the shipping bills were filed in 2008.

There was also no contemporaneous document supporting JSW Steel's claim that it had paid the higher amount because of verbal pressure from Customs officials.

CESTAT further rejected the argument that the excess amount fell outside the meaning of “duty” altogether. It held that the Supreme Court's decision in Mafatlal Industries did not provide an independent route to refund by invoking Article 265 of the Constitution.

The tribunal also considered the Supreme Court's decision in ITC Ltd. v. Commissioner of Central Excise. That ruling prevents a refund authority from reopening a final and unchallenged assessment through a refund claim.

CESTAT held that the ruling did not apply here. The ₹1.62 crore excess had never formed part of the assessment in the first place.

The correction was instead carried out by the Customs Export Department itself following the tribunal's earlier directions.

CESTAT accordingly set aside the Commissioner (Appeals)' order. It restored the order sanctioning the ₹1.62 crore refund to JSW Steel.

The tribunal also allowed JSW Steel's claim for interest. However, it did not calculate the interest from the original 2009 refund application.

It held that the excess amount was not ascertained until September 21, 2015. Before that date, there was no ascertained sum for Customs to refund.

The tribunal therefore held that the department could not be treated as being in default from 2009. The delay lay in the reassessment being carried out, rather than in the department's failure to refund an already ascertained amount.

Section 27A provides for interest where a refund is not paid within three months of the relevant refund application. On these facts, CESTAT held that the relevant date was September 21, 2015, when the excess amount was ascertained.

Accordingly, interest on ₹1,61,96,066 would run from December 22, 2015 until the date of actual refund, at the notified rate.

The tribunal consequently allowed both appeals. It restored the refund order, with interest to be paid as directed.

For JSW Steel Ltd.: Advocate Rohan Muralidharan,

For the Revenue/Respondent: Rajni Menon, Authorised Representative