IN THE CESTAT, WEST ZONAL BENCH, AHMEDABAD
[COURT NO. II]
Ms. Archana Wadhwa, Member (J), S/Shri K.K. Agarwal, Member (T) and B.S.V.
Murthy, Member (T)
Commissioner of Customs, Kandla
Hindustan Zinc Ltd.
Misc. Order No. M/222/2009-WZB/AHD, dated 24-2-2009 in Appeal No. C/149/2004
Represented By: Shri S.R. Prasad, SDR,for the Appellant.
S/Shri V. Sridharan, Anand Nanawati and Abhishek, Advocates, for the Respondent.
AIT Head Note: prior to 13-7-2006, refund, which became due on final assessment is
to be made without the claim being submitted by the assessee and therefore, did not
attract the provision of unjust enrichment (Para 8)
O R D E R
B.S.V. Murthy, Member (T)
1. This appeal has been referred to the Larger Bench for a decision on the following issue:-
“Whether, refund of customs duty arising out of finalization of provisional assessment,
in terms of provisions of Section 18 of the Customs Act, relatable to the period prior to
13-7-2006, when the provisions of Section 18 were amended, would attract the
provisions of unjust enrichment or not".
2. M/s. Hindustan Zinc Ltd. became entitled to a refund of Rs. 14,37,016/- on finalization
of provisional assessment of Bill of Entry in respect of imported goods. The refund was
credited to the Consumers Welfare Fund on the ground that the appellant could not
establish that duty liability has not been passed on to the buyers as required under Section
27 of the Customs Act 1962. The Commissioner (Appeals) allowed the appeal filed by the
respondents holding that refund is arising as a consequence of finalization of provisional
assessment order passed by the Assistant Commissioner relying upon the decision of the
Tribunal in Tecil Chemicals and Hydro Power Ltd. v. CCE, Cochin and in the case of Oriental
Exports v. Commr. of Customs New Delhi [2001 (127) E.L.T. 578 (Tri. Del.)] and also the
decision of the Apex Court in Mafatlal Industries case. The Revenue filed appeal against
this decision of the Commissioner (Appeals) and matter has been referred to Larger Bench.
3. Shri S.R. Prasad, Ld. SDR on behalf of the appellants made detailed submissions, as
The matter was adjourned earlier to await the decision of Hon'ble High Court of
Gujarat in an appeal on the same issue was pending and the decision has now come
against the Revenue and reported in 2008 (231) E.L.T. 36 (Guj.) but reliance cannot be
placed on the decision of the Hon'ble Gujarat High Court in Hindalco Industries case
[2008 (231)E.L.T. 36 (Guj.)] AIT-2008-350-HC since it has not discussed the decision
of Bombay High Court in Bussa Overseas case [2003 (158) E.L.T. 135 (Bom)]. Gujarat
High Court has relied upon decisions of Apex Court in the cases of Mafatlal Industries
[1997 (89) E.L.T. 247 (S.C.)] AIT-1996-02-SC , Allied Photographics AIT-2004-03-
SC [2004 (166) E.L.T. 3 (S.C.)] and TVS Suzuki Ltd. [2003 (156) E.L.T. 161 (S.C.)] (Refer
para 11 to 14). The said findings of the Hon'ble High Court of Gujarat in case of
Hindalco Ind. Ltd AIT-2008-350-HC. are erroneous being based on wrong appreciation
of the legal provisions of Customs Act, in view of the following:
(a) All the three cases relied upon relate to refunds arising out of finalization of
provisional Assessment in Central Excise and not of Customs as is the case in hand.
(b) The provisions of un-amended provisions of Section 11B and Rule 9B as existed prior
to 1-8-98 (Sec. 11B) and 25-6-99 (Rule 9B) were examined, when Section 11B did not
contain relevant provision for "relevant date" in respect of provisional assessment cases.
(c) Section 11B and Rule 9B certainly operated in different fields during the time prior
to respective amendments and hence Mafatlal case distinguished between "making of
refund" and "Claiming of refund" in Para 95 of the Order.
(d) After amendment w.e.f. 1-8-98 in Section 11B, no such differentiation was provided
in the relevant provision in clause (e b) of Explanation B to Section 11B. The only remedy
available for refund of duty is to first challenge the assessment order and not by way
of filing refund claim only as is held in cases of Flocks India [2000 (120) E.L.T. 285
(S.C.)] and Priya Blue huts. Ltd. [2004 (172) E.L.T. 145 (S.C.)].
(e) It is held by Hon'ble Bombay High Court in the case of Standard Drum & Barrel Mfg.
Co. [2006 (199) E.L.T. 590 (Born.)] that the said amendment dated 25-6-99 in Rule 9B is
clarificatory in nature and hence Rule 9B has to be read in consonance with amended
provision of Section 11B (Refer Para 26 & 27 of the Order).
(f) In the case of TVS Suzuki Ltd. refund accrued in 1996 and refund claim on 5-7-96
i.e. prior to amendment of Section 11B. The Apex Court was neither called upon to
consider the scope & effect of said amendment nor was it relevant in that case.
Whereas in this case, the refund has arisen on 11-11-97 (after amendment of Section 27
providing relevant date for provisional assessment cases vide Explanation I upto 1-8-98
and Explanation II w.e.f. 1-8-98). Even in a Central Excise case, TVS case was rightly
distinguished in case of Standard Drum by Hon'ble Bombay High Court (Para 29 of
(g) In Allied Photographic's case also the period considered I examined by Apex Court
was 1974-1984 i.e. prior to amendment of Section 11B and Rule 9B and therefore the
"making of refund" and "Claiming of refund" were taken differently.
(h) Prior to amendment, Section 11B and Rule 9B were not pari materia with Sections
27/18 of Customs, inasmuch as the lacuna found in Central Excise law was not there in
Customs law. Hence the decision of Allied Photographics case is not applicable to
Customs cases. This case was also therefore rightly distinguished in the case of
Standard Drum case (Para 30).
(i) Hon'ble Bombay High Court had though not considered the case of Allied
Photographics as it was not available then, yet had considered duly the judgments of
TVS Suzuki and Mafatlal Inds., which were relied upon in the case of Allied
Photographics. Bussa Overseas case represents correct interpretation of the provisions
of Customs Act in this regard as it has clearly and correctly distinguished the provisions
of Central Excise law as existed during the material time. It had pointed out lacuna in
the Central Excise law before amendments and had come to the right conclusion that
the refunds arising out of provisional assessment would be governed by Section 27 by
virtue of Explanation regarding "relevant date".
(j) Hon'ble Bombay High Court has correctly appreciated the provisions in the cases of
Bussa Overseas and Standard Drum &. Barrel Mfg. Co. and rightly held that such
refunds would be hit by unjust enrichment in terms of Section 27 even prior to
amendment in Section 18 i.e. w.e.f. 13-7-2006.
4. He also submitted that the decision of the Hon'ble High Court of Gujarat in CCE v.
Hindalco Industries Ltd. [2008 (231) E.L.T. .36 (Guj.)] need not be followed by the Larger
Bench in view of the fact that the decisions of the Larger Bench are applicable all over
India. Further he also submitted that Hon'ble High Court failed to appreciate that the
provisions relating to applicability of Section 27 in respect of refunds arising as a result of
finalization of provisional assessment were available in Section 27 through out the period
unlike Central Excise Act wherein the provisions were introduced only in the year 1998. It is
his submission that in view of this fact, the decision of the Apex Court rendered in respect
of the Rule 9B of Central Excise Rules 1944 and Section 11B of Central Excise Act 1944
(hereinafter referred to as 'the Act') as they existed prior to 1998 cannot be applied to
the provisions of Customs Act in view of the fact that the provisions are not comparable.
5. He also relied upon the observations of the Hon'ble Supreme Court that the doctrine of
unjust enrichment is a just and salutary doctrine and no person can be allowed to be
enriched unequally at the expense of another and it has got universal application by its very
nature. He relied upon the decision of the Hon'ble Supreme Court in Sahakari Khand Udyog
Mandal Ltd. v. CCE reported in 2005 (181) E.L.T. 328 (S.C.). He also relied upon CCE, Mumbai
v. Standard Drums and Barrels Mfg. Co. [2006 (199) E.L.T. 590 (Bom.) in support of his
contention that refund arising as a result of finalization of provisional assessment is
governed by Section 11 B.
6. Shri Sridharan, Ld. Advocate arguing for the respondents submitted as under:-
(a) Before it was amended on 20-9-1991, Section 11B of the Act had this provision under
section 11B(I)(B)(e) "in the case where duty of excise is paid provisionally under this
Act or the rules made there' under, the date of adjustment or duty after the final
assessment thereof". He submits that Hon'ble Supreme Court in CCE Mumbai v. Allied
Photographics India Ltd. case AIT-2004-03-SC [2004 (166) E.L.T. 3 (S.C.)] after
considering the fact that before amendment in 1991, the Proviso related to provisional
assessment existed in Section 11B and after considering the provisions of Section 11B
and Rule 9B provided for suo motu payment of refund on finalization of assessment by
the assessing officer, whereas Section 11B dealt with claiming of refund by the person
who has paid duty. He submits that the Hon'ble Gujarat High Court did not consider
the decision of Mumbai High Court in Bussa Overseas and Properties Pvt. Ltd. since it
was rendered before the decision of the Apex Court in Allied Photographics case. In
Allied Photographics case, the Supreme Court had considered the situation where the
provisions of Rule 9B of the Act and Section 11B of the Excise Act were similar to the
provisions of Section 18 and Section 27 of the Customs Act 1962. In view of the
above position, he submits the decision of the Hon'ble Gujarat High Court in the case
of CCE v. Hindalco Industries [2008 (231) E.L.T. 36 (Gujarat)] is correct.
(b) He also submits that the Hon'ble Supreme Court consistently relied upon the
observations of the Apex Court in Para 95 in Mafatlal Industries Limited v. UOI [1997
(89) E.L.T. 247 (S.C.) in all the subsequent judgments and has clearly held that there
is a difference between adjustment of the duty while finalizing the provisional
assessment wherein assessing officer is required to make suo motu refund and the
refund claim arising subsequent to final adjustment of duty after finalization of
provisional assessment. In Allied Photographic case, the difference between making a
claim and automatic adjustment has been elaborated.
(c) He also submits that according to the decision of the five member Bench of the
Tribunal in CCE, Chandigarh v. Kashmir Conductors [1997 (96) E.L.T. 257 (Tri.)] in Para
11, it was held that the Larger Bench may take a view which is appropriate in its
opinion when there are conflicting decision of High Courts on the same issue and the
decision of the Larger Bench in such cases would be binding on the authorities which
are not within the jurisdiction of the High Court whose decisions are contrary to the
decision of the Larger Bench. He, further drew our attention to Para 10 of the order
of the Larger Bench wherein Larger Bench had cited the decision of the Supreme
Court wherein it was held that "it is implicit in the potuer of supervision conferred on
a superior Tribunal that all the Tribunals subject to its supervision should conform to
the law laid down by it........." Therefore law declared by the highest Court in the State
is binding on the authorities or Tribunals under its superintendence. Therefore, in
view of this, he submits that the Larger Bench is bound by the decision of the Hon'ble
Gujarat High Court.
7. We have considered the submissions made by both the sides in detail.
7.1. Before we proceed further, the relevant provisions under Central Excise and Customs
are proposed to be discussed :-
Prior to its amendment in 1991, Section 11B did not have any provision for denial of
refund on the ground of unjust enrichment. Further the Section also provided that relevant
date in a case where duty of excise paid provisionally in the Act or the Rules made there
under, shall be the date of adjustment of duty after the final assessment thereof. Rule 9B
during the relevant time also provided that the duty provisionally assessed shall be adjusted
against the duty finally assessed and if the duty provisionally assessed fell short of, or in
excess of duty finally assessed, the assessee shall be required to pay or be entitled to
refund as the case may be. When Section 11B was amended in 1991 and provision relating to
unjust enrichment was introduced, the clause relating to provisional assessment as regards
relevant date in Section 11B was omitted. It was re-introduced in 1-8-1998 in Section 11B
and the Proviso providing that the refund relating to finalization of provisional assessment
shall not be made except in accordance with the procedure under section 11B was
introduced in Rule 9B on 25-6-99.
7.2 All the decisions of the Apex Court relating to unjust enrichment cited by both the
sides i.e. Mafatlal Industries, Allied Photographics, Sahkari Khand Udyog Mandal, are
related to the period prior to the year 1998. The observations of the Apex Court in respect
of the refund claims in allied Photographies in Para 7 is reproduced below :-
7. Before analysing Section 11B, it is important to note that there is a difference
between making of refund and claiming of refund. Section 11B was inserted in the said
Act w.e.f. 17-11-1980. Under sub-clause (e) to Explanation B to Section 11 B(l), where
assessment was made provisionally the relevant date for commencement of limitation of
six months was the date of adjustment of duty as final assessment. Entitlement to
refund would thus be known only when duty was finally adjusted. Sub-clause (e) referred
to limitation in cases covered by Rule 9B which dealt with duty paid under provisional
assessment. The said rule started with a non-obstinate clause. Rule 9B(1)(a) to (c)
indicated the circumstances in which the proper officer would allow provisional
assessment. Rule 9B(4) dealt with clearance of goods provisionally assessed whereas
Rule 9B(5) dealt with adjustment of provisionally assessed duty against finally assessed
duty. The said Rule 9B was a complete code by itself. On compliance with the conditions
therein, the proper officer was duty bound to refund the duty without requiring the
assessee to make a separate refund application. The said rule, therefore, provided for
making of refund. On the other hand, Section 11B(1) dealt with claiming of refund by the
person who has paid duty on his own accord. In this connection, Section 4 of the said
Act is relevant. In the case of Bombay Tyre (supra) it has been held that Section 3 of
the Act refers to levy of duty whereas Section 4 dealt with assessment. Assessment
means determination of the tax liability. Under the Act, duty was payable by the
manufacturer on his own account. Hence, under Section 11B(1), such a person had to
claim refund by making an application within six months from the relevant date except in
cases where duty was paid under protest in terms of the proviso. However, even in such
cases, the person claiming refund had to pay the duty under protest in terms of
prescribed rules. A bare reading of Section 11 B(1), therefore, shows that it refers to
claim for refund as against making of refund by the proper officer under Rule 9B.
7.3 The conclusion that emerges from the decision of the Apex Court in the Allied
Photographics case is that even prior to 1991 when Section 11 B had the provision relating to
provisional assessment, the refund claim arising after final adjustment and "vas not a part
of finalisation wherein the assessing officer was required to make the refund suo motu,
there was a need for making a refund claim under Section 11 B. Since this decision was not
considered by the Hon'ble Bombay High Court in Bussa Overseas case, we see considerable
force in the arguments advanced by the Ld. Advocate for the respondents that even when
Section 27 had the provisions relating to provisional assessment, prior to the period when
Section 18 was not amended i.e. prior to 2006 to incorporate the provisions of unjust
enrichment, the provisions relating to unjust enrichment would not apply unless refund
arises after the process of finalisation and adjustment of duty assessed is completed.
7.4 In the case of Section 18 and Section 27, the provisions relating to provisional
assessment were always there in Section 27 and Section 18 was amended only in 2006. The
Hon'ble Gujarat High Court in Hindalco case considered this issue in detail. The
observations of the Hon'ble Gujarat High Court as regards Section 18 prior to the
amendment and after the amendment in Para 16 and 18 of the judgment are very relevant
and therefore are reproduced below :-
"16. On a plain reading it becomes apparent that the said section overrides other
provisions of the Act except provisions of Section 46 of the Act and permits provisional
assessment of duty in case any of the three contingencies provided by clauses (a), (b) or
(c) under sub-section (1) of Section 18 of the Act happening; in such an eventuality the
proper officer is entitled to provisionally assess the duty leviable on imported goods
pending the production of necessary documents, or furnishing of requisite information,
or completion of necessary test or enquiry, subject to importer furnishing such security
as the proper officer deems fit for the payment of deficiency, if any, between the duty
finally assessed and the duty provisionally assessed. Under sub-section (2) of Section 18
of the Act, it is provided that when duty is assessed finally in accordance with the
provisions of the Act then the amount paid shall be adjusted against duty finally
assessed, and in case the amount paid falls short of the duty finally assessed, or the
amount paid is in excess of the duty finally assessed, the importer shall pay the
deficiency, or shall be entitled to the refund, as the case may be.
18. On a plain reading it becomes apparent that sub-sections (3) and (4) relate to
liability to pay interest or entitlement to claim interest consequent upon final
assessment order. However, sub-section (5) is the material amendment which indicates
that the Proviso appearing below sub-section (2) of Section 27 of the Act has now been
incorporated as a part of Section 18 of the Act. On a plain reading the distinction
between Section 18 as it stood prior to amendment i.e. upto 12-7-2006 and subsequent
to the amendment i.e. with effect from 13-7-2006 becomes apparent. The difference is
stark and revealing and it is not possible to agree with the contention of revenue that
such amendment has to be understood as clarificatory in nature. This is more so, when
one reads the amendments made in 1998 and the amendment made in Rule 9B of the
Central Excise Rules in 1999 considering the pronouncement of the Apex Court as to the
distinction between making of a refund and claiming of a refund; the amendment cannot
be considered to be retrospective in nature; and cannot be made applicable to pending
The Hon'ble High Court observed that amendment is not clarificatory in nature and
amendments are to be considered in the light of the pronouncements of the Apex Court as
to the distinction between making of the refund and claim of the refund. Therefore, the
High Court came to the conclusion that when provisional assessment is finalized, the
assessee is entitled to refund and he does not have to make the claim. Therefore, the
provisions of Section 27 is not attracted.
7.5 Another point that goes in favour of the respondent is that unlike Rule 9B which is a
part of subordinate legislation and therefore cannot be preferred to Section 11B which is
part of the main act, Section 18 and Section 27 are part of the Customs Act and neither is
subordinate to other. Therefore, Hon'ble High Court observed that provisions of Section
27 cannot be read into Section 18 of Customs Act, 1962.
7.6 Another point argued by the Ld. SDR is that Hon'ble Gujarat High Court had not
considered and discussed the decision of Mumbai High Court in Bussa Overseas case. In
view of the fact that judgment of the Hon'ble Supreme Court in Allied Photographic case
was rendered later and not considered by the Mumbai High Court and also in view of the
fact that the Hon'ble Gujarat High Court has analyzed the provisions of Section 18 and
Section 27 in detail and also has considered all the decisions of the Hon'ble Supreme Court,
we do not find any force in this argument.
7.7 We have not discussed the issue whether Larger Bench is bound to follow jurisdictional
High Court decision in view of the fact that our conclusions are based on the decision of
Gujarat High Court.
7.8 As regards the decision of Apex Court on Sahakari Khand Udyog case, we find that
according to the above judgment the unjust enrichment doctrine can be invoked to deny the
benefit to which a person is not otherwise entitled. The Court also observed that in absence
of a statutory provisions, a person can not claim or retain undue benefit (Para 48). The
conclusion is that if there is a statutory entitlement unjust enrichment doctrine has to be
invoked by examining the legal provisions and unjust enrichment doctrine can not be
8. In view of the above discussion, there is no doubt that prior to 13-7-2006, refund, which
became due on final assessment is to be made without the claim being submitted by the
assessee and therefore, did not attract the provision of unjust enrichment. The reference
made by the divisional Bench is answered in favour of the respondent.
9. Thus, the reference has been answered. Records may be placed before the regular Bench
for final disposal of the appeal
(Pronounced in the Court 24 Feb 2009)