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ITC Limited v. Commissioner of Central Excise, Kolkata IV

Civil Appeal · 2019 INSC 1049Decided 18 Sept 2019
Civil Appeal Nos. 293-294 of 2009
Justice Arun Mishra · Justice Navin Sinha · Justice Indira Banerjee

Background

ITC Limited, a paper manufacturer, had been availing a duty exemption on "waste paper/broke" used in its manufacturing process but later realised it had wrongly claimed this exemption and voluntarily started paying duty from May 2001. It then filed a refund claim in 2003 for duty paid during July 2001-March 2002, without having first appealed the underlying assessment order. The refund claim was rejected by the authorities and the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), leading to this appeal. The case was heard together with a large batch of similar appeals (filed by both importers/assessees and the government) from the Delhi and Madras High Courts, all turning on the same legal question.

Decision Breakdown

The central legal question was whether a refund of customs/excise duty can be claimed under Section 27 of the Customs Act (or the parallel excise provision) without the taxpayer first getting the original assessment order (including a "self-assessment") modified through an appeal. The Supreme Court held that an order of self-assessment is still an "order of assessment" and is appealable; therefore a refund application cannot be used as a backdoor way to reopen or re-assess the correctness of duty paid: the assessee (or the Revenue) must first challenge the assessment itself under Section 128 (appeal provision) before a refund claim under Section 27 can be entertained. The Court disagreed with the Delhi and Madras High Courts' reasoning (relied on in Micromax Informatics and similar cases) that self-assessment without a formal "lis" falls outside this requirement, and upheld the Tribunal's view that ITC's refund application was not maintainable since it had never appealed the final assessment order. All appeals in the batch, including ITC's, were accordingly disposed of upholding the Tribunal's approach, with parties bearing their own costs.

Lesson Learnt

If you believe customs or excise duty was wrongly assessed (including through self-assessment on a bill of entry), you must first formally appeal and get that assessment order corrected: simply filing a refund application later, without challenging the assessment, will not succeed even if the underlying exemption claim might have been valid.

Official source (sci.gov.in)View Judgment (PDF)

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