Justice C.Saravanan directed the respondent to refund a sum of Rs.6,85,687 being difference between the value of the goods imported and the customs duty paid to the petitioner within appeal of 30 days from the date of receipt of this order together with interest at 7.5% from the date of payment till the date of refund. Since the amount of Rs.13,58,794/- was paid before clearance of any goods, that refund of amounts pursuant to this order and orders to be passed will be outside the scope of Section 27 of the Customs Act, 1962. It is made clear that the petitioner shall not be subjected to any test of unjust enrichment.

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Customs Duty paid in Good faith shall be Refunded to victims of Fraud: Madras HC allows Partial Refund [Read Order]

By Taxscan Team – On April 19, 2021 5:49 pm
Customs Duty – Good faith – Refunded – Fraud – Madras High Court – Partial Refund – Taxscan

The Madras High Court directed the Customs Department to refund the difference amount between the value of the goods imported and the customs duty under the relevant provisions of the law.

The petitioner, M/s.Innomit Mineral Projects Pvt Ltd claimed to be a victim of the chinese exporter and sought for a refund of the customs duty paid at the time of filing of Bill of Entry under the self assessment procedure under the Customs Act, 1962.

According to the petitioners, after the Customs duty was paid, when the petitioner and the Customs Department inspected the imported goods, it was found that the Chinese Exporter imported Chalk Powder, Caustic Soda and Industrial Salt and instead of Remelted Lead Ingots.

The petitioner therefore requested the respondent to refund the Customs duty. Prior to refund the claim, the petitioner had decided to clear the imported goods to recover the loss suffered by the petitioner. However, the petitioner realized that the imported goods were worthless and had no marketable value and therefore the petitioner decided to abandon the goods.

the question before the Tribunal was that whether the petitioner is entitled to have the impugned show cause notice issued by the respondent quashed or should be relegated to participate in the said proceedings.

The show-cause notice was delayed considerably. Even though there is no limitation prescribed under 124 of the Customs Act, 1962, the petitioner is entitled to abandon the imported goods abandoned under Section 23 of the Customs Act, 1962. It cannot be said that the petitioner had indulged in any offence while importing the goods. On the other hand, the petitioner is a victim of fraud perpetrated by the Chinese.

The petitioner has paid a sum of Rs.13,58,794/- as Customs duty in good faith on the goods declared in the Bill of Trading namely Remelted Lead Ingots.

The single Judge bench of Justice C.Saravanan directed the respondent to refund a sum of Rs.6,85,687 being difference between the value of the goods imported and the customs duty paid to the petitioner within appeal of 30 days from the date of receipt of this order together with interest at 7.5% from the date of payment till the date of refund. Since the amount of Rs.13,58,794/- was paid before clearance of any goods, that refund of amounts pursuant to this order and orders to be passed will be outside the scope of Section 27 of the Customs Act, 1962. It is made clear that the petitioner shall not be subjected to any test of unjust enrichment.

“The balance amount of Rs.6,73,107 (13,58,794-6,85,687/-) shall be held in lien in the hands of the respondent Customs Department and is to be refunded back to the petitioner subject to outcome of the impugned show cause proceedings,” the court said.

The Court held that if no case is made out for confiscation of the imported goods or the respondent customs department comes to a conclusion that the goods were to be confiscated, the petitioner may be given an option to pay fine in lieu of confiscation under Section 125 of the Customs Act, 1962. In case, the petitioner decides to still abandon the imported goods, the Customs Department may take suitable action to auction the imported goods under Section 126 of the Customs Act, 1962 and refund the balance amount to the petitioner which will be held by the respondent customs department as lien pending adjudication of the impugned show cause proceedings in accordance with Law.

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