Holding

The Commissioner (Appeals) must make a factual finding on the nature of the goods before directing an appeal, and the Assistant Collector’s refund order was defective for lacking such findings; thus the orders of the Commissioner (Appeals) and the Tribunal are set aside.

Summary

The respondent imported goods claiming they were accessories exempt from customs duty, paid duty under protest, and later sought a refund. The Assistant Collector granted a refund of about Rs 2.5 crore for certain items, deeming them accessories, while denying refund for others as spares. The Commissioner (Appeals) invoked Section 28 and, under Section 129(2), directed an appeal without making a substantive finding on whether the goods were accessories or spares, also holding the refund application time‑barred. The Tribunal reversed the time‑bar finding but likewise did not decide the merits of the classification issue. The Supreme Court held that the Assistant Collector’s order was defective for lacking detailed findings and that the Commissioner (Appeals) must first determine the factual classification before ordering an appeal. It also rejected the Tribunal’s view that Section 129(2) was beyond the Collector’s powers. Consequently, the orders of both the Commissioner (Appeals) and the Tribunal were set aside and the matter remanded for a merits determination.

Issues considered

Whether the Commissioner of Customs (Appeals) can direct an appeal under Section 129(2) without first making a finding on the classification of imported goods as accessories or spare parts.
Whether the Assistant Collector’s order granting refund was valid despite not providing detailed factual findings.
Whether the Tribunal erred in holding that the Collector’s order under Section 129(2) was beyond his statutory powers.
Whether the refund application was barred by limitation.

Legislation cited

Customs Act, 1962s. 129(2), s. 28

Subjects

customs dutyrefundexemption notificationaccessoriesspare partslimitation periodSection 28Section 129Commissioner of CustomsCustoms Tribunalappeal

Judgment

A COMMISSIONER OF CUSTOMS (SEA), CHENNAI
v.
MIS. BALLARPUR INDUSTRIES LTD.

SEPTEMBER 11, 2001

B [B.N. KIRPAL, K.G. BALAKRISHNAN AND P. VENKATARAMA
REDDY, JJ.]

Customs Ac:, 1962 :

C Ss. 28 and 129D(2)-Power of Commissioner o,fCustoms to direct filing
of appeal before Commissioner (Appeals)-lmport o.f certain goods-Assessee
claiming them as accessories and as such covered under an exemption
not(fication-Revenue treating the goods as spare parts and demanding duty-
Assessee paying the duty under protest and later filing application.for refund-
D Assistant Collector allowing refund with regard to one set o.f goods holding
them as accessories-Claim o.f refund rejected with regard to other set o.f goods
as the same were held to be spares-On appeal, Commissioner (Appeals) held
the application for refund as time barred-On.further appeal, Tribunal held the
application for refund to have been filed within the period of limitation-
Tribunal also observed that order passed by Collector of Customs uls. l 29D(2)
E
was beyond the scope of his powers-Held, just as the Assistant Collector
considered in detail the items which he regarded as ~pares, it was incumbent
upon him to give details o.f other items before coming to the conclusion that they
were accessories and not spares-Duty was paid by assessee on the basis o,fthe
claim of Revenue that the items imported were spares and not accessories-
F Re.fund could be ordered only !f there was a positive.finding based on tangible
material to the effect that the items imported were accessories and not spares-
Commissioner was, there.fore, justified in passing an order u/s. 129D and
directing the.filing of an appeal-Neither the Commissioner (Appeals) nor the
Tribunal recorded any finding on merits as to whether the goods imported were
G accessories or ~pare parts and whether the refund was properly allowed-It
I
.......
was, incumbent upon Commissioner (Appeals) to give a.finding with regard to
the goods imported as to whether they were spares as claimed by Revenue or
accessories as Claimed by assessee-Case remanded to Commissioner (Appeals)
for deciding on merits whether refund was correct or any part thereo,f was
H correctly allowed.
24
COMMR. OF CUSTOMS (SEA), CHENNAI v. BALLARPUR INDUSTRIES LTD. 25
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3942-3944 of A
2001.

From the Judgment and Order dated 9.5.2000 of the Customs Excise and
Gold (Control) Appellate Tribunal, Chennai in A. No. CIR. No. 313 to 315/97
in F.O. No. 618-620 of 2000.
B
M.L. Verma, M. Gourishankarmurthy and B. Krishna Prasad for the
Appellant.

Ms. Indu Malhotra, Ms. Pooja Sriram, M. Venkataraman and Ms. Madhu
Sweta for the Respondent.
c
The following Order of the Court was delivered :

In the instant case, some goods were imported by the respondent under
three bills of entry. The claim of the respondent was that what was imported
were essentially accessories and under an exemption notification no customs
duty was payable in respect thereof. D

The record shows that a letter dated 12th September, 1992 was written
by the appellant with regard to the said import. It was stated in this letter that
some discussions had taken place between the representatives of the appellant
and the respondent and as the goods imported were urgently required so ·. > to
E
meet Export Shipment Deadline respondent was paying duty under protest at
the rate proposed by the appellant herein. The request was made to release the
consignment for assessment, payment of duty and early clearance.

After the goods were cleared, an application for refund of the duty paid
was filed. There is a dispute between the parties as to when was the application F
filed. According to the respondent, the application was filed on 5th March,
1993, whereas according to the appellant the application was received in the
Refund Section only on 7th April, 1993. The application bore more than one
stamp and there was a dispute with regard to the date of receipt of the said
,.,....I application.
G
The Assistant Collector allowed the refund of about Rs. 2.50 crores after
examining the goods in question and holding that they were accessories. With
regard to another set of goods, details of which are contained in the order of
the Assistant Collector, it was held that the same were spare parts and no refund
in respect thereof was permissible. H
26 SUPREME COURT REPORTS [2001) SUPP. 3 S.C.R.
A It seems that a notice under Section 28 was issued by the Department on
the premise that an excess refund had been ordered. We are not concerned with
this in the present case because the Commissioner passed an order under
Section 1290 of the Customs Act holding that the order of refund was not legal
and proper on the basis of the ground contained in the enclosure to the said
order under Section 1290. He, therefore, directed the Assistant Collector of
B
Customs to file an appeal before the Collector of Customs against the order of
refund.

The Collector of Customs (Appeals) came to the conclusion that the
application for refund had not been filed within the prescribed period. It did
C not accept the contention of the respondent herein that the application had been
filed on 5th March, 1993. As it came to the conclusion that the application for
refund was barred by time and therefore the refund should not have been
ordered, the Commissioner (Appeals) did not give a categorical finding on the
merits as to whether what was imported and in respect of which refund was
allowed was spare parts or accessories.
D
Against the order of the Commissioner (Appeals), the respondent filed
an appeal before the Tribunal. The Tribunal, after examining the evidence on
record, came to the conclusion that the application for refund had been filed
on 5th March, 1993 and the same was within the period of limitation. The
E Tribunal, however, while allowing the appeal of the respondent, did not go into
the other aspect as to whether the refund was properly allowed on merits,
namely, whether what was imported were accessories or spare parts. It can be
noticed that the exemption notification only permitted accessories from being
exempt from tax and not spares. In our opinion, the finding of fact arrived at
by the Tribunal that the application for refund of duty was within the period
F of limitation calls for no interference. We are, however, informed that there is
a criminal prosecution which has been launched alleging that the letter dated
5th March, 1993 was a forgery. That prosecution will take its own course and
we have nothing to say in respect thereto. We will, however, not go into a
disputed question of fact namely, whether the application for refund was filed
G on 5th March, 1993 or not and we do not propose to disturb the finding of the
Tribunal.

Proceeding on the premise that the application for refund was filed
within time, the authorities had to consider whether the refund had been
properly ordered. In our opinion, tlie order of the Commissioner of Customs
H under Section 1290 did not suffer from any infirmity. The said Section enables
COMMR. OF CUSTOMS (SEA), CHENNAI v. BALLARPUR INDUSTRIES LTD. 27
an order being passed, if the Commissioner is not satisfied as to the legality A
or propriety of the order of the Assistant Collector. In the instant case, we find
the the Assistant Collector did consider in detail the items which he regarded
as spares valued at approximately Rs. 18,74,620 and in respect of which refund
was denied. After dealing with this item, in respect of other items for which
refund of about Rs. 2.50 crores was ordered, the Assistant Collector observed
B
as follows :-

"The functions of other items were verified and they were found
to be installed in the relevant equipments. I agree that they are forming
part of the relevant equipments itself which can be classified as Capital
Goods. The Chartered Engineer has also confirmed that these items are c
accessories. I accept the same and extend the concession under the
EPCG Scheme for these items."

We are of the opinion that the aforesaid cryptic order of the Assistant
Collector would not be regarded legal. Just as the Assistant Collector had
considered each item and came to the conclusion that they were spares, it was D
incumbent upon him to give details of the other items before coming to the
conclusion that they were accessories and not spares. It is to be borne in mind
that the duty was paid by the respondent on the basis of the claim of the
appellant, namely, that what was imported were spares and not accessories. The
refund could be ordered only if there was a positive finding based on tangible E
material to the effect that what was imported wer~ accessories and not spares.
It was necessary, therefore, for the Assistant Collector to have examined and
given details thereof in the order which was passed. This not having been done,
apart from anything else, the Commissioner was justified in passing an order
under Section 129D and directing the filing of an appeal. The Commissioner
(Appeals) did not deal with the question as to whether what was imported and F
in respect of which the refund was allowed were spares or accessories. This
question was also not gone into by the Tribunal. The Commissioner (Appeals)
did not decide it because it was of the opinion that the application for refund
itself was barred by time, inasmuch as the application for refund is not to be
regarded as having been filed within time. It is incumbent upon the Commissioner G
to give a finding with regard to the goods imported as to whether they were
spares as claimed by the Department or accessories as claimed by the respondent.
The orders of the Commissioner (Appeals) and the Tribunal are, therefore,
liable to be set aside.

Before parting with the case, we may advert to one more aspect arising H
28 SUPREME COURT REPORTS [2001] SUPP. 3 S.C.R.
A out of the impugned order of the Tribunal. The Tribunal expressed the view
that the order passed by the Collector of Customs under Section. 129D(2) is
beyond the scope of his powers for the reason that the Collector cannot go into L
fresh facts or fresh evidence and he has to confine himself to the facts already
on recotd. According to the Tribunal, it was not open to the Collector to raise
the question as to the correctness or genuineness of the seal on the refund
B
application as it involves a detailed enquiry. Such a power, according to the
Tribunal, could only be exercised under Section 28. Assuming that the Tribunal's
understanding of the scope and ambit of Section 1290 (2) is correct, it is not
possible in the instant case .to hold that the Collector of Customs travelled-
beyond the record and culled out fresh facts or fresh evidence in support of his
c conclusion. The Collector, in our view, restricted himself to the examination
of the facts apparent from the record and drew the inferences and conclusions
of his own on an appreciation of the material on record and in the light of the
extant procedures. He did not launch upon an investigation of the f~cts which
can be said to be extraneous to the record placed before him. The basic
assumption underlying the view taken by the Tribunal is, therefore, incorrect. .
D
We, therefore, a:Jlow these appeals, set aside the order of the Tribunal as
well as the Commissioner (Appeals) and remand the case to the Commissioner
(Appeals) for a decision on the question as to whether the refund of Rs. 2.50
crores was correct or any part thereof was correctly allowed on merits.

R.P. Appeals allowed.