Refund if assessment Order not Challenged – Supreme Court declines to reconsider Flock and Priya Blue - Department bound by High Court Order
THE Supreme Court had in CE v. Flock (India) (P) Ltd. (), had held that a refund claim under the Central Excise Act, 1944 is not maintainable, if an assessment order, which is appealable, has not been challenged. In other words, it was held that such assessment order is not liable to be questioned and reopened in a proceeding for refund, which is in the nature of execution of a decree or order.
The Supreme Court in Priya Blue Industries Ltd. v. Commissioner of Customs (Preventive) (), adopting the ratio of the Flock case, had held that a refund claim under the Act is not an appeal proceeding and the officer considering a refund claim cannot sit in appeal or review an assessment order made by a competent authority. Such assessment order is final unless it is reviewed and/or modified in an appeal.
In a case in the Supreme Court, Senior Counsel Harish Salve submitted t hat the decisions of the Supreme Court in Flock and Priya Blue are incorrectly decided and require reconsideration. He submitted that the present appeal should be referred to a larger bench to finally and correctly decide the questions of law arising in this appeal. He further submitted that the appellant is entitled to claim refund by virtue of Section 27 of the Act, even after the assessment order of imported goods has attained the finality. He contends that the claim of refund under Section 27 after final assessment order is different from the refund claim under Section 18, which is after provisional assessment of the imported goods. He submits that Section 27 of the Act provides that the claim for refund shall be made within a period of one year or six months. This short period of limitation indicates that a claim for refund is maintainable even without preferring an appeal against the assessment order. In other words, if the claim for refund is permissible only after filing of an appeal by the party, then Section 27 of the Act will become redundant as the appeal proceedings would never be over within abovementioned period. In this regard, he further argued at great length by analyzing Section 27 of the Act in view of its legislative history and the philosophy and the broad scheme of the Act vis -a- vis Central Excise Act, 1944 and Income Tax Act, 1961. He further contended that decisions of the Court in Flock and Priya Blue have ignored or not considered the decision of nine Judge-Bench of this court in Mafatlal Industries Ltd. v. Union of India, (), which suggests that if the duty has been collected contrary to law, i.e., on account of a misinterpretation or misconstruction of a provision of law, rule, notification or regulation and the assessment order has attained finality, then the assessee is entitled to claim refund in accordance with section 11B of Central Excise Act, 1944 read with Rule 11 of the Central Excise Rules, 1944 on account of subsequent discovery of such mistake of law by any judgment of High Court or of this Court.”
The Supreme Court felt that the correctness of Flock and Priya Blue need not be considered for the purpose of the case at hand.
In the present case, the Deputy Commissioner rejected a refund claim invoking Flock and Priya Blue in spite of a clear direction from the High Court. And the High Court order was not challenged and so attained finality.
The Supreme Court observed, “if for any reason, the subordinate authority is of the view that the directions issued by the Court is contrary to statutory provision or well established principles of law, it can approach the same Court with necessary application/petition for clarification or modification or approach the superior forum for appropriate reliefs. In the present case, as we have already noticed, the respondents have not questioned the order passed by the High Court, which order has reached finality. In such circumstances, we cannot permit the adjudicating authority to circumvent the order passed by the High Court.”
This judgement was delivered by the Supreme Court yesterday – we bring it to you today.