CESTAT Allows Customs Duty Refund Claim Paid Through DEPB Scrip

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the customs duty refund claim paid through the Duty Entitlement Pass Book (DEPB) scrip.

The bench of Ajay Sharma (Judicial Member) has observed that the department has failed to establish through any kind of document or case law that debit of any amount under the DEPB scheme is not a mode of payment of duty, and therefore the benefit cannot be denied to the appellant.

DEPB Scrips could also be used to pay duty on imports through the Export Promotion Capital Goods (EPCG) Scheme. Under the scheme, an exporter was allowed credit on duty payments as a percentage of the free-on-board (FOB) value of exports made.

The issue raised was whether the appellant was entitled to a refund of additional duty on customs (SAD) paid through DEPB scrip or license.

The appellant/assessee filed refund claims under SAD. So far as the SAD refund of Rs. 6,75,155 is concerned, out of this amount, Rs. 4,48,989 was paid in cash, whereas the remaining amount of Rs. 2,26,166 was debited from the relevant DEPB license. In the second refund, out of the amount of Rs. 13,38,961, Rs. 8,94,587 were paid in cash, and the remaining Rs. 4,44,374 were debited from the relevant DEPB license.

The adjudicating authority sanctioned the refund of duty that was paid in cash and rejected the refund claims with respect to the duty that was debited from the DEPB License. On an appeal filed by the appellant, the Commissioner (Appeals) upheld the adjudicating orders and rejected the appeals filed by the appellant.

The appellant submitted that the SAD refund claims have been rejected by the authorities below only on the ground that the duty was paid through a debit from the relevant DEPB license. The appellant has satisfied all the conditions that state that an exemption has been provided from payment of the SAD amount on the imported goods when those are subsequently sold in India. The conditions make no mention of refunds when the duty was paid with DEPB scrip.

The department contended that, according to the DGFT's public notice, if SAD was paid using duty credit scrip after September 30, 2013, payment could not be considered proper payment of customs duty because the time limit for utilising the credit of 4% SAD was only until September 30, 2013. Therefore, the authorities below have rightly rejected the refund claim.

The CESTAT allowed the appeal filed by the assessee and held that the appellant has fulfilled the conditions set out in the notification for availing of the refund; the department is directed to issue orders granting the refund to the petitioner.

"I find no justification for rejecting the refund claim in respect of the duty paid through DEPB scrip, and thus the impugned order cannot sustain," the tribunal wrote.

Case Title: Virgo Suitings Pvt. Ltd. Versus Commissioner of Customs

Citation: Customs Appeal No. 86324 Of 2019

Date: 02.12.2022

Counsel For Appellant: Advocate Anjali Hirawat

Counsel For Respondent: Authorised Representative Ram Kumar

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