The Supreme Court has held that the claim for refund under Section 27 of the Customs Act cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law by taking recourse to the appropriate proceedings
The bench comprising Justice Arun Mishra, Justice Navin Sinha and Justice Indira Banerjee observed that in case any person is aggrieved by any order which would include self-assessment, he has to get the order modified under Section 128 or under other relevant provisions of the Act and that it would not be within the ken of Section 27 to set aside the order of self assessment and reassess the duty for making refund.
In ITC Limited vs. Commissioner Of Central Excise, the three judge bench was concerned with the issue is whether in the absence of any challenge to the order of assessment in appeal, any refund application against the assessed duty can be entertained?
Taking note of the provisions prior to amendment and post-amendment under Finance Act, 2011, the bench observed:
The provisions under section 27 cannot be invoked in the absence of amendment or modification having been made in the bill of entry on the basis of which self-assessment has been made. In other words, the order of self-assessment is required to be followed unless modified before the claim for refund is entertained under Section 27. The refund proceedings are in the nature of execution for refunding amount. It is not assessment or reassessment proceedings at all. Apart from that, there are other conditions which are to be satisfied for claiming exemption, as provided in the exemption notification. Existence of those exigencies is also to be proved which cannot be adjudicated within the scope of provisions as to refund. While processing a refund application, re-assessment is not permitted nor conditions of exemption can be adjudicated. Re-assessment is permitted only under Section 17(3)(4) and (5) of the amended provisions. Similar was the position prior to the amendment. It will virtually amount to an order of assessment or re-assessment in case the Assistant Commissioner or Deputy Commissioner of Customs while dealing with refund application is permitted to adjudicate upon the entire issue which cannot be done in the ken of the refund provisions under Section 27.
The bench also disapproved the High Court view that when there is no assessment order for being challenged in appeal, which is passed under Section 27(1)(i) of the Act, because there is no contest or lis and hence no adversarial assessment order, the cases would be covered by the provision of Section 27(i) (ii) and refund applications can be maintained by the assessee even in the absence of filing appeals against the assessed bill of entry. It said:
As the order of self-assessment is nonetheless an assessment order passed under the Act, obviously it would be appealable by any person aggrieved thereby. The expression 'Any person' is of wider amplitude. The revenue, as well as assessee, can also prefer an appeal aggrieved by an order of assessment. It is not only the order of re-assessment which is appealable but the provisions of Section 128 make appealable any decision or order under the Act including that of self-assessment. The order of self-assessment is an order of assessment as per section 2(2), as such, it is appealable in case any person is aggrieved by it. There is a specific provision made in Section 17 to pass a reasoned/speaking order in the situation in case on verification, self assessment is not found to be satisfactory, an order of re-assessment has to be passed under section 17(4). Section 128 has not provided for an appeal against a speaking order but against "any order" which is of wide amplitude. The reasoning employed by the High Court is that since there is no lis, no speaking order is passed, 32 as such an appeal would not lie, is not sustainable in law, is contrary to what has been held by this Court in Escorts (supra).
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