CESTAT Allahabad Ruled on Refund of Extra Duty Deposit, Unjust Enrichment, and Limitation u/s 27 of the Customs Act

Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 14.05.2026

CESTAT Allahabad Ruled on Refund of Extra Duty Deposit, Unjust Enrichment, and Limitation u/s 27 of the Customs Act

The legal dispute between M/s Global YDK Electric Pvt Ltd and the Customs Department, adjudicated by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Allahabad, centers on the refund of Extra Duty Deposit (EDD) paid during provisional assessment of imported goods. This case highlights the complexities of customs duty refunds, the principle of unjust enrichment, and the interpretation of statutory time limits under the Customs Act, 1962.

Background of the Case

1. Parties Involved:
   • Appellant: M/s Global YDK Electric Pvt Ltd, Greater Noida
   • Respondent: Commissioner of Customs, Central Goods & Service Tax, Noida
2. Nature of Dispute:
   • The appellant sought a refund of EDD totaling Rs. 5,08,628, paid against two Bills of Entry (2774040 dated 15.02.2021 and 7055380 dated 12.01.2022).
   • EDD was collected at 5% due to the related supplier status and provisional assessment.
   • After finalization of the Bills of Entry with no addition to declared value, the appellant filed for a refund.

Chronology of Proceedings

1. Initial Refund Claim:
   • Filed on 21.02.2024 for Rs. 5,08,628.
   • Assistant Commissioner sanctioned Rs. 3,26,972 (pertaining to Bill of Entry 2774040) and rejected Rs. 1,81,656 (pertaining to Bill of Entry 7055380) citing limitation.
2. Appeal and Remand:
   • The appellant challenged the rejection, leading to a remand by the Commissioner (Appeals) for proper analysis of unjust enrichment and assessment dates.
3. Adjudicating Authority’s Findings:
   • Confirmed eligibility for refund of Rs. 1,81,656 but ordered transfer to Consumer Welfare Fund, stating the duty incidence was passed to M/s Global Autotech Ltd (the promoter company).
4. Further Appeals:
   • The appellant argued the EDD was paid via a loan from the promoter, which was subsequently repaid, and thus the burden was not passed on.
   • Provided supporting vouchers, bank payment records, and Chartered Accountant certificates.

Key Legal Issues

1. Unjust Enrichment Principle

• Authorities claimed the refund was not due to the appellant as the duty was paid by the promoter company.
• The appellant demonstrated through accounting records and CA certificates that the EDD was a loan, not a transfer of duty burden.
• Tribunal found that the loan transaction was separate from the customs clearance and the burden was not passed to the buyer of goods.

2. Limitation Period for Refund Claims

• Section 27 of the Customs Act requires refund claims within one year of final assessment.
• The Tribunal clarified that EDD is a security deposit, not customs duty, and limitation provisions do not strictly apply.
• Cited relevant High Court and Supreme Court judgments supporting this interpretation.

3. Interest on Refunds

• The appellant claimed entitlement to interest under Section 18(4) of the Customs Act.
• Tribunal agreed, referencing Supreme Court precedents.

Tribunal’s Decision

• The Tribunal allowed the appeal, setting aside the impugned order.
• Recognized the appellant’s right to refund of Rs. 1,81,656, as the burden was not passed on and the EDD was a loan.
• Ordered payment of interest as per statutory provisions.

Implications and Precedents

1. EDD as Security Deposit:
   • EDD collected during provisional assessment is not customs duty and should be refunded if no additional duty is found upon final assessment.
2. Accounting Evidence:
   • Proper documentation (balance sheets, vouchers, CA certificates) is crucial in establishing who bore the duty burden.
3. Legal Precedents:
   • The case references multiple High Court and Supreme Court decisions, reinforcing the distinction between EDD and customs duty and the non-applicability of limitation for refund claims.

Conclusion

This case underscores the importance of clear financial records and legal understanding in customs disputes. The Tribunal’s decision affirms that EDD paid as a loan is refundable to the importer, not subject to unjust enrichment, and eligible for interest. Importers facing similar issues should ensure robust documentation and timely appeals to safeguard their rights.

Source: CESTAT Allahabad

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