COMMISSIONER OF CUSTOMS Vs. JRAJ EXPORTS (P) LTD.

JUDGEMENT

(1.) AFTER examining the records and hearing both sides, we are of the view that the appeal itself requires to be disposed of at this stage. Accordingly, after dismissing the present application of the department (appellant) for stay of operation of the impugned order, we take up the appeal itself for disposal.

(2.) THE respondents had imported capital goods duty -free under EPCG scheme. At the stage of clearance of the goods, they had furnished a bank guarantee for the amount of Customs duty which would have been leviable on the goods had there been no exemption. The respondents could not produce documentary proof of fulfilment of export obligation within the initial period allowed by DGFT. Hence they applied for extension of validity period of the EPCG licence. While this application was pending with DGFT, the department encashed the bank guarantee, saying that, it the absence of proof of fulfilment of export obligation, duty was leviable on the imported capital goods. Such encashment was on 01.04.2004. Subsequently, the importer produced proof of fulfilment of export obligation before the department, after getting the licence period extended. Thereafter, on 29.11.2004, they applied for refund of the amount covered by the bank guarantee. This application was rejected as time -barred. The order of the original authority was set aside by the first appellate authority on the ground that the limitation provisions of Section 27 of the Customs Act were not applicable to the application for refund of the bank guarantee amount. Hence the present appeal of the department.

(3.) LD . JCDR reiterates the grounds of this appeal. It is submitted that, since the amount covered by the bank guarantee was realised towards duty liability on the imported capital goods, the application filed by the assessee for its refund was an application for refund of duty and, therefore, Section 27 of the Customs Act was squarely applicable. Ld. JCDR seeks to distinguish the case law relied on in the impugned order. Ld. Counsel for the respondents submits that encashment of bank guarantee cannot be treated as recovery of duty. In this connection, reliance is placed on the Rajasthan High Courts judgment in Union of India v. Grasim Industries Ltd. 2005 (183) E.L.T. 12 (Raj.). Counsel submits that, in a case similar to the instant one the West Zonal Bench of the Tribunal has held that Section 27 of the Customs Act is not applicable to a claim for refund of amount realised by the department by way of encashment of bank guarantee. The reference is to the decision in Grasim Industries Ltd. v. Commissioner of Customs, Mumbai 2005 (189) E.L.T.100 (Tri. -Mumbai).