- 1 - HC-KAR NC: 2025:KHC:38342-DB CSTA No. 09 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD DAY OF SEPTEMBER, 2025 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE K. V. ARAVIND CUSTOMS APPEAL No. 09 OF 2024 BETWEEN: 1. PRINCIPAL COMMISSIONER OF CUSTOMS AIRPORT AND AIR CARGO COMMISSIONERATE, DEVANAHALLI, BENGALURU-560300. …APPELLANT (BY SRI ARAVIND V CHAVAN, SENIOR STANDING COUNSEL) AND: 1. M/S FESTO CONTROLS PRIVATE LIMITED, No.237,B, BOMMASANDRA INDUSTRIAL AREA, BANGALORE-560099. REPRESENTED BY MANAGING DIRECTOR. …RESPONDENT (BY SRI B. G. CHIDANANDA URS, ADVOCATE) THIS CSTA / CUSTOMS APPEAL IS FILED UNDER SECTION 130 OF THE CUSTOMS ACT, 1962 ARISING OUT OF ORDER DATED 19/03/2024 PASSED IN FINAL ORDER No. 20159-20165/2024 PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE HON'BLE CESTAT, BANGALORE IN FINAL ORDER No.20159-20165/2024 DATED 19.03.2024 VIDE ANNEXURE-A AND CONFIRM THE ORDER-IN- ORIGINALS DATED 18.11.2009, 19.02.2010, 31.01.2011, 06.01.2012, 01.03.2012, 08.03.2012, 22.03.2012 AND 24.04.2012 ORDER PASSED BY THE ASSISTANT COMMISSIONER (REFUNDS) OF CUSTOMS AND ORDER-IN- APPEALS DATED 11.03.2011, 14.10.2011, 30.05.2012 AND 19.07.2012 ORDER PASSED BY THE COMMISSIONER OF CUSTOMS (APPEALS). Digitally signed by VALLI MARIMUTHU Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:38342-DB CSTA No. 09 of 2024 THIS APPEAL COMING ON FOR HEARING THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.G.PANDIT and HON'BLE MR. JUSTICE K. V. ARAVIND ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE K. V. ARAVIND) Heard Sri. Aravind V. Chavan, learned Senior Standing Counsel for the appellant and Sri. B.G. Chidananda Urs, learned counsel for the respondent. 2. This appeal by the Revenue under Section 130 of the Customs Act, 1962, assailing the Final Order Nos.20159- 20165/2024 dated 19.03.2024 passed by the Customs, Excise and Service Tax Appellate Tribunal, Bengaluru (for short 'CESTAT'). 3. This Court by order dated 06.08.2025 admitted the appeal on the following substantial questions of law: "1. Whether on the facts and in the circumstances of the case, the Hon'ble CESTAT has erred in not appreciating the fact, that the CA Certificate submitted by the assessee fails to prove that the burden of duty has not been passed on to any other person as rightly brought out in the Order- In-Original's and Order-In-Appeals? - 3 - HC-KAR NC: 2025:KHC:38342-DB CSTA No. 09 of 2024 2. Whether on the facts and in the circumstances of the case, the Hon'ble CESTAT has erred in Interpretation of law, since it has not taken into consideration the claimant's own submission and inability to provide ledger abstracts/balance sheet to substantiate accounting of the claimed amount? 3. Whether on the facts and in the circumstances of the case, the Hon'ble CESTAT has erred in not appreciating the law, that in the facts of the present case there has been significant procedural irregularities, by undermining the importance of para 2(b) of Notification No.102/2007 dated 14.09.2007." Brief facts: 4. The respondent-assessee is engaged in the import of goods and sales thereof. The goods imported were cleared by paying 4% Special Additional Duty (SAD). On the sale of imported goods, the respondent applied for a refund of 4% SAD paid. The adjudicating authority rejected the refund request, stating that the respondent failed to produce the evidence to prove that the burden of duty was not passed on to the customers as required under Section 28D of the Customs Act, 1962 (for short 'the Act'). Further, held that the conditions under Circular No.06/2008-Cus dated 28.04.2008 and Circular No.16/2008-Cus dated 13.10.2008 are not fulfilled. Further, held that the conditions of Para 2(b) of Notification - 4 - HC-KAR NC: 2025:KHC:38342-DB CSTA No. 09 of 2024 No.102/2007-Cus, dated 14.09.2007, are not satisfied. On different dates, the refund applications came to be rejected. 5. The respondent-assessee preferred appeals before the Commissioner of Customs (Appeals). The appeals were rejected on different dates. The assessee, further aggrieved, preferred appeals before the CESTAT. 6. The CESTAT under the impugned order dated 19.03.2024, held that the certificate from the concerned Chartered Accountant certifying that the burden of duty is not passed on to the customers, is sufficient to discharge the burden as contemplated under Section 28D of the Act. Accordingly, allowed the appeal and directed a refund of 4% SAD. Hence, Revenue is in appeal. 7. Sri Aravind V. Chavan, learned Senior Standing Counsel appearing for the appellant-Revenue, submits that there is no dispute for the entitlement of a refund of 4% SAD. However, Section 28D of the Act imposes a presumption that the duty is passed on to the customers unless otherwise proved. The burden is on the assessee to prove that the duty - 5 - HC-KAR NC: 2025:KHC:38342-DB CSTA No. 09 of 2024 burden is not passed on to the customer to reclaim the refund. Though circulars referred to state that, the certificate of the Chartered Accountant certifying that the burden of duty is not passed on to the customer, as is the requirement, the certificate produced in the case is not to the satisfaction of the prescribed authority. 7.1 Learned Senior Standing Counsel further submits that the Tribunal committed an error in placing reliance on the judgment of this Court in the case of Commissioner of Customs, Bangalore vs. Apple India Pvt. Ltd., [2014 (309) E.L.T. 29 (Kar)]. In the above case, this Court found that a Chartered Accountant certificate is sufficient, if supported by other material, to the satisfaction of the prescribed authority, that the burden of duty is not passed on to the customer. Given the factual difference in the present case, the order in the case of Apple India Pvt. Ltd. (supra) is not applicable to the case at hand. 8. Per contra, Sri B.G. Chidananda Urs, learned counsel appearing for the respondent-assessee, submits that Section 28D of the Act imposes a presumption of passing the - 6 - HC-KAR NC: 2025:KHC:38342-DB CSTA No. 09 of 2024 duty burden to the customers. However, the presumption is rebuttable. The statutory presumption is rebutted by producing the Chartered Accountant certificate, certifying that the burden of duty is not passed on to the customers. Learned counsel further submits that Notification No.102/2007-Cus, dated 14.09.2007, provides for a certificate from the statutory auditor/Chartered Accountant who has certified the Annual Accounts of the importer, that the burden of 4% SAD has not been passed on by the importer to the buyer, would fulfill the requirement of unjust enrichment. The circular was further modified in Circular No.16/2008-Cus, dated 13.10.2008, and Circular No.18/2010-Cus, dated 08.07.2010. Learned counsel submits that in all these circulars, the certificate of a Chartered Accountant is prescribed as sufficient compliance to rebut the presumption and is entitled to a refund of 4% SAD. 9. It is submitted that the prescribed authority cannot expect or insist beyond the requisites of the aforementioned circulars. It is submitted that the CESTAT, considering the above circulars and the judgment of this Court in the case of Apple India Pvt, Ltd., (supra), rightly held that the - 7 - HC-KAR NC: 2025:KHC:38342-DB CSTA No. 09 of 2024 respondent-assessee is entitled to refund and there is no unjust enrichment. 10. Considering the rival contentions and perusal of the appeal papers, we find that the Revenue has not disputed the entitlement to a refund of 4% SAD. However, applying the statutory presumption under Section 28D, the claim of refund on unjust enrichment was rejected. It is the case of the prescribed authority that, in view of the statutory presumption under Section 28D of the Act, the burden is on the assessee to prove that the duty burden is not passed on to the customers. The certificate of a Chartered Accountant is held to be unsatisfactory. Section 28D of the Act reads as follows: "28D. Presumption that incidence of duty has been passed on to the buyer.-Every person who has paid the duty on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods." 11. The Central Board of Excise and Customs has issued Circular No.6/2008-Cus, dated 28.04.2008, regarding the procedure to be adopted for refunding 4% additional customs - 8 - HC-KAR NC: 2025:KHC:38342-DB CSTA No. 09 of 2024 duty in pursuance of notification No.102/2007-Cus, dated 14.09.2007. 12. This Circular was further clarified by Circular No.16/2008-Cus, dated 13.10.2008. One more Circular No.18/2010-Cus, dated 08.07.2010, came to be issued to the similar effect. 12.1 Circular No.6/2008-Cus, dated 28.04.2008, reads as follows: "6. Unjust enrichment: 6.1 The 4% CVD exemption under the said notification is operated through a refund mechanism, wherein the importer would have to first pay the said 4% CVD at the time of importation and, thereafter, can claim refund of 4% CVD on production of documents showing that the appropriate ST/VAT has been paid. Hence, the purpose of granting this exemption is to ensure that the importer pays either 4% CVD or the appropriate ST/VAT and not both. It is not the intention of the Government to allow the importer to recover the 4% CVD from the buyer as well as to claim refund of this amount from Customs. Hence, the principle of unjust enrichment needs to be examined in each case before sanction of refund under this notification. However, considering the voluminous transactions and the documents involved in the cycle, from import to sale, it was felt that it would be expedient to allow the importer to submit a certificate from the statutory auditor/Chartered Accountant who certifies the annual accounts of the importer, that the burden of 4% CVD has not - 9 - HC-KAR NC: 2025:KHC:38342-DB CSTA No. 09 of 2024 been passed on by the importer to the buyer and to fulfill the requirement of unjust enrichment. 6.2 In view of the above, it is clarified that the doctrine of unjust enrichment will apply to 4% CVD refunds Scheme under the said exemption notification issued in terms of Section 25(1) of the Customs Act, 1962. However, importers may produce a certificate from the statutory auditor/Chartered Accountant who certifies the importer's annual financial accounts under the Companies Act or any statute, explaining how the burden of 4% CVD has not been passed on by the importer and to fulfill the requirement of unjust enrichment. In addition to the aforesaid the importer shall also make a self- declaration along with the refund claim to the effect that he has not passed on the incidence of 4% CVD to any other person." 12.2 Circular No.16/2008-Cus, dated 13.10.2008, reads as follows: "(vii) Unjust enrichment and its Certification by Chartered Accountants: It is represented by the trade that for the purpose of satisfying the condition that burden of 4% CVD has not been passed on by the importer to any other person, a certification from an independent Chartered Accountant may be accepted by the Customs authorities. In this regard, it is stated that the intention of the Government is not to allow the importer to recover 4% CVD from the buyer and to claim the refund from Customs as well. The only method to ensure this is to make it conditional to satisfy the principle of unjust enrichment. In this regard, in the earlier circular, it has been provided that the importer may produce a certificate from the statutory auditor/CA who certifies that Annual Accounts of the importer (under the Companies - 10 - HC-KAR NC: 2025:KHC:38342-DB CSTA No. 09 of 2024 Act, 1956 or any statute) to the effect that the burden of 4% CVD has not been passed on by the importer to the buyer. The provisions contained in the various Sales Tax Laws prevailing in various States provide for Audit of the books and accounts for the purpose of ascertaining the correctness of ST/VAT payment/Input Tax Credit. Further, Section 44AB of the Income Tax Act, 1961 provides that certain persons carrying on business or profession exceeding the prescribed limit are required to get their accounts audited by "an Accountant" explained therein. Considering these provisions, it is clarified by the Board that the 'statutory auditor/Chartered Accountant' mentioned in para 6 of the earlier Board's circular refers to "Chartered Accountant" within the meaning of section 2(1)(b) of the Chartered Accountants Act, 1949. However, it is clarified that the Customs field formations shall accept the certificate given only by such a Chartered Accountant who either certifies the importer's financial records under the Companies Act, 1956 or any ST/VAT Act of the State Government or the Income Tax Act, 1961, in order to fulfil the requirement of the condition that the incidence of duty burden has not been passed on by the importer to any other person for the purpose of refund of 4% CVD. A certificate by any other independent Chartered Accountant would not be acceptable for this purpose." 12.3 Circular No.18/2010-Cus, dated 08.07.2010, reads as follows: "6. Some field formations have also raised certain doubts whether the audited Balance Sheet and Profit and Loss Account have to be examined in respect of the current financial year for scrutiny of unjust enrichment aspect. It is stated that a large number of refund claims relating to the current year were held up for want of such verification. In this regard, the issue has - 11 - HC-KAR NC: 2025:KHC:38342-DB CSTA No. 09 of 2024 been examined by the Board and it has been decided that the field formations shall accept a certificate from Chartered Accountant for the purpose of satisfying the condition that the burden of 4% CVD has not been passed on by the importer to any other person. Further, the importer shall also make a self-declaration along with the refund claim to the effect that he has not passed on the incidence of 4% CVD to any other person. Hence, there is no need for insisting on production of audited Balance Sheet and Profit and Loss Account in these cases. It may also be noted that recently the Board has also notified the list of documents required to be filed by the applicant along with the refund claim (Annexure- II) which is also displayed in the departmental website. Hence, other than these aforesaid documents, no other document would be required in the normal course of granting 4% CVD refund." 13. The CESTAT relied on the judgment of this Court in Apple India Pvt. Ltd., (supra). This Court held as under: "6. …..Section 28D of the Act states that there arise a presumption that the incidence of duty has been passed on to the customers. It also states that every person who has paid the duty on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods. Therefore, it is clear that it is rebuttable presumption. To rebut such presumption, the assessee has produced auditor report required to claim the refund of special additional duty. The auditor has unequivocally stated in his report that the burden has not been passed on directly or indirectly and in coming to such conclusion, they have taken into account how the price of the traded goods has been arrived for this purpose. Therefore, such presumption stands rebutted." - 12 - HC-KAR NC: 2025:KHC:38342-DB CSTA No. 09 of 2024 14. Section 28D of the Act imposes a rebuttable presumption against the assessee. However, there is no specific prescription for how the presumption can be rebutted. It appears that this area is taken care of in the aforementioned circulars. If Section 28D is read with the aforementioned three circulars, the production of a certificate from the Chartered Accountant who certifies the annual accounts of the importer to the effect that the burden of 4% SAD has not been passed on by the importer to the buyer would fulfill the requirement and discharge the statutory presumption of unjust enrichment. Except for the production of a certificate of the Chartered Accountant, no other criteria are contemplated in the circulars. 15. The above position and the rebuttal of presumption by producing the Chartered Accountant certificate is also accepted by this Court in Apple India Pvt. Ltd., (supra). 16. In the light of the above finding, we are not inclined to take a different view than that taken by this Court in Apple India Pvt. Ltd., (supra). The order of the CESTAT applying the principle in Apple India Pvt. Ltd. (supra) does not call for interference. - 13 - HC-KAR NC: 2025:KHC:38342-DB CSTA No. 09 of 2024 17. In light of the above, the following: ORDER (i). The appeal is dismissed. (ii). The substantial questions of law are answered in favour of the respondent- Assessee and against the appellant- Revenue. (iii). No order as to costs. Sd/- (S.G.PANDIT) JUDGE Sd/- (K. V. ARAVIND) JUDGE DDU List No.: 1 Sl No.: 42