HEADNOTE
M/s JK (India) Fabs v. Union of India & Ors.
Court: Delhi High Court
Jurisdiction: Writ Jurisdiction (Articles 226 & 227)
Bench: Justices Prathiba M. Singh & Shail Jain
Date of Judgment: December 11, 2025
Citation: W.P.(C) 14644/2022 (Delhi HC)
Laws / Notifications Involved:
Customs Act, 1962 – Sections 27 & 128;
Notification No. 1/2016–Infrastructure Cess dated 1 March 2016;
Finance Bill, 2016 (Clause 159);
Central Excise Act, 1944 – Section 5A
Keywords: Customs refund, Infrastructure Cess, electric vehicles exemption, EDI system glitch, reassessment of bill of entry, ITC Ltd. judgment
Summary
The Delhi High Court directed reassessment of bills of entry and consequent refund of excess Infrastructure Cess paid by an importer of electrically operated golf carts, holding that the benefit of exemption under Notification No. 1/2016 could not be denied due to a technical glitch in the EDI system. While reiterating that refunds under Section 27 of the Customs Act can be granted only after reassessment—following the Supreme Court ruling in ITC Ltd. v. CCE—the Court noted that the Department failed to deny the existence of the EDI error. Finding that the goods were clearly exempt from Infrastructure Cess, the Court ordered reassessment within two months and directed issuance of refund thereafter, emphasising that legitimate exemption benefits cannot be withheld on purely technical grounds.
Court’s decision
The Delhi High Court disposed of the writ petition by directing the customs authorities to reassess the relevant bills of entry within two months and, upon reassessment, to grant refund of excess Infrastructure Cess paid by the petitioner. The Court held that since the petitioner’s imported goods were admittedly covered by the exemption notification, the benefit could not be denied merely due to a technical error in the electronic system.
Facts
The petitioner imported electrically operated golf carts in March and September 2016 and filed bills of entry accordingly. Under Notification No. 1/2016–Infrastructure Cess, such electric vehicles were exempt from payment of Infrastructure Cess. However, due to a technical glitch in the EDI system, the exemption could not be claimed at the time of assessment, compelling the petitioner to pay higher customs duty. Despite repeated representations seeking reassessment and refund of the excess amount, the Department declined the refund, citing finalisation of assessment.
Issues
Whether refund of excess Infrastructure Cess could be directed when the exemption was not applied due to a technical glitch, and whether reassessment of bills of entry was mandatory before granting such refund.
Petitioner’s arguments
The petitioner contended that the imported golf carts were clearly exempt from Infrastructure Cess under the applicable notification and that excess duty was paid solely because of an EDI system error. It was argued that the Department could not unjustly retain the excess amount when the substantive exemption was undisputed, and that reassessment should be ordered to enable refund.
Respondents’ arguments
The Customs Department argued that since the bills of entry had been finally assessed, refund could not be granted unless the petitioner challenged the assessment through reassessment or appeal. It relied on statutory provisions and maintained that the refund claim was premature without modification of the assessment order.
Analysis of the law
The Court examined Section 27 of the Customs Act in light of the Supreme Court’s decision in ITC Ltd. v. CCE, Kolkata-IV, which mandates reassessment before grant of refund. While accepting this legal position, the Court noted that the Department did not controvert the petitioner’s claim of a technical glitch in the EDI system, nor dispute that the goods were eligible for exemption under Notification No. 1/2016.
Precedent analysis
The Court relied on ITC Ltd. v. CCE, Kolkata-IV (2019), which held that refund claims cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law. The precedent was applied to require reassessment, but not to deny the substantive benefit of exemption.
Court’s reasoning
Justice Prathiba M. Singh, speaking for the Bench, held that when the exemption clearly applied and the Department failed to rebut the plea of a technical glitch, the excess amount could not be retained indefinitely. The Court balanced procedural requirements with substantive justice by directing reassessment as a precursor to refund, rather than relegating the petitioner to prolonged appellate remedies.
Conclusion
The Delhi High Court directed the customs authorities to reassess the bills of entry within two months and thereafter issue the refund of excess Infrastructure Cess paid by the petitioner in terms of the exemption notification.
Implications
This judgment underscores that procedural technicalities and system errors cannot defeat substantive tax exemptions. While reaffirming the necessity of reassessment before refund, it provides important relief to importers facing EDI-related issues and reinforces administrative accountability in customs processing.
Case law references
• ITC Ltd. v. CCE, Kolkata-IV (2019) 368 ELT 216 (SC)
Holding: Refund under Section 27 of the Customs Act is permissible only after reassessment or modification of assessment.
Application: Followed to mandate reassessment prior to refund.
FAQs
Q1. Can customs refund excess duty without reassessment?
No. Reassessment or modification of assessment is mandatory before granting refund.
Q2. What if excess duty is paid due to a system error?
Courts can direct reassessment and refund if exemption eligibility is undisputed.
Q3. Were electric golf carts exempt from Infrastructure Cess?
Yes. They were exempt under Notification No. 1/2016 dated 1 March 2016.
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