2002 (4) TMI 343 - AT - Central Excise

Tribunal Considers Larger Bench for Post-Clearance Adjustments

S. KUMAR LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE

The Tribunal directed the Registry to consider forming a Larger Bench to address conflicting views on post-clearance adjustments and unjust enrichment. ... Refund - Unjust enrichment - Interpretation of statutes Issues Involved:1. Whether M/s. DTE were 'buyers' under Section 11D read with Section 11B of the Central Excise Act.2. Whether the refund claim was hit by unjust enrichment under Section 11B.3. Applicability of the Tribunal's decisions in Sangam Processors and Addison & Company.4. Validity of post-clearance adjustments like issuance of credit notes or cheques by the refund-claiming assessee.Detailed Analysis:1. Whether M/s. DTE were 'buyers' under Section 11D read with Section 11B of the Central Excise Act:The lower authorities held that M/s. DTE, who supplied the raw materials and were the owners of the processed fabrics, were not 'buyers' of the goods. This interpretation was based on the premise that the goods should have been 'sold' to a buyer to attract the provisions of Section 11B. Consequently, the refund claim was rejected on the ground that M/s. DTE were not considered 'buyers' under the relevant sections of the Central Excise Act.2. Whether the refund claim was hit by unjust enrichment under Section 11B:The authorities found that the incidence of duty had been passed on to M/s. DTE at the time of clearance of the goods. Therefore, any subsequent refund of duty by the appellants to M/s. DTE was deemed inconsequential for the purposes of Section 11B. The doctrine of unjust enrichment, as embodied in the proviso to sub-section (2) of Section 11B, was applied, leading to the rejection of the refund claim. This view was supported by the Tribunal's decision in Adarsh Guar Gum Udyog, which followed the precedent set in Sangam Processors.3. Applicability of the Tribunal's decisions in Sangam Processors and Addison & Company:The Tribunal's decision in Sangam Processors, which was upheld by the Supreme Court, held that the issuance of credit notes post-clearance did not alter the position regarding the passing of the duty burden. This decision was deemed applicable to the present case. Conversely, the decision in Addison & Company, which was reversed by the Madras High Court, was not considered good law in light of the Supreme Court's affirmation of Sangam Processors. The High Court's judgment in Addison & Company was not sufficient to override the established precedent.4. Validity of post-clearance adjustments like issuance of credit notes or cheques by the refund-claiming assessee:The Tribunal examined whether post-clearance adjustments, such as the issuance of credit notes or cheques by the refund-claiming assessee to the buyer, could help the assessee overcome the bar of unjust enrichment under Section 11B. The Tribunal's decision in Thermon Heat Tracers, which allowed a refund claim despite post-clearance adjustments, was contrasted with the decision in Sangam Processors. The Tribunal in Thermon Heat Tracers relied on the U.S. legal provision and the Supreme Court's ruling in Mafatlal Industries, but the correctness of this decision was questioned. The Tribunal concluded that the issue required examination by a Larger Bench due to the conflicting views in Sangam Processors and Thermon Heat Tracers.Conclusion:The Tribunal directed the Registry to place the papers before the Hon'ble President to consider the constitution of a Larger Bench to decide on the issue of post-clearance adjustments and unjust enrichment. However, the claim for refund of Rs. 1,34,521/-, which was not collected from the customer, was not hit by unjust enrichment and was eligible for refund.