2013 (10) TMI 1312 - AT - Central Excise

Tribunal Upholds Decision on Refunds, Emphasizes Judicial Discipline & Prevents Unjust Enrichment

The Tribunal upheld its previous decisions in favor of the appellant regarding refunds under similar circumstances, emphasizing the importance of judicial ... Denial of refund claim - Provisional assessment - Unjust enrichment - Issue of credit notes and cheques - Held that:- It is settled law that quantity discount cannot be treated as part of transaction value at the time of removal, even though the quantum and eligibility thereto is determined at a later date. - even in cases where there is a subsequent reduction in price pursuant to a price variation clause in an agreement between the buyer and seller, the assessee was required to discharge duty only at the reduced price and that whether the assessment is provisional or not is not at all relevant. - both the price and the rate of quantity discount offered are admittedly constant, as known at the time of clearance and hence, there is no change in price, but merely a discounted price on fulfilment of the pre-condition for availability of the discount. - rejection of the refund claims on merits is contrary to well settled law and therefore not legally sustainable. When the refundable amount collected initially by the buyer is returned by way of credit notes, refund cannot be denied by invoking the bar of unjust enrichment - assessee has created a situation whereby, there would be only refund claim to be made on the basis of actual quantity discount that is passed on by way of credit notes. The assessee is not passing on the quantity discount by determining it in advance and pay the differential duty where the dealer is not eligible. In case like this, if the assessee were to approach the department for provisional assessment, the Additional Commissioner/Deputy Commissioner would have normally refused to allow provisional assessment since there is no differential duty payable and there is no need for any security or cash deposit since there is no question of any differential duty demand that may arise as a result of provisional assessment. This is a case where the assessee knows definitely there would be only a refund claim since the assessee is paying duty without allowing any quantity discount and therefore only a reduction in the transaction value would occur and consequently only refund claim will arise. The scheme of the act has already been discussed and this would show clearly that this is not what the law proposes. What the appellant has done is that appellant has not passed on the quantity discount to the dealers initially and only at the end of the month the benefit is passed on in the form of credit notes. We all are aware that the first stage dealer or a second stage dealer can pass on the excise duty paid as Cenvat credit to the customer who can take it and utilize the same for payment of duty and final product. It is nobody’s case that paper is sold only to consumers who cannot take credit. No doubt the provisions of Section 11B do not contemplate verification as to whether a buyer has passed on the credit or not. - law does not contemplate any verification down the line because only the person who has suffered the duty has to claim the refund. In the situation created by the assessee in this case, a dealer might have passed on the duty liability to the customer or might have even passed on the amount of duty paid as Cenvat credit if the goods purchased from the appellant has already been sold by the dealer in the course of the normal trade. Even if provisional assessments were to be resorted to, the assessee may not be eligible for refund in view of the fact that no assessee can be allowed to create a situation where unjust enrichment of any person is possible as per the decision of the Hon’ble Supreme Court [1995 (5) TMI 28 - SUPREME COURT OF INDIA], since the same is not required, we are not going into further detailed discussion on this aspect and would not like to give it as our conclusion - even if provisional assessments were to be resorted to, the assessee may not be eligible for refund in view of the fact that no assessee can be allowed to create a situation where unjust enrichment of any person is possible as per the decision of the Hon’ble Supreme Court, since the same is not required, we are not going into further detailed discussion on this aspect and would not like to give it as our conclusion. - appellant has not made out a prima facie case for waiver or stay against recovery. Therefore, the appellant is directed to deposit the entire amount of refund sanctioned to them and demanded back within eight weeks - Decided against assessee. Issues Involved:1. Whether a contrary view can be taken by the Tribunal in the present appeals when an identical issue has already been decided in favor of the appellant.2. Whether refund of duty in proportion to quantity discount is admissible on merits when the appellant has not opted for provisional assessment.3. Whether the bar of unjust enrichment would be attracted when the burden of the excess duty claimed as refund is shown to have been borne by the appellant by issuing credit notes and cheques covering the said amount in favor of the buyer.Analysis of Judgment:Issue 1: Contrary View by TribunalThe Tribunal acknowledged that the issue involved in the present case is squarely covered in favor of the appellant in its own earlier cases. The Tribunal referenced several prior orders that held the appellant entitled to refunds under similar circumstances. The principle of judicial discipline mandates that orders of higher appellate authorities must be followed unreservedly. The Tribunal emphasized that there is no change in law or facts to justify a different view in the present appeals.Issue 2: Refund of Duty and Provisional AssessmentThe Tribunal examined whether the appellant was entitled to a refund of duty paid on quantity discounts without opting for provisional assessment. The Tribunal noted that the Commissioner (Appeals) had not disputed the eligibility of quantity discounts from the transaction value. However, the Commissioner (Appeals) held that the appellant would not be entitled to a refund as they had not opted for provisional assessment. The Tribunal referenced several cases where it was held that quantity discounts known at the time of removal but quantified later are permissible deductions from the transaction value. The Tribunal concluded that the law contemplates provisional assessment only when the price/classification cannot be determined by the assessee and that the appellant's method of claiming refunds without provisional assessment was not in line with the statutory provisions.Issue 3: Unjust EnrichmentThe Tribunal considered whether the bar of unjust enrichment applied when the appellant issued credit notes and cheques to cover the excess duty claimed as a refund. The Tribunal referenced the Sahakari Khand Udyog Mandal Ltd. case, where the Supreme Court held that the doctrine of unjust enrichment is based on equity and applies irrespective of statutory provisions. The Tribunal noted that the appellant had created a situation where refunds would always be claimed, potentially leading to unjust enrichment. The Tribunal concluded that the appellant had not made out a prima facie case for waiver or stay against recovery and directed the appellant to deposit the entire amount of refund sanctioned and demanded back.Conclusion:The Tribunal directed the appellant to deposit the entire amount of refund sanctioned within eight weeks and listed all pending appeals on the same issue for final hearing. The Tribunal emphasized the importance of following statutory provisions and preventing unjust enrichment, aligning with the principles laid down by the Supreme Court.