2013 (8) TMI 577 - HC - Central Excise

Court rules in favor of private company in cigarette shells classification case under Central Excise Tariff Act

Contemporary Packaging Technologies Pvt. Ltd. Versus Union of India & 2

The court ruled in favor of the petitioner, a private limited company, in a case involving the classification of cigarette shells under the Central Excise ... Refund Claim of Duty - Unjust enrichment - finalization of provisional assessment - Duty paid under Protest - refund claim was rejected by the original authority on the ground that the petitioner-company had passed on an excess amount being claimed as refund to the customers and the refund claim was hit by doctrine of unjust enrichment. - Held that:- The duty on differential assessable value on account of Modvat Credit on input was denied on the ground of doctrine of unjust enrichment - Non receipt of goods had not been contended - when excess duty payment was to be refunded without considering the provision of Section 11B of the Central Excise Act as under the provisional assessment, duty payment was made under protest & hence the very base of decline would not survive. The assessee had paid provisional duty which got reduced on finalizing assessment, entitling the petitioner to get the refund which is payable in terms of Rule 9B of Excise Rules, 1944. It is not disputed by either side that the assessee is entitled to refund on account of appellate order passed by Tribunal under sub-Rule (5) of Rule 9B of Excise Rules. Thus, any recovery or refund consequent upon adjustment under Sub-rule (5) of Rule 9B is not to be governed by Section 11A & 11B of the Central Excise Act. Neither the final decision under Rule 9B(5) was appealed against nor the issue was re-agitated once again after such claim was finalized. Therefore, the issue of unjust enrichment was not required to be considered. Once the Revenue does not dispute the receipt of paperboards used as input material under the cover of invoices for preparing shells by the assesse which contained duty paying particulars, the Modvat Credit cannot be denied to the assesse - Even if the assesse had agreed later on that M/s. ITC Ltd was the real manufacturer, that ipso facto would not take away its right to avail refund claim when duties were recovered from the assessee, treating it as the manufacturer at the time of recovery - the assesse had established due payment of such duties - Non-maintenance of procedure was since not the ground contested, further dwelling on that subject was unnecessary - Department was directed to refund the entire amount with interest - Decided in favor of assesse. Issues Involved:1. Classification of cigarette shells under the Central Excise Tariff Act.2. Refund claim for differential duties paid under protest.3. Doctrine of unjust enrichment.4. Modvat Credit on input materials.5. Procedural compliance under Rule 57G.Issue-Wise Detailed Analysis:1. Classification of Cigarette Shells:The petitioner, a private limited company engaged in producing cigarette shells, classified the goods under SH No.4901.90 of the Central Excise Tariff Act, 1985. The revenue, however, classified them under SH No.4819.12, attracting a 20% duty. The dispute was adjudicated, and the goods were finally classified under SH No.4823.90 by the Appellate Tribunal, leading to a lower duty rate.2. Refund Claim for Differential Duties:Following the Tribunal's reclassification, the petitioner filed a refund claim for the differential duties paid under protest. The original authority rejected the claim on the grounds of unjust enrichment, stating the excess amount had been passed on to customers. This decision was upheld by the Commissioner (Appeals) and the Appellate Tribunal.3. Doctrine of Unjust Enrichment:The primary contention was whether the doctrine of unjust enrichment applied since the duty was paid under protest. The Tribunal and lower authorities held that the petitioner had passed on the duty to customers, invoking Section 11B(1) of the Central Excise Act and the precedent set by Mafatlal Industries Ltd. v. UOI, which prohibits unjust enrichment.4. Modvat Credit on Input Materials:The petitioner claimed Modvat Credit of Rs.27.80 lacs for duty paid on paperboard used as input materials. The original authority denied this claim, citing non-compliance with Rule 57G procedures. The petitioner argued that the duty was paid under protest and should not attract unjust enrichment.5. Procedural Compliance Under Rule 57G:The respondents contended that the petitioner did not file necessary declarations under Rule 57G, which was essential for claiming Modvat Credit. The court, however, emphasized that non-receipt of goods was not contested, and the credit could not be denied if duties were duly paid.Court's Findings:The court examined the entire material and relied heavily on the Mafatlal Industries Ltd. case, which clarified that refunds consequent upon final assessment under Rule 9B are not governed by Sections 11A or 11B unless appealed. The court also referred to several precedents, including decisions from the Delhi High Court and the Supreme Court, which supported the petitioner's stance that unjust enrichment does not apply to provisional assessments finalized under Rule 9B.Conclusion:The court concluded that the petitioner was entitled to a refund of the excess duty paid under provisional assessment without the application of the doctrine of unjust enrichment. The Modvat Credit claim was also upheld as the petitioner had established due payment of duties. The petition succeeded, and the respondents were directed to refund the entire amount with 9% interest within 12 weeks.