2014 (8) TMI 780 - AT - Central Excise

Tribunal grants 15% credit on Naptha duty, rejects unjust enrichment claim

M/s Gujarat State Fertilizers & Chemicals Ltd. Versus CCE Vadodara

M/s Gujarat State Fertilizers & Chemicals Ltd. Versus CCE Vadodara - 2014 (309) E.L.T. 94 (Tri. - Ahmd.) Issues Involved:1. Eligibility of CENVAT Credit at 15% versus 10%.2. Applicability of unjust enrichment.Issue-wise Detailed Analysis:1. Eligibility of CENVAT Credit at 15% versus 10%:The appellant procured Naptha without payment of duty for manufacturing fertilizers, following the procedure under Chapter X of the Central Excise Rules, 1944. However, a portion of this duty-free Naptha was used to manufacture Synthesis gas, which was then used to produce Ammonia and Caprolactum instead of fertilizers. The appellant paid duty on this Naptha at 15% and took CENVAT Credit accordingly. The Revenue argued that the credit should be restricted to 10% as per Notification No. 5/94-CE(NT) and Notification No. 14/97-CE(NT). Upon being pointed out, the appellant adjusted the credit to 10% and later filed refund claims for the difference, asserting eligibility to 15% credit.The adjudicating authority rejected the refund claims, holding that credit was only eligible up to 10% as per the relevant notifications. The first appellate authority upheld this decision and added that unjust enrichment would apply if refunds were admissible on merits.The appellant argued that the amendment to Notification No. 14/97-CE(NT) was intended to restrict credit to 10% because consumers bore only 10% of the duty on Naptha, with the remaining 5% borne by Public Sector refineries. Since the appellant bore the entire 15% duty, they claimed eligibility for 15% credit. They cited the case of Gujarat Paraffins Pvt. Ltd. Vs UoI, where it was ruled that Notification No. 14/97-CE(NT) having retrospective effect was ultra vires of Articles 14 and 19(1)(f) of the Constitution of India.The Tribunal found that the restriction to 10% credit was because buyers bore only 10% of the duty, with the remaining 5% absorbed by Public Sector refineries. In this case, the appellant bore the entire duty incidence, making the provisions of Notification No. 5/94-CE(NT) inapplicable. The Tribunal concluded that the appellant was eligible for 15% credit, aligning with the judgment in Gujarat Paraffins Pvt. Ltd. Vs UoI.2. Applicability of Unjust Enrichment:The appellant presented a CA's certificate asserting that the refund sought had not been passed on to consumers. The appellant relied on several case laws supporting the acceptance of CA's certificates as evidence of non-recovery of amounts from customers unless contradicted by the Revenue.The Tribunal noted that the CA's certificate should be considered valid evidence in the absence of a contrary expert opinion. The Tribunal referenced the case of Mangal Textile Mills Pvt. Ltd. Vs UoI, where it was held that a CA's certificate should be accepted unless disputed by another qualified expert.The Tribunal concluded that the appellant had sufficiently demonstrated that the duty incidence was not passed on to consumers, thus unjust enrichment did not apply.Conclusion:The Tribunal allowed the appeal, confirming the appellant's eligibility for 15% credit on duty paid on Naptha under Rule 196 of the Central Excise Rules, 1944. The Tribunal also accepted the CA's certificate as evidence that the duty incidence was not passed on to consumers, negating the applicability of unjust enrichment. The appeal was allowed with consequential relief to the appellant.