2014 (8) TMI 780 - AT - Central Excise

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

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, ... Denial of refund claim - CENVAT Credit - Notification No. 5/94-CE(NT) read with Notification No.14/97-CE(NT), dt.3.5.1997 - whether appellant was eligible to take CENVAT Credit @ 15% of duty paid by the appellant on Naptha or the same was required to be restricted to only 10% of the duty paid as per Notification No.5/94-CE(NT), dt.1.3.1994 as amended by Notification No.14/97-CE(NT), dt.3.5.1997 - Held that:- trade notice that idea of restricting credit to only 10% was that buyer of the concerned inputs had borne the duty incidence of only 10% and the remaining 5% was absorbed by the Public Sector Refineries. In the present proceedings of the appellant Public Sector Refinery has only borne ‘Zero%’ of the duty and the entire duty incidence on Naptha is borne by the appellant under Rule 196 of Chapter X of Central Excise Rules 1944 for not using the inputs for the intended purpose for which the inputs were procured. The provisions of Notification No.5/94-CE(NT), d.3.5.97, as amended, thus will not be applicable. Appellant was liable to credit of duty paid @ 15% and cannot be restricted to 10% as the provisions of Notification No.5/94-CE (NT), as amended are not applicable to the present facts because the entire duty incidence is borne by appellant as per Rule 196 of Central Excise Rules, 1944 and not the Public Sector Refinery - So far as applicability of unjust enrichment is concerned appellant has relied upon CA s certificates to the effect that duty incidence borne by them is not passed on to the buyers. Such a certificate produced by the appellant cannot be brushed aside in the absence of a contrary view of another expert on the subject as appellant has discharged the initial burden of not recovering the duty for which refund is sought. There is no reason to hold in the present appeal as to why CA's certificate produced by the appellant should not be considered as an evidence of non-recovery of amount from the consumers - appellant is eligible to credit of duty paid on Naptha @ 15% under Rule 196 of Central Excise Rules 1944 - Decided in favour of assessee. 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.