2017 (1) TMI 1743 - AT - Central Excise

Manufacturer's Refund Claim Denied Due to Passing Duty to Customers

Tafe Motors and Tractors Limited Versus Commissioner of Central Excise & S.T., Jaipur

The Tribunal upheld the Order-in-Appeal denying a refund claim for excess duty paid by the appellant, a manufacturer of IC Engines. The appellant's ... Refund of excess paid duty - allegation is that appellant had passed on the duty element to the buyers and hence, the refund claim was hit by the bar of unjust-enrichment - HELD THAT:- Refund to the tune of ₹ 10,76,917/- has arisen at the time of finalization of provisional assessment for the period April, 2009 to December, 2010 and February, 2010 to March, 2010. However, the refund of the said amount was not paid in cash to the appellant but was credited to the Consumer Welfare Fund established under Section 12 C of the Central Excise Act, 1944. The reason cited in the Impugned order is that the appellant has not been able to establish that incidence of duty was not passed on. The claim of the appellant is that the IC Engines cleared by the appellant to another sister concern have been used in the manufacture of ‘Agricultural Tractors’ which are exempted from payment of Excise Duty. The issue whether unjust enrichment will be applicable for captive consumption has been decided by the Hon’ble Supreme Court India in case of SOLAR PESTICIDES PVT. LTD. VERSUS UNION OF INDIA [1991 (10) TMI 42 - HIGH COURT OF JUDICATURE AT BOMBAY]. The Apex Court has categorically held that the principle of unjust enrichment applies to cases of captive consumption also. The case which was with reference to Section 27 of the Customs Act, 1962 will be equally applicable to the Central Excise matters. There is nothing on record which has been submitted by the appellant to rebut that the presumption that the duty incident has been passed on which is built into Section 11B of the Central Excise Act - Appeal dismissed. Issues:Refund claim for excess duty paid, application of bar of unjust enrichment, finalization of provisional assessment, duty element passed on to buyers, captive consumption, refund procedure under Section 11B of the Central Excise Act.Analysis:The appeal challenged an Order-in-Appeal passed by the Commissioner (Appeals) regarding the refund claim for excess duty paid by the appellant. The appellant, engaged in manufacturing IC Engines, cleared goods to sister concerns without involving a sale, leading to provisional assessment. After finalizing the assessment, it was found that the appellant had overpaid duty by Rs. 10,76,917. The refund claim was rejected, and the amount was credited to the Consumer Welfare Fund due to the bar of unjust enrichment, as the duty element was deemed passed on to buyers.The appellant argued that unjust enrichment should not apply as there was no sale involved in the clearances to sister concerns. The appellant cited a Tribunal decision and highlighted that the final product, agricultural tractors, was duty-exempt, supporting the refund claim to be paid in cash. However, the Revenue contended that even though tractors were duty-exempt, the duty element was included in the total cost and ultimately recovered from customers. The Revenue relied on legal precedents to support the application of unjust enrichment under Section 11B.The Tribunal noted that the refund amount was not paid in cash but credited to the Consumer Welfare Fund due to the appellant's failure to prove that the duty incidence was not passed on. Citing a Supreme Court judgment, the Tribunal affirmed that the principle of unjust enrichment applied to captive consumption as well. As the appellant did not provide evidence to rebut the presumption of duty passing on, the impugned order was upheld, and the appeal was dismissed. The decision emphasized the importance of complying with Section 11B in refund claims under the Central Excise Act.