2008 (7) TMI 78 - AT - Central Excise

Taxpayers cannot claim suo moto credits or refunds without filing a Section 11B claim and departmental approval

CESTAT held that taxpayers cannot take suo moto credits or refunds for excess duty without filing a refund claim under Section 11B and obtaining ... Suo moto refund of excess paid duty - without filing a refund claim - credits were merely accounting corrections and did not require departmental sanction - HELD THAT:- We find that there is no provision under Central Excise Act and Rules allowing suo moto taking of credit or refund without sanction by the proper officer. The appellant's contention that refund in respect of duty paid twice cannot be considered as refund of duty and is only the accounting error does not appeal to us as the debit entry made in the accounts is towards payment of duty only and therefore refund of these amounts has to be considered as refund of duty only. The PLA account and the credit accounts are required to be submitted to the department and any correction carried therein, need to have department's sanction. We also note that the law relating to refund has been fully analysed by the Apex Court in the case of Mafatlal Industries [1996 (12) TMI 50 - SUPREME COURT] which makes it very clear that all types of refund claim be there of excess duty paid or otherwise are to be filed under Section 11B and have to pass the proof of not passing on the incidence of duty to others. The recent decisions of Hon'ble Supreme Court in case of Sahakari Khand Udyog and Others [2005 (3) TMI 116 - SUPREME COURT] clearly laid down that all refunds have to pass through doctrine of unjust enrichment, even if it is not so expressly provided for in the statute. From these decisions it clearly emerges that all types of refund have to be filed under Section 11B of the Central Excise Act and no suo moto refund can be taken unless and until the department is satisfied that the incidence of duty has not been passed on. Thus, we answer the reference made to us by holding that all types of refund have to be filed under Central Excise Act and Rules made thereunder and no sue moto credit of the duty paid in excess may be taken by the assessee. The matter is now sent back to the referral bench for passing appropriate orders on the appeal before it. Issues Involved:1. Whether an assessee can avail suo moto credit of the amount of duty paid in excess without filing a refund claim.2. Applicability of the views taken by the Tribunal in the cases of Comfit Sanitary Napkins (I) Pvt. Ltd. and Motorola India Pvt. Ltd.Issue-wise Detailed Analysis:1. Suo Moto Credit of Excess Duty Paid:The Tribunal examined whether an assessee can take suo moto credit for excess duty paid without filing a refund claim. The appellant argued that such credits were merely accounting corrections and did not require departmental sanction. They cited various Tribunal decisions supporting this view, such as Birla Copper, Raymond Ltd., and others, which held that cross entries to correct erroneous debits were standard accounting practices and did not necessitate refund applications under Section 11B of the Central Excise Act.2. Tribunal's Views in Comfit Sanitary Napkins and Motorola India Pvt. Ltd.:The Tribunal compared the views from two cases:- Motorola India Pvt. Ltd.: The Tribunal held that the excess amount paid was not duty but a deposit, as it was not reflected in any invoice. Therefore, the question of time bar did not arise, and the amount could be re-credited without filing a refund claim.- Comfit Sanitary Napkins (I) Pvt. Ltd.: The Tribunal held that the assessee could not take suo moto credit without applying for a refund when excess duty was paid.Arguments and References:The appellant contended that the double payment of duty was an accounting error and cited several Tribunal decisions where suo moto credit was allowed. They argued that as long as the excess duty was not reflected in the invoices, it should be considered an accounting correction, not requiring a refund application.The Department, represented by the Ld. DR, argued that any refund of duty, even if paid by mistake, must be claimed under Section 11B of the Central Excise Act. They cited various legal precedents, including decisions from the Hon'ble Supreme Court and High Courts, emphasizing that all refunds must pass through the provisions of Section 11B, including the doctrine of unjust enrichment.Tribunal's Decision:The Tribunal concluded that there is no provision under the Central Excise Act and Rules allowing suo moto taking of credit or refund without the sanction of the proper officer. They found the appellant's contention that the refund was merely an accounting error unconvincing, stating that any debit entry made in the accounts is towards payment of duty. Thus, the refund of these amounts must be considered as a refund of duty and must comply with Section 11B.The Tribunal emphasized that all types of refund claims, including those for excess duty paid, must be filed under Section 11B and pass the test of not passing on the incidence of duty to others. They referred to the Apex Court's decision in Mafatlal Industries and other cases, which clarified that all refunds must adhere to the provisions of Section 11B, including the doctrine of unjust enrichment.Conclusion:The Tribunal answered the reference by holding that all types of refund claims must be filed under the Central Excise Act and Rules, and no suo moto credit of the duty paid in excess may be taken by the assessee. The matter was sent back to the referral bench for passing appropriate orders on the appeal.