2023 (7) TMI 1308 - AT - Central Excise

Tribunal rules State Sales Tax inclusion settled; refund not time-barred under Section 11B, duty paid under protest valid.

The Tribunal ruled in favor of the appellant, determining that the inclusion of State Sales Tax in the assessable value for excise duty was settled in the ... Refund claim of duty paid under protest - rejection of refund claim on the ground that claim was barred by limitation - HELD THAT:- There is no dispute to the fact that it is not the appellant who at their own sou-moto paid the excise duty on the other charges. The said duty was deposited on the behest of department. The matter was further agitated by the appellant of their other unit on merit hence the issue on merit attained finality in favour of the appellant vide Tribunal’s order dated 29.09.2011. Firstly the duty was deposited on the behest of department and it is in the nature of payment of duty under protest for this reason, time limit of one year prescribed under Section 11B is not applicable in the facts of this case. Secondly, the issue on merit whether the other charges are liable for duty has been decided by this Tribunal vide its order dated 29.09.2011. The appellant’s refund rejected by lower authorities on the ground of limitation is not sustainable. The sanctioning authority is at liberty to ascertain other aspects of unjust-enrichment, duty payment aspect etc. while sanctioning the refund - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a refund claim for excise duty paid on 'other charges' is barred by limitation under Section 11B where the duty was deposited at the behest of the department (i.e., not voluntarily) and later contested on merit. 2. Whether the one-year limitation under Section 11B begins to run from the date of payment or from the date of a final adjudicatory/tribunal decision on the merit of liability for the contested 'other charges'. 3. Whether payment made 'on the behest of the department' amounts to duty paid under protest for the purpose of limitation and refund claims, and what consequences follow for the scope of refund adjudication (including unjust enrichment and other checks). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of Section 11B limitation where duty was paid at the behest of the department Legal framework: Section 11B prescribes time limits for refund claims of excise duty; ordinarily a one-year period from payment or from when claim arises is invoked unless payments are made under protest or otherwise required by the department. Precedent treatment: The Tribunal relied on its prior order in favour of the taxpayer dated 29.09.2011 (following the Supreme Court authority in Baroda Electric Meter Limited that non-manufacturing amounts not constituting profit are not includible in assessable value). Appellant also relied on multiple CESTAT authorities interpreting refunds where duty was deposited at the behest of the department or under protest. Interpretation and reasoning: The Tribunal found as a fact that the excise duty on 'other charges' was not voluntarily paid by the taxpayer but was deposited at the behest of the department. That factual finding places the payment in the nature of a payment 'under protest' even though the statutory mechanics may have recorded a deposit. Given this characterization, the Tribunal reasoned the one-year limitation under Section 11B is not applicable to bar a refund claim where the payment resulted from departmental compulsion and the substantive liability was later adjudicated in favour of the taxpayer. Ratio vs. Obiter: Ratio - where duty is paid at the behest of the department (i.e., not voluntarily), Section 11B's one-year limitation does not automatically bar a refund claim; such payment may be treated as duty paid under protest. Obiter - ancillary remarks about the ability of the sanctioning authority to examine unjust enrichment are procedural and permissive, not determinative of limitation. Conclusions: The Tribunal concluded that since the duty was deposited at the behest of the department, the refund claim cannot be rejected on the ground of limitation under Section 11B. Issue 2 - Commencement of limitation period where final adjudication on merit occurred after deposit Legal framework: Limitation for refunds runs from the date fixed by statute (Section 11B) but case law and practice distinguish voluntary payments from payments made under compulsion or protest; where a substantive adjudication later declares no liability, the effective date for assessing timeliness of a refund claim may be tied to that adjudicatory outcome. Precedent treatment: The Tribunal relied on its own prior adjudicatory finding (29.09.2011) that 'other charges' are not includible in assessable value, invoking the Supreme Court authority on the legal principle that additional amounts not representing profit from non-manufacturing activity are not liable to duty. Appellate citations presented by appellant (several CESTAT decisions, and a Supreme Court admission) support the proposition that limitation should not defeat refunds where payment was under compulsion and final adjudication vindicates the payer. Interpretation and reasoning: The Tribunal held that because the question of liability on 'other charges' attained finality in favour of the taxpayer by the Tribunal's order dated 29.09.2011, the taxpayer's subsequent refund claim filed on 05.05.2012 falls within permissible time for refund consideration. The Tribunal thus treated the effective starting point for a bona fide refund claim as aligning with the date when the legal right to refund was finally determined in the taxpayer's favour, rather than the date of compelled deposit. Ratio vs. Obiter: Ratio - where a compelled deposit is followed by a final adjudication establishing no liability, a refund claim filed after that adjudication and within a reasonable interval is not to be rejected as time-barred under Section 11B. Obiter - references to specific timelines beyond the facts of the case or future proof requirements are non-binding observations. Conclusions: The Tribunal concluded that the refund claim filed after the Tribunal's favourable order is within time and not hit by limitation; therefore the lower authorities erred in rejecting the refund solely on limitation grounds. Issue 3 - Characterization of payment 'on the behest of the department' and scope of refund adjudication (including unjust enrichment and penalty/interest considerations) Legal framework: Refunds of duty require examination not only of limitation but also of entitlement, unjust enrichment, and statutory consequences (interest, penalty) under provisions such as Sections 11AB and 11AC. Payments made under protest or under departmental compulsion raise questions of appropriate remedy and procedural safeguards. Precedent treatment: The Tribunal referred to its earlier decision (and to Supreme Court doctrine in Baroda Electric Meter) which addressed substantive liability; it also accepted that administrative heads may examine issues like unjust enrichment when sanctioning refunds even where limitation is not fatal. Interpretation and reasoning: While holding that limitation cannot defeat the refund claim, the Tribunal expressly left open the administrative/sanctioning authority's power to verify other aspects before sanctioning refund - for example, to ascertain unjust enrichment, proper accounting, and correctness of duty payment. The Tribunal thus separated the threshold question of limitation from the merits and equitable checks to be performed at sanction stage, indicating that a successful limitation defence is not the only ground for denial and that refund sanctioning remains subject to verification. Ratio vs. Obiter: Ratio - refusal to permit limitation to be the sole ground for rejecting a refund where payment was at department's behest; sanctioning authority retains jurisdiction to examine unjust enrichment and related matters. Obiter - detailed procedural steps for sanctioning were not prescribed and remain within administrative discretion. Conclusions: The Tribunal allowed the appeal holding the refund claim is not time-barred and remitted the matter effectively for sanctioning/verification; the sanctioning authority may consider unjust enrichment and other aspects while processing the refund claim.