Provisional assessment refunds escape unjust enrichment bar; input credit reversal on intermediate goods also fails.

Refunds arising from finalisation of provisional assessment under Rule 9B of the erstwhile Central Excise Rules, 1944 could not be denied on unjust enrichment for claims filed before the 1999 amendment inserting that bar. The governing law for the relevant period did not permit rejection of such refund claims on that ground. Credit reversal directed in relation to inputs used for intermediate goods was also unsustainable where those intermediate goods were consumed in the manufacture of the final excisable product and the factual findings favoured the assessee. The refund was left intact and the reversal direction was set aside.

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Issues: (i) whether refund arising from finalisation of provisional assessment was hit by unjust enrichment; (ii) whether the direction to reverse credit taken on inputs used in the manufacture of intermediate goods could be sustained.

Issue (i): Whether refund arising from finalisation of provisional assessment was hit by unjust enrichment.

Analysis: The clearances were under provisional assessment under Rule 9B of the erstwhile Central Excise Rules, 1944. On finalisation of such assessment, excess duty paid is refundable or short-paid duty becomes recoverable. The bar of unjust enrichment was introduced into Rule 9B only by amendment in 1999, whereas the refund claims in question were filed in 1991. The governing law for the relevant period did not permit rejection of refund arising from provisional assessment on the ground of unjust enrichment.

Conclusion: The refund was not hit by unjust enrichment and the Revenue's challenge failed.

Issue (ii): Whether the direction to reverse credit taken on inputs used in the manufacture of intermediate goods could be sustained.

Analysis: The credit had been used for discharging duty on intermediate products which were later held to be non-excisable or non-dutiable, but those intermediate products were consumed in the manufacture of the final excisable product. In view of the provisional assessment and the final outcome in favour of the assessee, the direction to reverse the credit could not stand on the facts found.

Conclusion: The direction for reversal of credit was set aside and the assessee succeeded on this issue.

Final Conclusion: The common order left the refund intact and set aside the credit reversal direction, with the Revenue's appeal rejected and the assessee's appeal allowed.

Ratio Decidendi: Refunds arising from finalisation of provisional assessment for a period preceding the insertion of the unjust enrichment bar in Rule 9B cannot be denied on that ground.

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