2017 (6) TMI 366 - AT - Central Excise

Appellants' Refund Claim Upheld on Merits: Importance of Unjust Enrichment Consideration

The appellants' refund claim under Section 173S of the Central Excise Rules 1944, relating to the reduction of invoice values due to liquidated damages, ... Refund claim - appellant supplied the berths to various organs of the Railway as well as various state transport authorities, their invoice values were reduced by them after deducting the amount on account of liquidated damages - price variation clause - Held that: - the issue in whether the amount deducted by the buyer on account of liquidated damage should be allowed as deduction on transaction value has been settled by this Tribunal in the case of Victory Electricals Ltd. [2013 (12) TMI 81 - CESTAT CHENNAI], where it was held that The value payable in a case where liquidated damages is applied would therefore be the consequent value and this would constitute the 'transaction value'. - the appellant are entitled to refund on merits. The burden is on the appellant to produce necessary evidence that the incidence of duty has not been passed on by the appellant to any person - appeal allowed by way of remand. Issues:Refund claim under Section 173S of the Central Excise Rules 1944 rejected by Assistant Commissioner, upheld by Commissioner (Appeals), appellants filed appeal based on reduction of invoice values due to liquidated damages. Issue of unjust enrichment raised by learned AR.Analysis:The appellants filed a refund claim under Section 173S of the Central Excise Rules 1944, stating that their invoice values were reduced by buyers deducting amounts for liquidated damages after supplying berths to Railway organs and state transport authorities. The claim was initially rejected by the Assistant Commissioner, and the Commissioner (Appeals) upheld the decision. The appellants appealed this rejection, citing the case of CCE, Hyderabad vs. Victory Electricals Ltd. (2013) where a similar issue was decided in favor of the appellants.The learned Advocate for the appellant requested to decide the appeal based on written submissions, emphasizing that the buyers had reduced the invoice value by deducting liquidated damages as penalties. The learned AR acknowledged that the issue was covered in favor of the appellants by the aforementioned judgment but highlighted the need to examine the refund claim for unjust enrichment, referring to the judgment in the case of CCE, Madras vs. Addison & Co. Ltd. (2016).After hearing both parties and examining the records, it was found that the issue of allowing deduction for liquidated damages had been settled by the Tribunal in the case of Victory Electricals Ltd., where it was held that the value payable after deducting liquidated damages constituted the transaction value. The Tribunal emphasized that post the amendment of Section 4 and the statutory definition of transaction value, the value after factoring in liquidated damages would be the relevant value for levy of duty.Consequently, the appellants were deemed entitled to a refund on merits. However, the issue of unjust enrichment was raised, placing the burden on the appellants to prove that the duty incidence had not been passed on to any person. As a result, the matter was remanded back to the adjudicating authority for a fresh order with directions to allow the appellants a fair opportunity to present their defense. The appeal was disposed of by way of remand, ensuring a fair process for the appellants.