2017 (6) TMI 509 - HC - Central Excise

High Court upholds Revenue in Assessee case, overturns Tribunal decision

Commissioner of Central Excise, Chennai Versus M/s. National Plywood Industries Limited

The High Court upheld the Commissioner (Appeals) order and overturned the Tribunal's decision, ruling in favor of the Revenue against the Assessee. The ... Refund claim - adjustment of excise duty paid against duty short paid - unjust enrichment - whether the methodology of credit notes would be countenanced to revise the final price payable by the customer? - Held that: - it was incumbent upon the Assessee to demonstrate, as contemplated under Section 11B of the 1944 Act that the amount of duty of excise, in relation to which, refund was claimed, had not been passed on by him to any other person. Clause (e) appended to the proviso to Section 11B(2), which enabled even the customer or buyer to seek refund, assessee could claim refund, provided one was able to demonstrate that the incidence of duty had not been passed on to any other person. Similarly, a third category, that is, a class of applicant, who could claim refund was also noticed. These are applicants referred to in clause (f) to the proviso appended to Section 11B(2). This class of applicants, in terms of the said clause, would emerge as claimants of the refund, only upon the Central Government issuing the notification in that behalf, in the official gazette. Pertinently, though, Central Government's, mandate in that behalf is circumscribed to the extent that it cannot issue such a notification, unless it forms an opinion that the applicants, so notified had not passed on the duty to any other person. No refund can be claimed, unless the Assessee satisfies the conditions set forth in Section 11B of the 1944 Act - The Assessee, in this case is a manufacturer, had to necessarily demonstrate that the burden of duty had not been passed on to the ultimate customer - The Assessee, clearly, has not discharged its burden, as set forth in Section 11B. Appeal dismissed - decided against assessee. Issues Involved:1. Justification of the Tribunal in setting aside the Commissioner Appeals' order without considering Sec.11B read with Section 12 of the Central Excise Act, 1944.2. Consideration of amended provisions of CEA 1944 regarding refund in Provisional Assessment and the principle of unjust enrichment.3. Tribunal's decision validity when relied upon cases have not reached finality.Issue-wise Detailed Analysis:Issue 1: Justification of the Tribunal in Setting Aside the Commissioner Appeals' Order- The Tribunal set aside the Commissioner (Appeals) order without dealing with non-obstante Sec.11B read with Section 12 of the Central Excise Act, 1944. The Tribunal concluded that upon finalization of the provisional assessment, the excise duty paid should be adjusted against duty short paid, and based on the difference, it should be determined if any amount is to be refunded to the Assessee. The Tribunal also held that the burden of duty had not been passed on to the customers, based on credit notes issued by the Assessee after the incidence of duty. However, the High Court found that the Tribunal did not consider the factual findings of the Commissioner (Appeals) which indicated that the Assessee was not maintaining stock-wise and item-wise accounts in the Depots, making it impossible to correlate the credit notes with the goods dispatched to customers. The High Court concluded that the Tribunal's basis for setting aside the Commissioner (Appeals) order was incorrect.Issue 2: Consideration of Amended Provisions of CEA 1944 Regarding Refund in Provisional Assessment and the Principle of Unjust Enrichment- The Tribunal failed to consider the amended provisions of CEA 1944, which mandate that refund in Provisional Assessment should be sanctioned only after considering the principle of unjust enrichment. The Commissioner (Appeals) had found that the Assessee could not establish that the duty had not been passed on to the ultimate customer and directed that the refund amount should be credited to the Consumer Welfare Fund. The High Court supported this view, emphasizing that the Assessee must demonstrate that the burden of duty had not been passed on to the ultimate customer as per Section 11B of the Central Excise Act. The High Court relied on the Supreme Court judgment in Commissioner of Central Excise, Madras V. Addison & Co. Ltd. [2016] 10 SCC 56, which clarified that no refund could be claimed unless the Assessee satisfied the conditions set forth in Section 11B.Issue 3: Tribunal's Decision Validity When Relied Upon Cases Have Not Reached Finality- The Tribunal relied on the judgment of the Rajasthan High Court in Union of India V. A.K.Spintex, 2009 (234) ELT 41 (Raj.) to support its conclusion that the burden of duty had not been passed on to the customers. However, the High Court noted that the Supreme Court had reversed the Rajasthan High Court's judgment in Commissioner of Central Excise, Madras V. Addison & Co. Ltd. [2016] 10 SCC 56. Therefore, the basis of the Tribunal's judgment did not hold good any longer. The High Court concluded that the Tribunal's decision was not valid as it was based on a judgment that had been overturned by the Supreme Court.Conclusion:- The High Court sustained the order of the Commissioner (Appeals) and reversed the Tribunal's judgment. The High Court answered question Nos.1 and 2 in favor of the Revenue and against the Assessee, and concluded that question No.3 did not need to be answered. Consequently, the Civil Miscellaneous Appeal was allowed with no order as to costs.