2018 (3) TMI 761 - AT - Central Excise

Tribunal allows refund of excess excise duty on post-clearance discounts, remands for unjust enrichment verification

Mahanagar Gas Ltd. Versus Commissioner of Central Excise, Mumbai-II

The Tribunal allowed the appeal for reconsideration by the adjudicating authority in a case concerning the refund of excise duty on discounts passed after ... Refund claim - unjust enrichment - Held that: - discount though passed on after removal of the goods but the same was known as per the agreement between appellant and OMCs, therefore discount was deductible from the assessable value - the excise duty paid on such discount was paid in excess which is prima facie liable to be refunded to the appellant - appeal allowed by way of remand. Issues:Refund of excise duty on discount passed after clearance of goods.Analysis:The appellant sold goods to Oil Marketing Companies (OMCs) and provided a further discount after sale, issuing credit notes for the excise duty attributed to the discount. The appellant sought a refund, which was rejected by lower authorities, stating that post-clearance discounts are not excludable from assessable value for excise duty. This decision was based on the Supreme Court judgment in Grasim Industries Ltd Vs. CCE, Bhopal [2011(271) ELT 164(SC)], where credit notes for duty return were not considered reliable. The appellant contended that the discount was part of a pre-existing agreement with OMCs and the excise duty on credit notes was not passed on to anyone. The appellant also cited the Supreme Court's decision in Commissioner of Central Excise Vs. Addison Co. Ltd. [2016 (339 (ELT) 177(SC)]. The Tribunal found that the discount, though given post-clearance, was known due to the agreement with OMCs, making it deductible from the assessable value. The excess excise duty paid on such discount was deemed refundable. However, the issue of unjust enrichment regarding whether the duty amount was passed on to further customers needed examination, as lower authorities had not addressed this. The Tribunal remanded the matter for verification, following a previous order in the appellant's case, emphasizing the need to establish that the duty incidence was not passed on to avoid unjust enrichment. The appeal was allowed for reconsideration by the adjudicating authority after verifying this fact.This judgment highlights the importance of considering pre-existing agreements for discounts, the deductibility of discounts from assessable value, and the crucial aspect of unjust enrichment in excise duty refund cases. The Tribunal's decision to remand the matter for further verification underscores the significance of determining whether the duty amount was ultimately passed on to customers to prevent unjust enrichment.