2019 (1) TMI 700 - AT - Central Excise

Appeals allowed based on Adhoc Exemption Order 2002, no unjust enrichment bar. Second claim valid.

The Tribunal dismissed the revenue's appeal and allowed the appellants' appeals. It held that the refund claims based on the Adhoc Exemption Order of 2002 ... Refund Claim - Adhoc Exemption Order dated 4th April 1994 - Section 5A (2) Of the Central Excise Act, 1944 - Section 11B of the Central Excise Act, 1994 - amount credited to Consumer Welfare Fund - unjust enrichment - What is the scope and impact of the Adhoc 0045emption Order issued under Section 5A(2)? - Whether the refund claim permissible in terms of Adhoc Exemption Order issued under Section 5A(2) of the Central Excise Act, 1944, when the goods have been assessed to duty and cleared on payment of duty, by the supplier at the time supply of goods? - Held that:- The Adhoc Exemption Order issued under the said sub-section is distinct from the general exemption granted under Section 5A(1). The section exemption is ranted qua the user of the goods exempted for specified purpose. The said adhoc exemption order is issued in public interest and not to grant benefit to a particular person - After issuance of the adhoc exemption order, the same can be implemented either by way of refund in respect of the duty paid on the goods received by the person qua whom said adhoc exemption order has been issued or by way of non-payment of duty in respect of the goods covered by the said adhoc exemption order and still not cleared from the source, i.e. from the factory of supplier or from the port of clearance in case of imported goods. Sub-section (2) to Section 5A, is an exceptional power available with the Government to exempt specified goods to be used for specified purpose by a specified person in public interest. This power is over riding the power under sub- section (1), wherein the exemption is granted in general to all the users of the said goods subject to such conditions as may be specified - In our view there is no dispute in respect of the operation of adhoc exemption order by way of refund under section 11B. If such a view is taken then it will make the Insertion of clause (ee) in explanation to section 11B otiose - refund allowed. Whether bar under the erstwhile Rule 57C be applicable in this case i.e. because the supplier has availed the Modvat Credit Of the inputs used in manufacture and supply of the finished goods to person to whom Adhoc Exemption Order has been issued under Section 5A(2), the refund claim seeking exemption from duty be granted? - Held that:- In the present case the goods have been cleared on payment of duty by the supplier/ manufacturer who has availed the MODVAT Credit on the inputs used in manufacture of the said goods. Once the goods are cleared by the person availing the MODVAT Credit on payment of duty, requirements of rule 57C of the erstwhile Central Excise Rules, 1944 are satisfied - Since in the present case the goods by the person availing the MODVAT Credit have been cleared on payment of duty, as assessed and payable the finished goods cleared will not attract rule 57C - the submissions to the effect that in the present case the supplier/ manufacturer has availed the MODVAT Credit in respect of the inputs used in manufacture of the finished goods, to the recipient availing the benefit of adhoc exemption order issued under Section 5A(2) of the Central Excise Act, 1944 is not tenable. Where the proceedings in respect of the refund of duty exempted under the Adhoc Exemption Order, concluded by the order of the Tribunal, dismissing the appeals filed by the appellants on the ground of seeking clearance from the Committee of Secretaries? - Held that:- When Tribunal had dismissed the appeal with liberty to revive the same after clearance from the Committee of Secretaries, the issues in the appeal cannot be said to have been disposed of by the said order of Tribunal. It was committee of secretaries and Ministries which resolved the issue by issuing the Adhoc Exemption Order afresh. Thus the Adhoc Exemption Order issued in 2002 was final resolution of the disputes between the parties. Thus we do not find applicability of 'principle of res-judicata' in the present case a tenable argument. Whether the second refund claim was maintainable consequent to issuance of Second Adhoc Exemption Order in the year 2002 in supersession of the adhoc exemption order of 1994? - Held that:- From the two adhoc exemption orders and the correspondences leading to issuance of second order, it is quite evident that the second order was issued to rectify the operational errors being faced in the first Order. The said intention can also be drawn from the fact that when second order has been issued in supersession of the first order, first order had outlived itself. As per the para 3 of the order of 1994, the said order was valid only upto “31.03.1995.” thus if the said order was valid only upto 31.03.1995, issuing another order for the same period from 1990 orders in respect of the same goods supplied by the same manufacturer/ suppliers in terms of quantity and value to the appellant cannot be but for rectification of the operational difficulties faced in the operation of first order. Thus in our view Section 38A Of the Central Excise Act, 1944 would not be applicable in the present case. Whether the appellants have produced sufficient documentary evidence to establish that they have paid the duty for which they are seeking the refund, to satisfy the requirements of Section 11B? - Held that:- From the said documents it is quite evident that appellants have produced the duty paying documents in respect of which the refund has been claimed before the concerned authorities. Even the adjudicating authority do not dispute the production of the said documents along with the refund claims. In absence of any evidence to the contrary the averments made with regards to non production of documents as required under Section 11B of the Central Excise Act, 1944 do not merit acceptance. Whether Bar of Unjust enrichment applicable in such cases where the refund claim is filed by the person qua whom adhoc exemption order is issued? - Held that:- There is no dispute about the fact that no refund claim can be sanctioned in the favour of claimant in terms of Section 11B, without recording a finding of fact to the effect that the person claiming the refund has suffered the burden of the duty paid by him and has not passed on the said burden to anyone else - In terms of 'e' in Proviso to section 11B(2), the refund will be paid to the claimant if he is the buyer and has not passed on the burden of the said duty on to any other person. In the present case the appellants are the consumer of the goods and have utilized the said goods in creation of Konkan Rail Project, for which the adhoc exemption order Of 1994 and the 2002 issued. The burden of duty claimed as refund has been borne by the appellant and could not have been passed on to the anyone else. The bar of unjust enrichment as in Section 11B is not a absolute bar but a rebuttable presumption - appellants have sufficiently discharged the burden cast on them as buyer/ consumers of these goods, to show that they have borne the incidence of duty paid by them, and hence the bar of unjust enrichment would not be applicable in respect of the refund claims filed. Appeal dismissed - decided against Revenue. Issues Involved:1. Scope and impact of Adhoc Exemption Order under Section 5A(2).2. Applicability of Rule 57C regarding Modvat Credit.3. Finality of proceedings in respect of the refund of duty exempted under Adhoc Exemption Order.4. Maintainability of the second refund claim after issuance of the second Adhoc Exemption Order in 2002.5. Sufficiency of documentary evidence to establish payment of duty.6. Applicability of the bar of unjust enrichment.Issue-wise Detailed Analysis:1. Scope and Impact of Adhoc Exemption Order:The Adhoc Exemption Order under Section 5A(2) of the Central Excise Act, 1944, distinct from general exemptions under Section 5A(1), is issued in public interest and can exempt specified goods for specified purposes by a specified person. The Tribunal noted that such exemptions can be implemented by way of refund if the goods have been cleared on payment of duty before the issuance of the exemption order. The Tribunal referred to the Central Board of Excise and Customs Circular No. 12/97-Cus, which clarified that the benefit of Adhoc Exemption Orders should not be denied even if issued after the clearance of goods. The Tribunal held that the refund claims based on Adhoc Exemption Orders are maintainable, distinguishing them from cases where refunds were claimed due to errors in assessment.2. Applicability of Rule 57C:Rule 57C of the Central Excise Rules, 1944, bars credit of duty on inputs used in the manufacture of final products exempt from duty. However, the Tribunal found that in this case, the goods were cleared on payment of duty by the supplier who availed Modvat Credit. The Adhoc Exemption Order applied to the recipient, not the supplier, making Rule 57C inapplicable. The Tribunal held that the exemption was for the recipient, and the supplier's use of Modvat Credit did not bar the recipient's refund claim.3. Finality of Proceedings:The Tribunal examined whether the proceedings were concluded by the earlier adjudication and Tribunal orders. It found that the Tribunal had dismissed the appeals with liberty to revive them after obtaining clearance from the Committee of Secretaries, following the Supreme Court's directive in the ONGC case. The Tribunal noted that the matter remained unresolved until the issuance of the Adhoc Exemption Order in 2002, which was a final resolution of the dispute. Thus, the earlier proceedings did not bar the current refund claims.4. Maintainability of the Second Refund Claim:The Tribunal rejected the argument that the second refund claim was not maintainable due to the earlier adjudication. It noted that the Ministry of Finance issued the second Adhoc Exemption Order in 2002, superseding the 1994 order, to rectify operational difficulties. The Tribunal held that Section 38A of the Central Excise Act, 1944, did not apply as the second order was intended to correct errors in the first order's operation.5. Sufficiency of Documentary Evidence:The Tribunal found that the appellants had produced all necessary duty-paying documents with their refund claims filed in 1994. The adjudicating authority did not dispute the production of these documents. The Tribunal held that the appellants had satisfied the requirements of Section 11B of the Central Excise Act, 1944, regarding documentary evidence.6. Applicability of the Bar of Unjust Enrichment:The Tribunal acknowledged that refunds under Section 11B must consider whether the claimant has passed on the duty burden. However, it noted exceptions in Section 11B(2), including refunds to buyers who have not passed on the duty burden. The Tribunal found that the appellants, as ultimate consumers of the goods used in the Konkan Rail Project, had borne the duty burden and had not passed it on. The Tribunal held that the bar of unjust enrichment did not apply, as the appellants had sufficiently demonstrated that they bore the duty burden.Conclusion:The Tribunal dismissed the revenue's appeal and allowed the appellants' appeals. It held that the refund claims based on the Adhoc Exemption Order of 2002 were maintainable, the bar of unjust enrichment did not apply, and the appellants had provided sufficient documentary evidence. The Tribunal also found that the second refund claim was valid, as the 2002 order superseded the 1994 order to correct operational errors.