2019 (9) TMI 577 - AT - Central Excise

Department's Refund Recovery Limited by Finality Rule; Unjust Enrichment Doctrine Inapplicable

M/s TVS Motor Company Ltd Versus Commissioner Of Central Tax, Mysuru Commissionerate

M/s TVS Motor Company Ltd Versus Commissioner Of Central Tax, Mysuru Commissionerate - TMI Issues Involved:1. Provisional assessment and subsequent refund eligibility.2. Doctrine of unjust enrichment.3. Jurisdiction and validity of recovery proceedings initiated by the department.4. Finality of the order sanctioning refund and the applicability of Section 11A of the Central Excise Act, 1944.Issue-wise Detailed Analysis:1. Provisional Assessment and Subsequent Refund Eligibility:The appellant engaged in the manufacture of two-wheeler motor vehicles, resorted to provisional assessment due to unknown abatements at the time of removal of goods from the factory. The provisional assessment for the period 2005-06 was finalized, and the appellant was found eligible for a refund of Rs. 4,81,647/- for excess duty paid. This refund was sanctioned by the OIO dated 29.10.2007.2. Doctrine of Unjust Enrichment:The department issued a notice proposing to hold the refund sanction as irregular based on the Apex Court's ruling in the case of Addision & Co., which mandated that the doctrine of unjust enrichment must be satisfied. The adjudicating authority consequently ordered the recovery of the refund along with interest, asserting that the discounts must be passed on to the ultimate buyer as per Section 11B read with Section 12B of the Central Excise Act, 1944.3. Jurisdiction and Validity of Recovery Proceedings Initiated by the Department:The appellant argued that the department did not file an appeal against the OIO sanctioning the refund, which had attained finality. The appellant contended that the issue of unjust enrichment or any other ground could not be raised for recovery of the refund once validly sanctioned. They cited several judicial precedents, including decisions from Bridgestone India Pvt. Ltd. and TVS Motor Ltd., which held that the department could not recover erroneously sanctioned refunds via parallel proceedings or show cause notices (SCN).4. Finality of the Order Sanctioning Refund and the Applicability of Section 11A of the Central Excise Act, 1944:The Tribunal found that once an order under Section 11B attained finality, the refund allowed would be outside the scope of 'erroneous refund' under Section 11A. The Tribunal referenced the Delhi Tribunal's decision in Bridgestone India Pvt. Ltd., which stated that Section 11A could not be used to recover duty believed to be erroneously refunded if the refund order had attained finality. The Andhra Pradesh High Court and the Madras High Court also supported this view, emphasizing that once an adjudication under Section 11B was completed, the refund could not be termed erroneous for recovery under Section 11A.The Tribunal also noted that the decision in Axwel India Pvt. Ltd. was not applicable in this case due to the binding precedents from various High Courts. Additionally, the Tribunal reiterated that the test of unjust enrichment does not apply to cases of provisional assessment, as established in the case of J.K. Tyre Industries Ltd.Conclusion:The Tribunal concluded that the impugned order was not sustainable in law and set it aside, thus allowing the appeal of the appellant. The Tribunal emphasized that the department could not recover the refund via SCN once the order sanctioning the refund had attained finality without being challenged. The order was pronounced in Open Court on 13/09/2019.