2021 (8) TMI 15 - AT - Central Excise

CESTAT allows refund claim for duty-paid goods supplied to Indian Navy under exemption

The CESTAT set aside the decision restricting a refund claim for duty-paid goods supplied to the Indian Navy under an exemption notification. The ... Refund claim - supply of Low Sulphur High Flash High Speed Diesel (LSHFHSD) to Indian Navy Claiming exemption under Notification No 64/95-CE dated 16.03.1995 at Sr No 3 - refund claimed on the ground that the supplies were made from the stock of goods which were duty paid - principles of unjust enrichment - HELD THAT:- There is not dispute in respect of the admissibility of the refund claim made by the appellant. Both the authorities have conclusively recorded in respect of the duty paid nature of the goods received from the BPCL and also the fact that the goods were supplied to Indian Navy claiming the exemption under Notification No 64/95-CE. Both authorities also have concluded that the refund claim is not hit by the principles of unjust enrichment enshrined in Section 11B of the Central Excise Act, 1944. Both authorities have restricted the refund claim only for the reason that the duty paid goods received from the M/s BPCL were stored in tank No 5, whereas the supplies to Indian Navy were made from tank No 3 and 5. So they ruled in favour of the refund to the extent of supplies made from tank no 5. From the circular No 804/1/2005-CX dated 04.01.2005, it is quite evident post withdrawal of the facility of warehousing, all the petroleum products cleared from refinery are cleared on the payment of duty and hence there cannot be any issue of intermixing of duty paid and non duty paid petroleum products. The circular very categorically states that all the goods stored in the warehouse from 06.09.2004, are to be duty paid. Since all the goods stored in warehouse are duty paid as per the board circular 2004, the ground on which Assistant Commissioner has proceeded is clearly contrary to this clarification issued by the board. Appellant has supplied the goods to Indian Navy under claim of exemption out of the duty paid stock. In case where the entire stock is deemed to be duty paid, then whether the supply is made from tank 3 or 5 is irrelevant. Assistant Commissioner stating that goods received from M/s BPCL were stored only in tank 5 is of no significance as the goods stored in tank 3 also are duty paid. Irrespective of the tank from which supply has been made Assistant Commissioner did not find any reason to restrict the refund claim. Refund allowed - appeal allowed - decided in favor of appellant. Issues Involved:1. Admissibility of refund claim.2. Requirement of drop-by-drop linkage.3. Applicability of unjust enrichment.4. Compliance with warehousing and bonding permissions.5. Relevance of CBEC Circulars post-withdrawal of warehousing facility.Issue-wise Detailed Analysis:1. Admissibility of Refund Claim:The appellant supplied Low Sulphur High Flash High Speed Diesel (LSHFHSD) to the Indian Navy, claiming exemption under Notification No. 64/95-CE. The supplies were made from duty-paid stock received from M/s BPCL, and a refund claim of Rs. 50,81,772.56 was filed. The Assistant Commissioner restricted the refund to Rs. 2,07,220, as only supplies from tank No. 5 were considered. Both the Assistant Commissioner and Commissioner (Appeals) acknowledged the duty-paid nature of the goods and the admissibility of the exemption but restricted the refund due to the specific tanks from which supplies were made.2. Requirement of Drop-by-Drop Linkage:The Commissioner (Appeals) rejected the appeal on the ground that a drop-by-drop linkage was required to establish that the same goods which had suffered duty were supplied to the Indian Navy. The appellant argued that such a requirement was not necessary, citing previous favorable orders and CESTAT Ahmedabad's decision in the Indian Oil Corporation Limited case, which held that unit-to-unit correlation was not required as long as the receipt of goods on payment of duty and supplies to the Indian Navy were not in dispute.3. Applicability of Unjust Enrichment:Both the Assistant Commissioner and Commissioner (Appeals) concluded that the refund claim was not hit by the principles of unjust enrichment under Section 11B of the Central Excise Act, 1944. The invoices issued to the Indian Navy did not show the amount of Central Excise duty, indicating that the duty incidence was not passed on to the Indian Navy.4. Compliance with Warehousing and Bonding Permissions:The Assistant Commissioner referred to the violation of bonding permissions, stating that goods received from M/s BPCL were stored in tank No. 5, while supplies to the Indian Navy were made from tanks No. 3 and 5. This was deemed irrelevant as all goods stored in the warehouse post-06.09.2004 were duty-paid, as clarified by CBEC Circular No. 796/29/2004-CX. The appellant's supply from duty-paid stock, irrespective of the tank, was deemed compliant with the exemption notification.5. Relevance of CBEC Circulars Post-Withdrawal of Warehousing Facility:The CBEC Circulars clarified that post-withdrawal of warehousing facilities, all petroleum products cleared from refineries were duty-paid. The 2005 circular allowed provisional assessments for goods supplied under end-use exemptions but was not applicable here as the supplies were made from the warehouse, not directly from the refinery. The reliance on these circulars by the Commissioner (Appeals) was deemed out of context.Conclusion:The CESTAT found no merit in the impugned order and set it aside, allowing the appeal. It was concluded that the appellant supplied duty-paid goods to the Indian Navy under the exemption notification, and the restriction of the refund claim based on the specific tanks was unjustified. The decision aligned with the previous orders and CBEC Circulars, emphasizing that all goods stored in the warehouse were duty-paid and the supply from any tank should be eligible for the refund.