2022 (9) TMI 675 - AT - Central Excise

Tribunal sets aside recovery order, ruling no unjust enrichment, refunds final.

M/s. Bridgestone India Private Limited Versus Commissioner, CGST & Central Excise, Ujjain

The Tribunal allowed the appeal, setting aside the Commissioner's order directing the recovery of refunded amounts to the appellant. It held that the show ... Power to issue SCN - Recovery of erroneous refund with interest - direction to credit the amount to the Consumer Welfare Fund under section11A (2) of the Excise Act - provisional assessment was rejected on the ground that excise duty can be paid on the normal transaction value and there was no need for provisional assessment - assessment of quantum of eligible discounts before allowing the refund - doctrine of unjust enrichment. Whether the show cause notice could have been issued by the Department under section 11A of the Excise Act for recovery of the duty refunded to the appellant once the orders granting refund of duty had attained finality? - HELD THAT:- Section 35(1) of the Excise Act deals with Appeals to Commissioner (Appeals) and section 35B deals with Appeal to the Appellate Tribunal. Section 35G of the Excise Act deals with Appeal of the High Court against the order passed by the Appellate Tribunal - In the present case, the amount was refunded to the appellant pursuant to an order dated 04.06.2015 passed by the Tribunal and admittedly this order of the Tribunal has attained finality as an appeal was not filed by the Department before the High Court against the order of the Tribunal. Section 11A of the Excise Act does provide for recovery of duties erroneously refunded, but if duties have been refunded pursuant to orders passed under section 11B of the Excise Act, it is not possible to hold the powers under section 11A of the Act can still be exercised for refund of the amount as this will not fall in the category of ‘duties erroneously refunded’. It also needs to be noted that an appeal can be filed to the High Court against the order passed by the Tribunal and if this power has not been invoked, it will not be open to the Department to take recourse to the provisions of section 11A of the Excise Act - The Commissioner, therefore, could not have issued the show cause notice dated 30.08.2017. In the present case, as under section 11A of the Excise Act when the order passed by the Tribunal in proceedings arising out of section 11B of the Excise Act had attained finality. This issue was also examined by the Andhra Pradesh High Court in THE COMMISSIONER CUSTOMS AND CENTRAL EXCISE, TIRUPATI VERSUS M/S. PANYAM CEMENTS AND MINERALS INDUSTRIES LTD., KURNOOL [2015 (9) TMI 726 - ANDHRA PRADESH HIGH COURT] and it was held that where an order under section 11B of the Act attains finality, the refund allowed would be outside the scope of an ‘erroneous refund’ contemplated under section 11A of the Act. The Madras High Court in M/S. EVEREADY INDUSTRIES INDIA LTD. VERSUS THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE ASSISTANT COMMISSIONER OF CENTRAL EXCISE, THE COMMISSIONER OF CENTRAL EXCISE, [2016 (4) TMI 688 - MADRAS HIGH COURT] followed the view taken by Andhra Pradesh High Court and also observed that once an application for refund is allowed under section 11B, the amount refunded will not fall under the category of ‘erroneous refund’ so as to enable the order of refund to be revoked under section11A of the Excise Act. It is, therefore, more than apparent that section 11A of the Excise Act cannot be resorted to by the Department for recovery of duty which it believes was erroneously refunded if the order passed for refund of duty under section 11B of the Excise Act on an application filed for refund of duty attained finality for the simple reason that it cannot fall in the category of ‘duty erroneously refunded’ - The show cause notice dated 30.08.2017 seeking recovery of the duty refunded to the appellant is without jurisdiction. The order passed on such a show cause notice, therefore, deserves to be set aside. Incidence of duty - HELD THAT:- Clause (e) of the proviso to section 11B of the Excise Act which relates to a buyer was under consideration and not a manufacturer (like the appellant) who would be covered by clause (d). Section 11B (2)(d) states that when in the case of a manufacturer the duty of excise is paid by the manufacturer and such incidence of duty has not been passed on to any other person, such an amount of duty and interest payable on such duty shall be refunded to the applicant. In the present case, it is not in dispute that the incidence of excise duty was borne by the appellant by the issuance of the credit notes to its dealer. The impugned order dated 16.11.2018 passed by the Commissioner for recovery of the amount earlier refunded to the appellant is set aside - Appeal allowed. Issues Involved:1. Entitlement to refund claims.2. Doctrine of unjust enrichment.3. Legality of issuing a show cause notice under Section 11A of the Central Excise Act after the refund orders have attained finality.4. Applicability of the Supreme Court judgment in Addison and Company Ltd. to the present case.5. Jurisdiction of the Commissioner to issue a show cause notice for recovery of duty refunded.Detailed Analysis:1. Entitlement to Refund Claims:The appellant, engaged in manufacturing and selling tyres, filed refund claims for excise duty paid on discounts offered to dealers. The discounts were calculated quarterly and given post-sale via credit notes. The appellant faced difficulties in calculating the correct excise duty due to these post-sale discounts and initially sought provisional assessment, which was denied. Consequently, the appellant filed refund claims quarterly. The refund claims for various periods were initially rejected but later allowed by appellate authorities and the Tribunal. The Tribunal's order dated 04.06.2015 confirmed the appellant's entitlement to refunds, and no appeal was filed by the Department against this order, making it final.2. Doctrine of Unjust Enrichment:The Tribunal held that the discounts provided by the appellant were not sales promotion expenses but genuine quantity discounts. The issuance of credit notes reduced the invoice price, and the burden of proof shifted to the Department to prove that the credit notes were bogus. The Tribunal found no evidence from the Department to support this claim, thus ruling out unjust enrichment. The Commissioner (Appeals) and the Tribunal consistently held that the refunds were not hit by the doctrine of unjust enrichment.3. Legality of Issuing a Show Cause Notice under Section 11A:The Department issued a show cause notice under Section 11A seeking recovery of the refunded amounts, alleging erroneous refunds based on the Supreme Court's judgment in Addison. However, the Tribunal noted that the refund orders had attained finality as no appeal was filed by the Department. The Tribunal emphasized that once an order granting refund under Section 11B attains finality, it cannot be reopened under Section 11A. This view was supported by various High Court judgments, including those from Andhra Pradesh, Madras, Gauhati, and Gujarat High Courts, which held that refunds granted under Section 11B are not 'erroneous refunds' under Section 11A if they have attained finality.4. Applicability of the Supreme Court Judgment in Addison:The Tribunal distinguished the present case from Addison, stating that Addison dealt with buyers, whereas the appellant is a manufacturer. The Tribunal noted that under Section 11B(2)(d), a manufacturer is entitled to a refund if the incidence of duty has not been passed on to any other person. In this case, the appellant had borne the incidence of duty through credit notes issued to dealers. The Tribunal also cited a previous order dated 30.07.2018, where it had considered the Addison judgment and ruled in favor of the appellant.5. Jurisdiction of the Commissioner:The Tribunal concluded that the Commissioner lacked jurisdiction to issue the show cause notice dated 30.08.2017 for recovery of the refunded amount, as the refund orders had attained finality. The Tribunal emphasized that the Department could not reopen concluded issues based on a subsequent judgment or under Section 11A when the refund orders were final.Conclusion:The Tribunal set aside the Commissioner's order dated 16.11.2018, which directed the recovery of Rs. 19,09,56,371/- refunded to the appellant, and allowed the appeal. The Tribunal held that the show cause notice was without jurisdiction and that the refunds were not hit by the doctrine of unjust enrichment. The Tribunal also ruled that the Department could not reopen the concluded refund orders based on the Supreme Court's judgment in Addison. The appeal was pronounced in favor of the appellant on 14.09.2022.