2023 (2) TMI 941 - AT - Central Excise

Tribunal rules in favor of assessee on refund claims citing absence of unjust enrichment doctrine

Commissioner of GST & Central Excise, Puducherry Versus M/s. Deepak Cables India Ltd. (Vice-Versa)

The Tribunal allowed the assessee's appeal and dismissed the department's appeal, holding that the refund claims for Rs. 60,10,076/- and Rs. 11,86,500/- ... Refund of excess duty paid - downward price revision based on the negative supplementary invoices - rejection on the ground of unjust enrichment - HELD THAT:- It requires to be mentioned that the show cause notices in regard to both the refund claims have proposed to deny the refund raising the issue of unjust enrichment only. However, the Commissioner (Appeals) vide O-in-A dated 14/2014 dated 08.04.2014 has set aside the sanction of refund both on merits as well as on the issue of unjust enrichment. For the purpose of calculation of variation, the said clause has devised a formula based on which each and every supply made by the assessee was worked out and final payment was made to PGCL. The assessee then pays the differential duty by raising supplementary invoices wherever there was price increase. In case there is a downward price revision, they raise negative supplementary invoices and 100% negative bill value in order to adjust the excess amount billed - The assessee has furnished the supplementary invoices for the downward price variation with regard to both refund claims. It is not disputed that there has been excess payment of duty due to the downward price revision. In the case of COMMISSIONER OF C. EX., COIMBATORE VERSUS FLOW TECH POWER [2006 (1) TMI 37 - HIGH COURT OF JUDICATURE (MADRAS)], the Hon’ble High Court of Madras had held that when the assessee has submitted the Chartered Accountant certificate to prove that the duty has not been passed on to their customers, the refund is not hit by unjust enrichment. Thus, the refund is not hit by unjust enrichment. The assessee is eligible for refund on merits as well having satisfied the test of unjust enrichment. Appeal dismissed. Issues Involved:1. Refund claim for excess duty paid due to downward price revision.2. Application of the doctrine of unjust enrichment.Detailed Analysis:Issue 1: Refund Claim for Excess Duty Paid Due to Downward Price RevisionThe assessee, engaged in the manufacture of ACSR Conductors, filed a refund claim for Rs. 60,10,076/- on 26.10.2009 and another claim for Rs. 11,86,500/- on 12.01.2012. Both claims were based on negative supplementary invoices raised to M/s. Power Grid Corporation India Limited (PGCL) due to downward price revision. The initial refund claim was rejected by the original authority, which cited potential contravention of Section 11 B of the Central Excise Act, 1944, due to unjust enrichment. The Commissioner (Appeals) later allowed the refund, observing that the assessee had not passed on the duty burden to PGCL, as evidenced by a Chartered Accountant Certificate and financial records showing the duty as receivables.Issue 2: Application of the Doctrine of Unjust EnrichmentThe department contested the refund on the grounds of unjust enrichment. The assessee argued that the contract with PGCL had a price variation clause, and the excess duty paid was not reimbursed by PGCL. The assessee provided supplementary invoices and certificates from PGCL and a Chartered Accountant to substantiate their claim. The Commissioner (Appeals) initially sanctioned the refund, but later, on appeal, set aside the refund on both merits and unjust enrichment grounds.Judgment Analysis:1. Original Authority's Rejection: The original authority rejected the refund claim, citing doubts about whether the duty incidence was passed on to PGCL. The rejection was based on the terms of the purchase order and the timing of payments.2. Commissioner (Appeals) Decision: The Commissioner (Appeals) allowed the refund, noting that the assessee had provided sufficient evidence, including a Chartered Accountant Certificate, to show that the duty burden was not passed on to PGCL. The refund was shown as receivables in the assessee's financial statements.3. Department's Appeal: The department appealed against the sanction of the refund, arguing that the refund was hit by unjust enrichment and that the Chartered Accountant Certificate alone was insufficient to prove that the duty incidence was not passed on.4. Tribunal's Decision: The Tribunal examined the contract terms, supplementary invoices, and certificates provided by the assessee. It referred to several precedents, including cases where refunds were allowed based on Chartered Accountant Certificates and financial records. The Tribunal concluded that the refund was not hit by unjust enrichment and that the assessee had sufficiently proved that the excess duty was not passed on to PGCL.Conclusion:The Tribunal allowed the assessee's appeal and dismissed the department's appeal. It held that the refund claims for Rs. 60,10,076/- and Rs. 11,86,500/- were not hit by the doctrine of unjust enrichment, affirming the assessee's eligibility for the refund on both merits and the unjust enrichment test. The decision emphasized the validity of Chartered Accountant Certificates and financial records in establishing that the duty burden was not passed on to the buyer.Final Order:- Appeal No. E/42825/2014 filed by the assessee is allowed.- Appeal No. E/95/2012 filed by the department is dismissed.(Order pronounced in the Open Court on 20.02.2023)