2000 (2) TMI 112 - HC - Central Excise

Deposit during adjudication held refundable not excise duty; Rules 233B/232B inapplicable; refund with interest ordered

The HC allowed the petition and held the amount deposited during adjudication was a deposit refundable, not excise duty, because the department failed to ... Validity of show cause notices - Refund of amount which was deposited during the adjudication proceedings - manufacture of non-alcoholic beverage base - excise duty under heading 33.02 - Applicability of Rule 233B and Section 11B of the Central Excise Act, 1944 - whether clause (d) of proviso to sub-clause (2) of Section 11B of the Act would apply or not - excise duty being the differential amount of Central Excise Duty - HELD THAT:- It is not the case of the respondents that though the goods manufactured by the petitioner was excisable goods, petitioner had not prominently indicated the same in the invoice of sales and the amount of such duty did not form part of the price at which the goods were sold. Therefore, whatever excise duty was charged at the relevant time, the incidence of which had been passed on to other persons, is not being claimed. It is also not the case of the respondents that the duty was not paid as per the rates mentioned in the tariff at the time of clearance, but the case was that assessable value was not correctly shown and therefore proper excise duty was not paid. The value was required to be enhance according to the authority issuing notice and as a consequence, assessee was called upon to pay more than what was paid at the time of clearance. Now as there is no dispute so far as the proper amount of duty is concerned, we find no merits in the submissions made by learned counsel for the Revenue. Reading the provision of section 11, it becomes clear that at the time of payment of duty as mentioned in the aforesaid Rule, if the assessee has any objection to the rates etc. then he has to make payment under protest to the appropriate officer. It is for that duty/refund of duty, the procedure as laid down under rule 233B is required to be followed. This rules will be applicable at the time of clearance of the goods and not at any time thereafter. At the time of payment of duty when the goods are being cleared the question of payment of duty with protest or without protest may arise. This provision cannot be applied in a case where disputed was subsequently raised that the duty paid by the assessee was less than due. Here the assessee was called upon to pay additional amount on the ground that the value of the product had been incorrectly stated and thereby cost/price had been reduced. Thus it was alleged that though the rate was rightly applied for calculating the duty, the Revenue had suffered as cost was artificially reduced and hence show cause notice was issued much after disposal of material in the market after collecting the excise duty at the applicable rate. Now, if the manufacturer is held liable to pay the duty, the manufacturer would be required to pay the amount which has not been recovered from the consumers and paid to the Revenue on 15th February, 2000. In the instant case, it is not the case that at the time of clearance of goods any protest was made. Whatever duty was leviable, has been paid. In view of this, there is no question of applicability of Rule 232B of the rules because at the time of payment of duty, no duty was paid under protest. In the instant case, at the cost of repetition, we state that the case is of enhancing value of the material, for which the show cause notice was issued, on the basis which the amount was paid. Therefore, this would amount to 'deposit' and not 'duty'. Even considering the facts of the present case, it cannot be said that it is a case of unjust enrichment and, therefore, the amount which is deposited by the petitioner is required to be refunded when the order of the appellate authority is set aside. On what basis the Revenue contends that this is unjust enrichment has not been place before us. The Revenue could not point out as to the difference between the amount deposited during the appeal and amount deposited during the adjudication proceedings. As we have said earlier, the amount of duty paid under Section 3 of the Act is the duty and whatever is claimed subsequently can be said to be duty only after the order passed by the adjudicating authority is finally confirmed. Till then, it cannot be said to be amount of duty. It is clear that the amount of duty shown in the bill is paid to the Revenue. Subsequent demand is on the ground of undervaluation, but the Department has miserably failed in establishing it. Therefore, it cannot be said that the assessee has recovered from its customers the amount subsequently deposited with the Revenue and thus enriched itself by collecting such amount from the customers. Therefore, in the instant case, the Revenue's contention that until the assessee establishes that it has not enriched itself by collecting duty from its customers it cannot claim refund, cannot be accepted. Thus, we are of the view that the amount as deposited by the petitioner has to be taken as 'deposit' and the Revenue is required to refund the amount of deposit. It is directed that the Revenue shall, within a period of four weeks from today, refund the amount with interest will be calculated from the date of the order of CEGAT. However, if the amount is not paid within a period of four weeks, the Revenue shall have to pay interest at the rate of 18% per annum for the subsequent period. This petition stands allowed accordingly. Issues Involved:1. Validity of show cause notices.2. Refund of amounts deposited during adjudication.3. Applicability of Rule 233B and Section 11B of the Central Excise Act, 1944.4. Concept of unjust enrichment.Summary:1. Validity of Show Cause Notices:The petitioner, engaged in the manufacture of non-alcoholic beverage base, was issued show cause notices alleging contravention of Rules 9(1), 173C, 173F, 173G, and 226 of the Central Excise Rules, 1944. The notices demanded differential central excise duty and special excise duty totaling Rs. 2,86,90,828.68 and proposed penalties u/r 173Q(1). The petitioner challenged these notices, arguing that the respondent had no authority to issue them and that the amounts were wrongly withheld.2. Refund of Amounts Deposited During Adjudication:The petitioner deposited certain amounts with the Excise Department during adjudication. Despite the Central Excise and Gold (Control) Appellate Tribunal (CEGAT) setting aside the adjudicating authority's orders and directing consequential relief, the amounts were not refunded. The petitioner contended that these amounts were deposits, not duties, and should be refunded following the Tribunal's order.3. Applicability of Rule 233B and Section 11B of the Central Excise Act, 1944:The Revenue argued that the amounts were duties, not deposits, and that refunds should follow the procedure u/s 11B, which includes ensuring the burden was not passed to consumers. They also cited non-compliance with Rule 233B, which requires payments under protest to be acknowledged by the proper officer. The court held that Rule 233B applies at the time of clearance, not retrospectively, and that the amounts paid during adjudication were deposits, not duties. Therefore, the procedural requirements of Rule 233B and Section 11B did not apply.4. Concept of Unjust Enrichment:The court rejected the Revenue's argument of unjust enrichment, noting that the petitioner did not collect additional amounts from consumers. The court emphasized that the amounts were deposits made to avoid interest during the adjudication process and were not duties collected from consumers. Consequently, the doctrine of unjust enrichment did not apply.Conclusion:The court directed the Revenue to refund the deposited amounts within four weeks, with interest calculated from the date of the CEGAT order. If the refund was delayed, the Revenue would have to pay interest at 18% per annum for the subsequent period. The petition was allowed, and the rule was made absolute with no order as to costs.