2025 (11) TMI 1696 - HC - Central Excise

Refund on provisional assessments not hit by unjust enrichment; later contrary rulings per incuriam, Rule 9B(5) applied

The Commissioner of Customs and Central Excise, And Service Tax Versus M/s. Amrutanjan Limited, M/s. Amrutanjan Health Care Ltd.

HC held that for refund claims pertaining to February 1985 to April 1995 arising from finalization of provisional assessments, the law laid down in ... Refund claim - finalization of provisional assessments - applicability of principles of unjust enrichment - amendment to Rule 9B(5) with effect from 25.06.1999 - HELD THAT:- With the observations made by the Hon’ble Supreme Court in Sahakari Khand Udyog Mandal Ltd. vs. Commissioner of Central Excise & Customs [2005 (3) TMI 116 - SUPREME COURT] so also in Sinkhai Synthetics & Chemicals Pvt. Ltd. [2002 (4) TMI 65 - SUPREME COURT] were all per incuriam and that it was the judgment in Mafatlal Industries Ltd. & Ors. [1996 (12) TMI 50 - SUPREME COURT] and followed by the judgment in T.V.S. Suziki Ltd. [2003 (8) TMI 42 - SUPREME COURT] holds good and is correct law to be applied for refund of claim for the period between February, 1985 to April, 1995. Further, in view of the aforesaid authoritative decision of the Hon’ble Supreme Court and also in the light of the Circular of the Central Board of Excise and Customs, there are no hesitation in holding that the question of law framed has to be answered in favour of the assessee and against the Revenue and it is ordered accordingly - appeal dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether refund claims arising out of finalization of provisional assessments for the period February 1985 to April 1995 are subject to the doctrine of unjust enrichment and the restrictions under Section 11B of the Central Excise Act, 1944. 1.2 Whether the Tribunal was justified in holding that such refunds need not pass the test of unjust enrichment in view of the legal position prior to the amendment to Rule 9B(5) with effect from 25.06.1999 and in basing its decision on an earlier Tribunal order which was sub judice before the High Court. 1.3 Consequentially, whether the assessee is entitled to refund of the quantified amount for the relevant period and the manner and timeframe for grant of such refund with interest. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of unjust enrichment and Section 11B to refunds consequent upon finalization of provisional assessment (February 1985 - April 1995) Legal framework 2.1 The Court considered the scheme of provisional assessment under Rule 9B of the Central Excise Rules, 1944, particularly sub-rule (5), along with Sections 11A and 11B of the Central Excise Act, 1944, in light of the law declared in the Constitution Bench decision in Mafatlal Industries Ltd. and subsequent Supreme Court decisions in T.V.S. Suzuki Ltd., Allied Photographics India Ltd. and Hindustan Zinc Ltd. 2.2 The Court referred to the Central Board of Excise and Customs Circular No. 794/27/2004-CX dated 23.06.2004, which, following the Supreme Court decision in Allied Photographics, clarified the applicability of the doctrine of unjust enrichment to cases of provisional assessment and duty paid under protest, and endorsed the position that refund consequent upon finalization of provisional assessment under Rule 9B(5) would not be governed by Section 11B. Interpretation and reasoning 2.3 Relying on T.V.S. Suzuki Ltd., the Court noted that where refund claims arise pursuant to finalization of provisional assessment and were made prior to the insertion of the proviso to Rule 9B(5) (effective 25.06.1999), such refund claims are governed by the rule in Mafatlal Industries Ltd., namely that the restrictions in Sections 11A and 11B do not apply to refunds consequent upon finalization of provisional assessments. 2.4 The Court emphasized the reasoning in T.V.S. Suzuki Ltd. that a subsequent amendment introducing a proviso to Rule 9B(5) cannot retrospectively govern refund claims already lodged prior to such amendment, and that mere administrative delay in processing such claims cannot defeat the assessee's vested right to refund under the law prevailing on the date of claim. 2.5 Referring to Allied Photographics India Ltd., the Court highlighted the distinction drawn by the Supreme Court between: (a) duty paid under protest, governed by Section 11B (refund claim regime), and (b) duty paid under provisional assessment under Rule 9B, where refund on adjustment under Rule 9B(5) is in the nature of 'making of refund' and is not governed by Section 11B or the bar of unjust enrichment, unless an independent refund claim is filed after finalization seeking re-agitation of decided issues, in which case Section 11B applies. 2.6 The Court also referred to Hindustan Zinc Ltd., wherein the Supreme Court, dealing with provisional assessments (including by analogy under customs law), reaffirmed that the doctrine of unjust enrichment was not applicable to refunds arising from finalization of provisional assessments, and confined the later decision in Sahakari Khand Udyog Mandal Ltd. to its own facts, on the ground that it had overlooked the binding ratio in Allied and the specific exposition in paragraph 104 of Mafatlal Industries Ltd. 2.7 The Court noted that in Hindustan Zinc Ltd. it was specifically held that Sahakari Khand Udyog Mandal Ltd. must be confined to its facts, as it did not properly account for paragraph 104 of Mafatlal Industries Ltd. and the earlier consistent line of authority concerning provisional assessment refunds. 2.8 On this basis, the Court held that the view taken in Sahakari Khand Udyog Mandal Ltd. and in Sinkhai Synthetics & Chemicals Pvt. Ltd. (to the extent they purported to apply unjust enrichment to provisional assessment refunds) was per incuriam, and that the correct and governing law is that laid down in Mafatlal Industries Ltd. as applied and explained in T.V.S. Suzuki Ltd., Allied Photographics India Ltd. and Hindustan Zinc Ltd. 2.9 Applying this legal position to the relevant period (February 1985 to April 1995), the Court held that refunds arising out of the finalization of provisional assessments for that period do not attract the doctrine of unjust enrichment and are not controlled by Section 11B, as the claims were consequent upon finalization under Rule 9B(5) and were anterior to the 25.06.1999 amendment. Conclusions 2.10 The Court concluded that the Tribunal was justified in holding that the principles of unjust enrichment have no application to refund claims arising from finalization of provisional assessments for the period February 1985 to April 1995. 2.11 The substantial question of law regarding applicability of unjust enrichment and Section 11B was answered in favour of the assessee and against the Revenue, and the appeal challenging the Tribunal's 26.03.2009 order was dismissed. Issue 2: Validity of the Tribunal's order granting refund without unjust enrichment test and relying on its earlier order pending in appeal Interpretation and reasoning 2.12 In the second appeal, the Revenue contended that since the Tribunal's earlier order dated 26.03.2009 (forming the basis for granting refund in the later proceedings) was under challenge before the High Court, the Tribunal ought not to have decided the subsequent refund appeal and should have awaited the outcome of the pending High Court appeal. 2.13 The Court observed that the fate of the second appeal was entirely dependent on the outcome of the first appeal concerning the correctness of the Tribunal's 26.03.2009 order. If the first appeal failed, the basis of challenge in the second appeal would automatically fall; conversely, if the first appeal succeeded, the second would have to be reconsidered. 2.14 Having already dismissed the first appeal and affirmed the Tribunal's order dated 26.03.2009 on the substantive issue of unjust enrichment, the Court held that the foundation of the Revenue's objection in the second appeal disappeared. The Tribunal's reliance on its own earlier order, which has now been upheld, could not be faulted either on facts or in law. 2.15 In light of the binding Supreme Court decisions and the CBEC circular already discussed, the Court reaffirmed that no unjust enrichment test was required for refunds arising out of finalization of provisional assessments for the relevant period, and therefore the Tribunal's subsequent order granting refund in accordance with the earlier order was legally sustainable. Conclusions 2.16 The Court held that the Tribunal's decision that refund arising from finalization of provisional assessments between February 1985 and April 1995 need not pass the test of unjust enrichment was correct. 2.17 The Court further held that the Tribunal did not err in deciding the later appeal on the basis of its earlier 26.03.2009 order, notwithstanding that such earlier order was pending in appeal, as that order now stands affirmed by the High Court. 2.18 The substantial questions of law in the second appeal were answered in favour of the assessee and against the Revenue, and the Tribunal's order dated 03.08.2016 was affirmed. Issue 3: Entitlement, quantification and direction for refund with interest Interpretation and reasoning 2.19 Consequent upon affirming the Tribunal's orders and the legal position that unjust enrichment does not apply, the Court upheld the assessee's entitlement to refund of the amount determined by the Tribunal, being the refund arising out of finalization of provisional assessments for the specific periods in question. 2.20 The Court noted that the refund claim of the assessee had remained pending with the Department for nearly two decades and that, with both appeals dismissed, there was no legal impediment to release of the refund in accordance with statutory provisions. Conclusions 2.21 The Court held that the assessee is entitled to refund of Rs. 2,86,39,117/- for the periods March 1985 to April 1991 and March 1994 to April 1995, as determined by the Tribunal, without applying the test of unjust enrichment. 2.22 The Court directed the Customs Department to compute and pay the entire refund amount along with interest as per the applicable statutory provisions within an outer limit of three months from the date of judgment. 2.23 Both appeals were dismissed, miscellaneous petitions were closed, and no order as to costs was made.