2026 (2) TMI 228 - AT - Central Excise

Refund of duty on dealer discounts upheld where final tribunal orders and evidence show no passing on of incidence of duty.

Tribunal finality and unjust enrichment were decisive for refund claims of duty on cash and quantity discounts. Where an appellate order granting refund ... Unjust enrichment - show cause notice u/s 11A - finality of tribunal order - chartered accountant's certificate as evidence - refund of duty on discounts and credit notes - Whether the bar of unjust enrichment is satisfied in the present cases or not. - HELD THAT:- It is not in dispute that the appellant had reduced the price by credit note or cash discount to its dealers. A perusal of the decision rendered by the Tribunal on 04.06.2015 [2018 (10) TMI 388 - CESTAT NEW DELHI], in the matter of the appellant shows that the period of dispute involved was from October 2011 to June 2012. The Commissioner (Appeals) had allowed cash discount to the appellant but had rejected the discount towards quantity. Both the appellant and the department filed appeals before the Tribunal. The appeal filed by the appellant was allowed while the appeal filed by the department was rejected. In view of the said decision of the Tribunal, the appellant would be entitled to refund of the cash discount. It is seen that though the Commissioner (Appeals), by order dated 17.07.2014, had allowed the appeal filed by the appellant for refund of cash discount but still the show cause notice was issued under section 11A of the Central Excise Act, 1944 [the Central Excise Act] for recovery of the amount. It is also seen that ultimately, the Tribunal by its decision dated 04.06.2015 dismissed the appeal filed by the department. The issue, therefore, that would arise for consideration is whether a show cause notice could be issued under section 11A treating the amount paid to the appellant as erroneously refunded. This issue was examined by this Tribunal in Excise Appeal Bridgestone India Pvt Ltd vs. CGST & CE, Ujjain [2019 (3) TMI 849 - CESTAT NEW DELHI] and Excise Appeal M/s. Bridgestone India Private Limited vs. Commissioner, CGST & Central Excise, Ujjain [2022 (9) TMI 675 - CESTAT NEW DELHI]. In the present case also, the order passed by the Commissioner (Appeals) granting refund to the appellant on the cash discount attained finality upon dismissal of the appeal by the Tribunal. It is pointed out by learned authorized representative appearing for the department that the department has filed appeals before the High Court of Madhya Pradesh against the aforesaid two orders passed by the Tribunal but stay has not been granted by the High Court. In any view of the matter, the decision date 04.06.2015 passed by the Tribunal has attained finality and, therefore, the appellant would clearly be entitled to refund of the cash discount and the quantity discount. The issue involved in Excise Appeal filed by the appellant would also have to be decided in favour of the appellant as the appellant would clearly be entitled to refund of the amount in terms of the decisions dated 04.06.2015 and 30.07.2018 of the Tribunal. As noticed above, has already been decided by the Tribunal in the aforesaid two decisions dated 04.06.2015 and 30.07.2018. Though these two decisions were placed before the Commissioner (Appeals) in the Written Submissions filed by the appellant but they have not been examined by the Commissioner (Appeals). The Commissioner (Appeals) has also rejected the Certificates of the Chartered Accountant filed by the appellant to show that the incidence of duty had not been passed on to the customers and also affidavits of the dealers to show that the incidence of duty had not been passed on to the customers but these two documents have been rejected by the Commissioner (Appeals). The Commissioner (Appeals), therefore, committed an error in rejecting the Certificates issued by the Chartered Accountant to show that the incidence of duty had not been passed on to the customers as no evidence to the contrary was produced by the department. The appellant would, therefore, clearly be entitled to refund in these six appeals. Issues: (i) Whether a show cause notice under Section 11A can be issued to recover duty where an order granting refund under Section 11B has attained finality; (ii) Whether the appellant is entitled to refund of excise duty paid on cash discounts and credit notes (i.e., whether the bar of unjust enrichment is attracted), including the evidentiary value of Chartered Accountant certificates and dealers' affidavits.Issue (i): Whether a show cause notice under Section 11A can be issued to recover duty after a refund order under Section 11B has attained finality.Analysis: The Tribunal's prior decisions held that once refund orders under Section 11B attain finality (no departmental appeal under Section 35), such amounts cannot be treated as 'duty erroneously refunded' for purposes of initiating recovery under Section 11A. The impugned appeals involve refund orders that were finally adjudicated in the appellant's favour by earlier Tribunal decisions; those decisions had attained finality.Conclusion: A show cause notice under Section 11A for recovery of amounts already finally refunded under Section 11B could not lawfully be issued; the appellant is entitled to relief on this ground.Issue (ii): Whether the bar of unjust enrichment prevents refund of duty on cash discounts and credit notes and whether the Chartered Accountant certificates and dealers' affidavits suffice to rebut the presumption of passage of duty.Analysis: The Commissioner (Appeals) rejected the CA certificates and affidavits for lack of supporting material, relying on precedent applying the unjust enrichment principle. Subsequent authority, including Tribunal decisions relied on by the appellant and appellate precedent, establish that where no contrary evidence is produced by the department, certified financial records and CA certificates (and supporting ledger documents/affidavits) may discharge the appellant's burden to show that the incidence of duty was not passed on. The impugned order failed to examine the Tribunal decisions and erred in rejecting the certificates without evidence to the contrary from the department.Conclusion: The bar of unjust enrichment is not established on the record before the Tribunal; the appellant is entitled to refund of duty on cash discounts and credit notes, and the CA certificates and affidavits should have been accepted in the absence of contrary evidence.Final Conclusion: The appeals are allowed and the appellant is entitled to refunds and reliefs as determined by the Tribunal, reversing the impugned order and granting consequential reliefs.Ratio Decidendi: Where an order granting refund under Section 11B has attained finality, the department cannot invoke Section 11A to recover the refunded amount as 'erroneously refunded'; further, certified financial evidence (such as a Chartered Accountant's certificate with supporting documents) must be accepted to rebut the presumption of passage of duty unless the department produces contrary evidence.