AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 550
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal assessment in terms of Rule 7 of the Central Excise Rules, 2002 on the impugned abatements such as freight, free service charges and discounts such as institutional sales, Money Spinner Scheme, ASC Redistribution Incentive scheme, Growth Incentive, Dealer Incentive, Retail Incentive Scheme, Billing Incentive Scheme, BS-III discount, free insurance scheme discount, CSD claim etc. since the quantum of which could not been ascertained at the time of clearance from their factory. After receipt of the exact quantum of discounts etc. on which duty was paid, the appellant filed the documents for finalization of assessment. On finalization of assessment, the amount of duty excess paid and short-paid during the relevant period have been determined and the adjudicating authority accordingly quantified the amount of refund due to excess payment of duty admissible to the appellant. In some of the orders, the Department allowed 'netting off' i.e. the duty excess paid to the duty short-paid during the particular period and quantified the amount of admissible or duty payable by the appellant. The Revenue has mostly challenged such action of the Department as contrary to the provisions of law ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stion as the said order has attained finality. He has submitted the Department has filed four appeals bearing No. E/3234/2012, E/3233/2012, E/20683/2019 and E/20294/2019 challenging the respective Orders-in-Appeal passed by the Commissioner of Central Excise (Appeals), Mysore that 'netting off' of excess and short-paid duty cannot be permitted under law. He has submitted that the issue is no more res integra and considered by the Tribunal in the following cases:- i. Toyota Kirloskar Auto Parts Pvt. Ltd. Vs. CCE, LTU, Bangalore [2012(276) ELT 332 (Kar.)] ii. Hindustan Zinc Ltd. Vs. CCE, Jaipur [2016(336) ELT 328 (Tri. Del.)] iii. Jonas Woodhead & Sons (I) Ltd. Vs. CCE, Chennai- IV [2015(329) ELT 577 (Tri. Chennai)] iv. JK Tyres & Industries Ltd. Vs. CCE, Mysore [2023(12) TMI 899 - CESTAT BANGALORE] 3.3. He has further submitted that adjustment of excess duty arising out of provisional assessment is permissible notwithstanding the bar of unjust enrichment and once it is established that excess duty has been paid, the same shall rightly be set off against the duty short paid to arrive at the net liability i.e. refund / duty payable. It i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....und of the excess duty paid. In support, they have referred to the judgment in the case of Johnsons Matthey (India) Ltd. Vs. CCE [2017 (3) TMI 1449 CESTAT CHANDIGARH] and Sudhir Papers Ltd. Vs. CCE, Bangalore-I [2012(276) ELT 304 (Kar.)] 3.6. He has submitted that in Addison's case, it is held that if it is not possible to identify the person / persons who have borne the duty, the amount of excise duty so collected in excess will remain in the fund which will be utilized for the benefit of the consumers as provided in Section 12D of the Central Excise Act, 1944. In the present case, since it is identified that the appellant is the person who has borne the duty and no duty has been passed on to the dealers, then the amount of excess excise duty is to be refund to the appellant. The question of unjust enrichment stands satisfied at this stage itself and further verification whether the dealer has passed on duty incident to the consumers is irrelevant and uncalled for. 3.7. On various abatements / discounts passed on, the learned advocate has submitted as follows:- ➢ The dealer provides free service to the buyer of the vehicle on production of the free service co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urther, as the name suggests, no charges have been recovered by the dealer from the end customer. When the ultimate customers are not charged for the free services, it cannot be said that the burden of duty on such FSC was passed on to the ultimate customers by the dealers. ➢ Therefore, it is clear that the benefit of the abatement pertaining to FSC reimbursements has percolated to the end customer by way of provision of free service. Such being the case, there is no unjust enrichment at the hands of the Appellant and the excess duty paid is rightly eligible as refund. ➢ Similar to FSC, the Appellant also extends trade discounts to the ultimate customer through their dealers. The trade discounts are of different types. Some of them are: i. Discounts on purchase during the festival season; ii. Free insurance, viz., the premium for insurance is borne by the Appellant and paid directly to the insurance company; iii. Arranging interest free financing or finance at reduced rate. ➢ The end customer approaches the dealer with the knowledge of such discounts/abatements. Even in cases where the benefits are extended ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... been passed on to the dealer, then the amount of excess excise duty has to be refunded to the Appellant. The question of unjust enrichment stands satisfied and further verification of whether the dealer has passed on the duty incidence to the customer is irrelevant. 4. Learned AR for the Revenue has reiterated the findings of the learned Commissioner(Appeals) in rejecting the refund claims. Also, he has reiterated the grounds of appeal wherever Revenue has filed appeal against the orders of the Commissioner(Appeals) allowing netting off of the duty. 5. Heard both sides and perused the records. 6. The issues involved in the present appeals filed by both Revenue and assessee are (i) after finalization of provisional assessment, whether netting off of duty is permissible and (ii) amount claimed as refund during the relevant period is hit by bar of unjust enrichment. 7. On the issue relating to netting off of duty, this Tribunal in the case of JK Tyres & Industries Ltd. Vs. CCE, Mysore (supra), following the judgment of the jurisdictional High Court in the case of Principal Commissioner of Central Tax, Mysore Vs. Vikrant Tyres Ltd. (supra), held as follows:- 8. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ility. It is the Revenue's contention that there is no specific provisions under Rule 7 of the Central Excise Rules, 2002 directing such adjustment/netting off duty. 11. Revenue has referred to the judgment of the Hon'ble Madras High Court in the case of TVS Electronics Ltd. case (supra) which followed the judgment in Addison & Co. Ltd. passed by the Hon'ble Supreme Court in directing that the refund amount arising due to provisional assessment be subjected to unjust enrichment. 12. The appellant's contention on the other hand is that the very purpose of provisional assessment is for adjustment of excess duty-paid to short-paid during a particular period and determining the net effect of the duty, that is, either by way of payment or seeking refund of the amount paid. In support they referred to the judgment of jurisdictional High Court in the case of Vikrant Tyres Ltd's case and in Toyota Kirloskar Auto Parts Pvt. Ltd's case(supra). 13. The Revenue's argument may seem attractive in view of the judgment of Hon'ble Madras High Court in TVS Electronics's case(supra), but we find that the jurisdictional Hon'ble Karnataka High Court in the appellant's own cas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to other years. Revenue cannot pick and choose the assessment years for challenging the orders having similar effect. Moreover, as observed by the First Appellate Authority, the issue of unjust enrichment has been raised for the first time on the sanction of refund order consequent on finalisation of provisional assessment. The authorities have admitted that the credit notes were issued by the assessee to their dealer representing various discounts which have been actually passed on, in accordance with marketing circulars/policies. It is also observed that on verification of sample depot invoices at the time of completion of provisional assessment, that the assessee has not issued any cenvatable invoice from the depot which are prescribed document for availment of cenvat credit under Cenvat Credit Rules, 2004. Thus, it cannot be held that the assessee has not subjected to the test of unjust enrichment." 14. It has been brought to our notice that the said judgment of the Hon'ble Karnataka High Court has been accepted by the Revenue as communicated through their letter dated 17.11.2023. Needless to mention, the principle laid down by the jurisdictional High Court is binding ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cise, provided he did not pass on the incidence of such duty to any other person. There is a third category of a class of applicants who may be specified by the Central Government by a notification in the official gazette who are also entitled for refund of the duty of excise. A plain reading of Clauses (d), (e) and (f) of the proviso to Section 11B(2) shows that refund to be made to an applicant should be relatable only to the duty of excise paid by the three categories of persons mentioned therein i.e. the manufacturer, the buyer and a class of applicants notified by the Central Government. Clause (e) refers to the buyer which is not restricted to the first buyer from the manufacturer. The buyer mentioned in the above Clause can be a buyer downstream as well. While dealing with the absence of a provision for refund to the consumer in the rules this Court in Mafatlal Industries v. Union of India (supra) held as follows :- "98. A major attack is mounted by the learned counsel for petitioners-appellants on Section 11B and its allied provisions on the ground that real purpose behind them was not to benefit the consumers by refusing refund to manufacturers (on the ground of p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsumer to make applications for refund. In that connection it was held as follows :- "99. We agree with Shri Parasaran that so far as the provisions of the Act go, they are unexceptionable. Section 12C which creates the Consumer Welfare Fund and Section 12D which provides for making the Rules specifying the manner in which the money credited to the Fund shall be utilised cannot be faulted on any ground. Now, coming to the Rules, it is true that these Rules by themselves do not contemplate refund of any amount credited to the Fund to the consumers who may have borne the burden; the Rules only provide for "grants" being made in favour of consumer organisations for being spent on welfare of consumers. But, this is perhaps for the reason that clause (e) of the proviso to sub-section (2) of Section 11B does provide for the purchaser of goods applying for and obtaining the refund where he can satisfy that the burden of the duty has been borne by him alone. Such a person can apply within six months of his purchase as provided in clause (e) of Explanation B appended to Section 11B. It is, therefore, not correct to contend that the impugned provisions do not provide for refunding ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 10. From the aforesaid observation of the Hon'ble Supreme Court, it is clear that while claiming refund, it is necessary and relevant to establish that the burden of duty has not been passed on to 'any other person' which includes buyers and ultimate consumers. In the present case, the appellant had claimed that duty paid on free service charges, abatement on discounts, freight charges has been ultimately borne by them and not passed on to dealers or 'any other person'. With regards to Free Service Charges, it is claimed that the same is offered to the ultimate customers at the time of purchasing of new vehicles from the dealer. After the dealers render free services to the customers against the free service coupons, they claim the amount from the Appellant on the basis free service coupons collected from the customers as proof of having rendered free service to the customers which are reimbursed by the appellant by issuance of credit notes. It is their claim that they have placed on record point-to-point correlation between the credit notes issued and the free service coupons collected from the customers against which dealers are reimbursed by the appellant. It is submitted t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f excise duty paid has to be refunded to the appellant and the question of unjust enrichment does not arise in such cases. Against the said backdrop of the claim of the appellant, in the Appeal paper book and during the course of hearing, sample evidences have been referred/placed to show that the burden of duty has not been passed on. 13. In contrast to the aforesaid claims of the Appellant, we find that in majority of the orders of the learned Commissioner(Appeals), relying on hypothetical examples, it is inferred that the FSC, Discounts and freight charges on which duty was paid while resorting to provisional assessment, the appellant could not demonstrate that the burden of excess duty paid on the elements of abatement/discounts, now claimed as refund, have not been passed on to any other person. Only in one of the impugned Order pertaining to appeal No. E/20387/2021, the learned Commissioner (Appeals), verifying certain invoices, held that the appellant could not establish that the burden of duty has been borne by them and the same has not been passed on to any other person. 14. Besides, it has been also brought to our notice that on the refund claims on similar discount....