TaxTMI 
TaxTMI 
2026 (8) TMI 1700
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....umbai (For Short "the Tribunal") in Appeal No. E/740 to 742/2003. 3. These Tax Appeals are admitted vide order dated 28.04.2009 on the following substantial questions of law : "(a) Whether the CESTAT has been right in law in holding that the applications for rectification of mistake filed by the appellants were barred by limitation? Whether the action of the CESTAT in refusing to decide ROM applications on merits is legally correct and maintainable? (b) Whether the orders of the CESTAT refusing to correct mistake that had crept in while allowing Revenue's appeals are legally correct? (c) Whether the orders of the CESTAT refusing to direct the Commissioner of Central Excise to redetermine Annual Production Capacity of the appellants after excluding gallery portion are correct in law as well as in facts of this case?" 4. As these Tax Appeals involve common issue, the same were heard analogously and are being disposed of by this common order. 5. Brief facts of the case are as under :- 5.1. The appellants-assessees are engaged in the manufacture of excisable goods falling under Chapter 52, 54 and 55 of the Schedule to the Central Excise Tariff....
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....ies Ltd. v. Union of India reported in 1997 (89) ELT 247 (SC), wherein the Hon'ble Apex Court held that it is not open to any person to make a refund claim on the basis of the decision of the Court or a Tribunal rendered in case of another person and, therefore, the decision relied upon by the appellants was brushed aside for rejecting the claim on the ground that the appellants failed to prove that the incidence of duty was not passed on to the buyers resulting into unjust enrichment by drawing a presumption that the duty was passed on to the buyers of the appellants. 6. Being aggrieved, the appellants preferred an appeal before the Commissioner (Appeals). The Commissioner (Appeals) without considering the veracity of the evidence produced on record proceeded to decide the case in favour of the appellants stating that the inclusion of galleries in the dimension of the chamber is unconstitutional and, therefore, levy of duties is unconstitutional. Relying upon the decision of the Sangam Processors Bhilwara Ltd. (supra) and held that the unconstitutional levies are not governed by the provisions of Section 11B and Section 12B of the Act and allowed the appeals. 7. Being aggrie....
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....chemicals Ltd. 1998 (101) ELT 568. The respondents have not crossed the bridge as brought out in para 11 of this order. 10. The respondents' reliance on the decision of the Madras High Court would not advance their case. There is no way how this Tribunal can direct the Commissioner of Central Excise to pass another order determining the APC after following principles of natural justice as the subject matter of appeal before is entirely different. A high court or the Supreme Court in their writ jurisdiction can direct such proceedings and not the tribunal acting under a special enactment such as the Central Excise Act. 11. We also observe that the invoices produced before the Commissioner (Appeals) to say that the incidence of duty has not been passed on do not support the contention of the respondents. The Tribunal in Christine Hoden v. CCE (155) ELT 271 held that the invoices which show the same price before and after the excess duty is paid do not indicate that the incidence of duty has not been passed on. The Tribunal held that it may be a case of passing on a part of their profit to the buyer and not the incidence of duty itself. This decision is based on the ....
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....y the Revenue inasmuch as the Tribunal has held on all three counts on which the refund applications were rejected by the Adjudicating Authority as the appellants did not follow the procedure laid down under Rule 233B of the Central Excise Rules,1944 which is meant for preventing manipulation by an assessee to claim extended period of time for the purpose of claiming refund. It was, further, submitted that the appellants never challenged the order determining the Annual Production Capacity by the Commissioner (Appeals) nor they have paid the duty under the protest so as to entitle the appellants for refund claim. 10.1. It was submitted that the Tribunal has arrived at a finding of fact that the appellants have not proved or shown that the excess duty paid by them was not passed on to the customers and, therefore, granting refund to the appellants would amount to unjust enrichment as held by the Hon'ble Apex Court in case of Mafatlal Industries Ltd., (supra). It was further submitted that the Rectification Applications preferred by the appellant have also been rightly rejected by the Tribunal in the facts of the case. It was, therefore, prayed that the questions of law framed by ....
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....shall be deemed to be one chamber of a stenter and any fraction of such length shall be computed on a pro-rata basis." 12.2 The significant difference in the Explanation I in the Rules of 2000 was the introduction of the words "except the galleries". This Explanation in the Rules of 2000, though made it sufficiently clear that the galleries should be excluded for computing the Annual Production Capacity, the legal controversy that arose was whether such explanation should apply only to the cases covered under the Rules of 2000 or also to earlier cases which may have arisen at the time when the new rules were not yet framed. The Tribunal in case of M/s R.M. Gupta Textiles P. Ltd. (supra) took the view that such explanation is only clarificatory in nature and therefore, would apply with retrospective effect. We may recall that it is on the basis this decision that the petitioners filed the refund claims. We have also notice that the decision in case of M/s R.M. Gupta Textiles P. Ltd. (supra) came to be referred to Larger Bench in view of conflicting of opinions and the Larger Bench of the Tribunal in case of M/s. Sangam Processors Bhilwara Ltd. v. Commissioner of Central Exc....
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....served as under: "12. In so far as the present is concerned, as indicated above, though the appellant did not challenge the correctness of the order dated 12th July, 1999 in independent and substantive proceedings, in response to the show-cause notice, the appellant did raise objection to the correctness thereof. In our considered view, by the time the matter reached to the Tribunal, the law having been settled by the Supreme Court holding that the length of galleries having no fan or radiator attached to it cannot be taken into consideration while determining the numbers of chambers, the Tribunal was competent to consider and rather ought to have considered the applicability of law laid down by the Supreme Court in the case of SPBL Limited to the facts of the present case." 13. We would ordinarily have adopted the same course. In decision of the Bombay High Court, however, it was noted that admittedly, no appeal lie from the order passed by the Excise Commissioner determining the Annual Production Capacity. Thus, the Bombay High Court proceeded on the concession that the order determining Annual Production Capacity was not appealable. 14. In that view of....
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....led rules have been made for the manner in which the Annual Production Capacity of an independent processor shall be determined. Sub-rule (3) of rule 4 provides that the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, shall, as soon as may be, after determining the annual capacity of production and the average value of processed textile fabrics and the number of chambers (of a hot-air stenter) of the factory of the independent processor, by an order, intimate the same, as also the rate of duty applicable to the independent processor. Proviso to sub-rule (3) of rule 4 permits the competent authority to determine the annual capacity of production on a provisional basis pending verification of the declaration furnished by the independent processor and pass an order accordingly and thereafter, determine the annual capacity, as soon as may be, and pass an order accordingly. 14.5 Rule 5 provides for changes in parameters for capacity determination and covers the cases where independent processor proposes to make any change in the installed machinery or any part thereof which tends to change any of the parameters referred....
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....t quasi-judicial order that the competent authority may pass under the Act deciding the list between the parties. In our view, therefore, mere determination of an Annual Production Capacity by the prescribed authority under the Rules of 2000 or even under the earlier Rules of 1998, would not give rise to any appealable order. 17. If the determination was not appealable, in our view, it would be incorrect to hold that without challenging such an order, the manufacturer cannot claim refund of duty erroneously collected. The fact that the galleries were included while determining the Annual Production Capacity and as such, the galleries were otherwise not required to be included by virtue of the decisions of the Tribunal and the Apex Court, there is no dispute. In our view, therefore, the petitioners were justified in filing refund claims in terms of section 11B of the Central Excise Act claiming refund of excess duty collected on the basis of such consideration of galleries in determining Annual Production Capacity and collecting corresponding excise duty on such capacity. In our view, the excise authorities as well as the Tribunal erred in rejecting such claims merely on th....
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....n other two issues raised in the show cause notice. 19. Under the circumstances, the orders under challenge in these petitions are set aside. All proceedings are placed back to the Deputy Commissioner for further consideration of the refund claims in the light of the show cause notice issued to each petitioner bearing in mind the observations made hereinabove. Such exercise should be completed expeditiously and preferably within a period of six months from the date of receipt of a copy of this judgement." 12. Therefore, the ground raised by the Adjudicating Authority and sustained by the Tribunal that the appellants have not challenged the determination of Annual Production Capacity would not survive for rejecting the refund claims. With regard to the ground for rejection of the refund claims by the Adjudicating Authority that the appellants did not pay the duty under protest, it is pertinent to note that the Commissioner (Appeals) has rightly held that duties itself being unconstitutional the same is required to be refunded while relying upon the decision of the larger Bench of the Tribunal in case of Sangam Processors Bhilwara Ltd. (supra) by observing as under:- ....
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....osed, how the burden of duty is borne or its economic impact not relevant, refund of tax not to be confused with restitution or compensation. It is also held in this judgment that all claims for refund except where levy is held to be unconstitutional, to be preferred and adjudicated upon under Section 11B of the Central Excise Act, 1944 and subject to claimant establishing that burden of duty has not been passed on to third party. In the present case, it is quite clear that the levy of duty on galleries were unconstitutional as has been clarified by the Hon'ble Supreme Court in the case of SPBL Limited. Accordingly, the provisions of Section 11B viz., limitation would not be applicable and they are not required to discharge the burden casted under Section 12B of the Central Excise Act, 1944." 13. In view of the above factual finding recorded by the Commissioner (Appeals) which is not reversed by the Tribunal while setting aside the order on merits on the ground of principle of unjust enrichment as held by the Hon'ble Apex Court in case of Mafatlal Industries Ltd. (supra), we are of the opinion that the Tribunal has committed error in applying the principle of unjust enrichment w....
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.... of the common law which has been called quasi-contract or restitution." (7) In Nelson v. Larholt, (1948) 1 KB 339 Lord Denning has observed as follows: "It is no longer appropriate to draw a distinction between law and equity. Principles have now to be stated in the light of their combined effect. Nor is it necessary to canvass the niceties of the old forms of action. Remedies now depend on the substance of the right, not on whether they can be fitted into a particular framework. The right here is not peculiar to equity or contract or tort, but falls naturally within the important category of cases where the court orders restitution if the justice of the case so requires" (Emphasis supplied) This court further stated the law thus: "....... It is well established that a person who seeks restitution has a duty to account to the defendant for what he has received in the transaction from which his right to restitution arises. In other words, an accounting by the plaintiff is a condition of restitution from the defendant (See 'Restatement of the Law of Restitution', American Law Institute, 1937 Edn., p. 634)." (Emphasis supplied....