2007 (12) TMI 328 - AT - Central Excise

Refund - Unjust enrichment - assessee had returned the excess duty collected to the dealers by issue of credit notes

Summary

Issues:
1. Refund of excess duty paid due to revision in rate of duty.
2. Applicability of the doctrine of unjust enrichment.
3. Interpretation of provisions regarding refund claims under Central Excise Act.

Issue 1: Refund of excess duty paid due to revision in rate of duty:
The case involved a revenue appeal against the Commissioner (Appeals) decision allowing the assessee's appeal for a refund of excess duty paid on betel nut powder. The assessee had paid duty at 18% ad valorem, unaware of the reduction to 15% ad valorem under a notification. Upon realizing the error, the assessee issued credit notes to dealers for the excess amount collected. The revenue contended that duty is paid at the time of clearance and only the ultimate burden bearer is eligible for a refund. The revenue relied on previous decisions to support their claim that post-clearance transactions do not concern Central Excise authorities. The Tribunal found that the excess amount collected by the assessee had been repaid, following the judgment in Addison & Co. v. C.C.E. The Tribunal also considered the Apex Court's decision in Mohd. Ekram Khan & Sons v. Commissioner of Trade Tax, holding that payment through credit notes constitutes a sale, making the issue of credit notes a valid form of payment. The Tribunal concluded that the assessee was eligible for a refund, dismissing the revenue's appeal.

Issue 2: Applicability of the doctrine of unjust enrichment:
The respondents argued that the product they manufactured was not excisable, making the collection of excise duty unconstitutional. They contended that they were not liable to pay any duty and, therefore, the provisions of Section 11B regarding refund claims did not apply. Citing various judicial authorities, they supported their argument that the proceedings against them should abate. The Tribunal considered the argument in light of the judgment in Addison & Co. v. C.C.E., where the High Court allowed the appeal of an assessee whose refund claim was rejected, even though credit notes were issued for the excess amount collected. The Tribunal found that the excess amount collected had been repaid by the assessee, and the issue of credit notes constituted a valid form of payment, eliminating the possibility of unjust enrichment.

Issue 3: Interpretation of provisions regarding refund claims under Central Excise Act:
The revenue relied on Sangam Processors (Bhilwara) Ltd. v. C.C.E., Jaipur to argue that the refund claim should be rejected as the duty incidence had been passed on to customers at the time of clearance. However, the Tribunal distinguished the facts of the present case, where the excess amount collected was not differential excise duty since the goods were not excisable. The Tribunal found that the excess amount collected had been repaid by the assessee, following the precedent set in Mohd. Ekram Khan & Sons, which held that payment through credit notes amounted to a sale. Therefore, the Tribunal upheld the impugned order, dismissing the revenue's appeal for lack of merit.