2009 (2) TMI 601 - AT - Central Excise

Summary

Issues:
Refund claim rejection based on entitlement under Notification No. 214/86-C.E. and unjust enrichment.

Analysis:
The case involved a refund claim rejection by the Deputy Commissioner citing the appellant's ineligibility to benefit from Notification No. 214/86-C.E. and the principle of unjust enrichment. The respondent contended before the Commissioner (Appeals) that Ethyl Alcohol is crucial for manufacturing Di-Ethyl Phthalate, which, due to government restrictions, must be denatured before clearance. The denaturing process necessitates Di-Ethyl Phthalate as an essential input. Consequently, Di-Ethyl Phthalate, when supplied to Ethyl Alcohol manufacturers, becomes a vital material for Ethyl Alcohol production. The appellant argued that under the Cenvat Credit Rules, 2001, they should clear Di-Ethyl Phthalate without duty payment, as it serves as a necessary component for Ethyl Alcohol procurement. The appellate authority overturned the Deputy Commissioner's decision, emphasizing the importance of Di-Ethyl Phthalate in the manufacturing process and allowing the appeal on both substantive grounds and unjust enrichment.

The Commissioner (Appeals) acknowledged that Ethyl Alcohol's denaturation with Di-Ethyl Phthalate, a final product of the appellants, is essential for Ethyl Alcohol production, which is subsequently utilized in Di-Ethyl Phthalate manufacturing. The Notification No. 214/86 provisions apply to manufacturers, permitting the transfer of raw materials to job workers with specific conditions. The Commissioner highlighted that even if the raw materials undergo changes and result in a new product, the job work relief can still be claimed. Regarding unjust enrichment, it was noted that the duty paid by the appellants on Di-Ethyl Phthalate supplied to Distilleries was not reimbursed, as confirmed by a Chartered Accountant's certificate. The appellants bore the tax burden, justifying their entitlement to a refund of the duty paid.

In their judgment, the Appellate Tribunal found no flaws in the Commissioner (Appeals) decision regarding the applicability of Notification No. 214/86 and the unjust enrichment aspect. The non-reimbursement of duty by the distilleries to the appellants was undisputed, leading to the rejection of the Revenue's appeal. The Tribunal upheld the Commissioner (Appeals) order, emphasizing the importance of following the Cenvat Credit Rules and the entitlement to refunds based on valid claims, ultimately dismissing the Revenue's appeal.