2009 (2) TMI 677 - AT - Central Excise

Refund - Unjust Enrichment - Held that - The price prevailing at depot has been lower than the price at which duty was paid by the appellant. The buyer at depot paid the duty on this lower price. Thus the excess duty paid by the appellants at the time of removal of the goods from the factory has not been recovered from the buyer. Hence, incidence of duty has not been borne by the appellants only - the appellants fulfilled the conditions of unjust enrichment by showing that the depot price prevailing at the relevant time - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim based on provisional assessment for depot sales; Application of Section 4 of Central Excise Act, 1944; Doctrine of unjust enrichment; Co-relation of goods cleared from factory and depot sales; Interpretation of Rule 7 of Central Excise (Valuation) Rules, 2000.

Analysis:
The case involved the appellants engaged in the manufacture of Cotton Yarn and Blended Yarn, opting for provisional assessment for depot sales. The original authority sanctioned the refund claim, but the Revenue appealed, leading to the Commissioner (Appeals) setting aside the adjudication order. The main contention was whether the incidence of duty had been passed on to another person due to the price difference between factory gate and depot sales.

The advocate for the appellants argued that the depot price should be deemed the price for assessment purposes, citing relevant case law. On the other hand, the Revenue contended that the doctrine of unjust enrichment applied, emphasizing the need to establish that duty burden had not been transferred. The Commissioner (Appeals) supported this view, requiring proof that goods sold from depot at a lower price were the same as those cleared from the factory.

Upon review, the Tribunal found that Rule 7 of the Valuation Rules dictated that duty should be based on the price prevailing at the depot when goods were cleared from the factory. The Tribunal agreed with the original authority that the excess duty paid at the factory gate had not been recovered from the buyer at the depot, indicating non-transfer of duty burden. The Tribunal disagreed with the Commissioner (Appeals) and upheld the original authority's decision.

The Tribunal referenced a relevant case to support the view that once goods were cleared from the factory to the depot, duty was to be paid based on the prevailing depot price, without the need to track subsequent sales prices. The Tribunal concluded that the appellants had fulfilled the conditions of unjust enrichment by demonstrating the depot price prevailing at the relevant time, rendering the cited cases by the Revenue irrelevant.

In the final decision, the Tribunal set aside the Commissioner (Appeals) order and restored the original authority's decisions, allowing all the appeals in favor of the appellants.