2011 (10) TMI 553 - HC - Central Excise

Denial of refund claim - Whether the refund of excess debit of credit equal to excise duty paid on spares and components are relevant for the purpose of Section 11B of the Central Excise Act, 1944 - Held that - Claim for refund of duty can be made in terms of Section 11B of the Central Excise Act, 1944. By that provision, any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise before the expiry of six months from the relevant date in such form and manner as may be prescribed. The application shall be accompanied by such documentary or other evidence including the documents referred to in Section 12A as the applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was collected from or paid by him and the incidence of such duty had not been passed on by him to any other person. The claim for refund would arise only if the incidence of duty had not been passed on. As the onus is on the assessee to prove that the incidence of duty had not been passed on to the customers, the question of claim of refund could not be entertained. For that reason, both the Commissioner of Central Excise (Appeals) and the CESTAT came to the conclusion that the application under Section 11B is to be rejected and they rightly rejected the application. The finding of the Commissioner of Central Excise (Appeals) that in view of the fact that the assessee was unable to prove that the duty incidence had not been passed on, he ordered the sanction of the claim and consequently credited the same to the Consumer Welfare Fund. This finding of the Appellate Authority was confirmed by the CESTAT. As the assessee has not established the right to refund of claim in terms of Section 11B, the substantial questions of law raised by the assessee require no consideration and for that reason, the appeal must fail. Decided against assessee.

Summary

Issues:
1. Interpretation of Section 11B of the Central Excise Act, 1944 regarding refund of excess debit of credit equal to excise duty paid on spares and components.
2. Requirement of filing a refund claim under Rule 173S of the Central Excise Rules, 1944 for excess debit of credit.
3. Applicability of Section 11B of the Central Excise Act, 1944 to Modvat credit and refund.
4. Application of the principle of unjust enrichment under Section 11B for excess debit of Modvat credit on inputs diverted to duty paid spares godown.
5. Determining whether refund of wrong/excess debit made in RG-23A Part II or RG-23C Part II falls under Section 11B or if the assessee can take suo motu credit.
6. Clarification on whether debits and credits in RG-23A or C are adjustments or duty for the purpose of Section 11A and Section 11B.
7. Possibility of denying refund of excess credit debited due to diversion of spares originally meant for OE purpose to DPSG.
8. Variation in the character of refund for duty paid-credit availed components/spares diverted to DPSG under Section 11B.

Analysis:
1. The case involved a challenge regarding the refund of excess duty paid on Modvat inputs diverted to a duty paid spares godown. The appellant claimed refund under Notification No. 28/95-C.E., but the authorities denied the claim citing failure to prove that the duty incidence was not passed on to others within the specified time limit of six months from the relevant date. The court emphasized that compliance with Section 11B is crucial for refund claims, requiring the claimant to prove non-passing of duty incidence and submit necessary documents within the prescribed period.

2. The appellant argued that the authorities did not consider the entitlement of refund under Notification No. 28/95 dated 29-6-1995, limiting the duty reversal to the extent of Modvat credit availed. However, the court upheld the lower authorities' decisions, stating that the onus is on the assessee to demonstrate non-passing of duty incidence to customers. As the appellant failed to establish this, the claim for refund was rightly rejected, leading to the dismissal of the appeal.

3. The court clarified that the claim for refund must adhere to the conditions set out in Section 11B, emphasizing the burden on the assessee to prove non-passing of duty incidence. Without meeting these requirements, the entitlement to benefits under subsequent notifications, such as the one dated 29-6-1995, cannot be considered. As the appellant failed to satisfy the conditions for refund, the substantial questions of law raised were deemed irrelevant, resulting in the dismissal of the civil miscellaneous appeal.