1985 (7) TMI 367 - AT - Central Excise

Summary

Issues:
1. Whether the refund claim filed by the appellants has been rightly rejected by the lower authorities.

Analysis:
The appellants, manufacturers of rough die cast rotor cages, contended that these cages were not liable to pay excise duty as they were semi-finished articles. The dispute arose when the Department demanded duty, which the appellants paid under protest. An order in March 1975 by the Collector of Central Excise, Bombay, upheld the appellants' contention that no excise duty was payable on the goods in question. The appellants then claimed a refund of the duty paid from 1972 to 1975 based on this order.

The Assistant Collector rejected the refund claim, stating that since the customers of the appellants had availed proforma credit equal to the duty paid, the claim was not entertainable. The Appellate Collector upheld this decision partially, allowing a refund only for the amount not covered by proforma credit. The appellants argued that they should receive a full refund as they had paid the duty under protest and the Collector's order confirmed no duty was payable. They also cited a Supreme Court judgment on refund of duty collected without legal authority.

The Tribunal found that the appellants had paid the duty under protest and were entitled to a refund as per the Collector's order. The lower authorities' view that proforma credit availed by customers negated the refund claim was deemed unsustainable. The Tribunal noted that Rule 56A allowed for adjustment or recovery of erroneously allowed credits, which the excise authorities failed to consider before denying the refund.

The Tribunal held that the appellants were entitled to the refund as the concept of refund applies to amounts not payable for any reason. The Tribunal disagreed with the Appellate Collector's interpretation of Rule 56A, stating that the variation in duty demand due to an adjudication order qualified for a refund. Therefore, the Tribunal set aside the rejection of the refund claim and allowed the appeal with consequential relief for the appellants.

In a contra opinion, one Member of the Tribunal argued that the refund should only be granted for money paid in excess and not recovered through credits. This Member contended that since the excess amount had been returned through credits, no further refund was warranted. Ultimately, the majority decision set aside the Appellate Collector's order and allowed the appeal in favor of the appellants.

In conclusion, the Tribunal ruled in favor of the appellants, emphasizing their right to a refund of the duty paid under protest based on the Collector's order and the provisions of Rule 56A. The decision highlighted the principle of refunding amounts not legally due and the failure of the excise authorities to consider the adjustment or recovery of credits before denying the refund claim.