2010 (7) TMI 961 - AT - Central Excise

Quantities found in excess/short - Assessee is a refinery engaged in production of petroleum products by distillation from crude oil. Their finished goods are sold to Oil Marketing Companies (OMCs) on payment of duty - demand of duty on quantities found to have been cleared to OMCs by the Refinery in excess of quantity on which the Refinery paid duty at the time of clearance - demands being set off suo motu against refunds claimed to be due, by the assessee - Held that - once excisable goods have been cleared on payment of duty, the law does not provide for tracking the goods to the buyer s premises to determine the actual duty liability with reference to receipt - post- removal adjustment in duty liability is not permissible. As regards the duty demand on excess removals, we find that the demand of duty and interest is in accordance with law - Right course for the assessee would have been to follow provisional assessment. Notwithstanding the discrepancy between quantities ascertained by the assessee and the buyer, then the transaction value would have been that as agreed mutually in a contract and paid by the OMC. Denial of refund of duty paid on quantities short received by OMCs compared to the quantity on which the Refinery had paid duty - Held that - The issue has arisen due to a clerical mistake on the part of M/s. IOC. There is an automatic systems of debit of duty by the respondents in the account of IOC. Even if mistake occurs, duty in the account of IOC at the end of the respondents automatically gets debited. The only way, in such a register, to correct the mistake is to provide credit to IOC. In the present case it is seen that the invoice was raised on 17-4-2002 and the rectification was done on 5-7-2002 i.e. within a fort-night. If the respondent is not given the refund, it will be traverse of justice, as the respondents will never be able to set the refund of duty paid erroneously or due to a clerical error. Appeal rejected - decided against assessee.

Issues Involved:
1. Demand of duty on excess quantities cleared.
2. Denial of refund for duty paid on quantities short received by OMCs.
3. Application of the principle of unjust enrichment.
4. Legality of post-removal adjustments in duty liability.
5. Penalty imposition on the assessee.

Issue-wise Detailed Analysis:

1. Demand of Duty on Excess Quantities Cleared:

The Commissioner demanded duty on quantities found to have been cleared to OMCs by the Refinery in excess of the quantity on which the Refinery paid duty at the time of clearance. The assessee had been reconciling discrepancies between quantities dispatched and received on a monthly basis, raising debit notes for excess receipts and credit notes for short receipts. The Commissioner held that short payment against one clearance could not be set off against excess payment observed in another clearance, and demanded differential duty along with interest for delays. The Tribunal upheld the demand, finding it in accordance with law, and noted that the practice of reconciliation and netting of liability/refund involved had been in vogue for a long time in respect of such removals made under bond. However, the Tribunal set aside the penalties, citing the absence of contumacious conduct or mala fide on the part of the assessee.

2. Denial of Refund for Duty Paid on Quantities Short Received by OMCs:

The Commissioner (Appeals) sustained orders denying claims for refund of duty paid on quantities short received by OMCs. The Tribunal found that once excisable goods have been cleared on payment of duty, the law does not provide for tracking the goods to the buyer's premises to determine the actual duty liability with reference to receipt. The Tribunal cited the Apex Court's judgment in MRF Ltd. v. Collector of Central Excise, Madras, which held that post-removal adjustment in duty liability is not permissible. The Tribunal concluded that the denial of refund on this reasoning was in order.

3. Application of the Principle of Unjust Enrichment:

The Commissioner (Appeals) rejected the claims for refund on the ground of unjust enrichment, citing the Tribunal's decision in Dutron Plastics and the Larger Bench decision in S. Kumar Ltd. v. CCE. The Tribunal upheld this view, noting that the subsequent issuance of credit notes could not be said to be sufficient for not attracting the provisions of unjust enrichment. The Tribunal also referenced the Apex Court's decision in Sangam Processors (Bhilwara) Ltd. v. Collector of Central Excise, Jaipur, which held that refund of excess duty to the assessee would entail unjust enrichment even if the same was passed on to the buyer through credit notes after clearance of the excisable goods.

4. Legality of Post-Removal Adjustments in Duty Liability:

The Tribunal found that the transaction value adopted at the time of clearance cannot be reduced for whatever reason and refund allowed to the assessee in light of the Apex Court's judgment in MRF Ltd. v. Collector of Central Excise, Madras. The Tribunal noted that the unit value adopted for each transaction was not disputed, and the assessments made on invoices were final with respect to value and quantity. The Tribunal held that the right course for the assessee would have been to follow provisional assessment.

5. Penalty Imposition on the Assessee:

The Tribunal set aside the penalties imposed on the assessee, citing the absence of contumacious conduct or mala fide in engaging in the transactions. The Tribunal referenced the Apex Court's judgment in Hindustan Steel Ltd. v. State of Orissa, which held that in the absence of contumacious conduct in defiance of law, the assessee is not liable to penalty.

Conclusion:

The Tribunal upheld the demands for duty and interest on excess quantities cleared, denied the refund claims for duty paid on quantities short received, and applied the principle of unjust enrichment. The Tribunal also found that post-removal adjustments in duty liability were not permissible and set aside the penalties imposed on the assessee. The appeals filed by BPCL-KRL were rejected.

← Previous Next →