2014 (8) TMI 1031 - AT - Central Excise

Refund claim - rejection of refund claim on unjust enrichment - Held that - We find that in the case of Sudhir Papers Ltd. v. Commissioner of C. Ex., Bangalore-1 (2011 (3) TMI 1443 - KARNATAKA HIGH COURT ) considered the very same issue and came to the conclusion that if credit notes are issued and benefit passed on to the customers, the assessee is entitled to refund of the same. Since the issue is covered by decision of the Hon ble High Court of Karnataka and refund claim has arisen as a result of provisional assessment and in terms of Rule 7(3) of the Central Excise Rules, 2002, such refund is required to be paid by the Assistant Commissioner on his own, we consider that the impugned order has no merits. Accordingly, the impugned order is set aside and the appeal is allowed in favour of assessee

Summary

Issues:
Refund claim arising from de-escalation in prices against provisional assessment under Rule 7 of Central Excise Rules, 2002; Rejection of refund claim on the ground of 'unjust enrichment'; Applicability of credit notes issued due to price reduction; Interpretation of relevant legal provisions and precedents.

Analysis:
The case involved appellants engaged in manufacturing Electrical Distribution Transformers, with a significant portion sold to Electricity Supply Companies (ESCOMS). Purchase Orders issued by M/s. CESC contained provisional prices subject to variation as per IEEMA Price Variation Clause. The supplies were made at provisional prices, and Excise duty/Education Cess were discharged accordingly. The refund claim arose due to a de-escalation in prices, leading to the issuance of credit notes for differential duty and value for each purchase order. However, the claim was rejected on grounds of 'unjust enrichment.'

The appellants argued citing the decision in Crane Betel Nut Works Ltd. and Sudhir Papers Ltd. to support the admissibility of refunds in such cases. The issue revolved around the payment of duty under Rule 7 of Central Excise Rules, 2002, which allows for provisional assessment pending finalization. The rejection of the refund claim was based on the appellants issuing credit notes due to price reduction and already collecting differential duty. The original authority considered 'unjust enrichment' and the applicability of Section 11B in separate refund claims, referencing the case of Grasim Industries v. Commissioner of C. Ex., Bhopal.

The Revenue relied on the decision in Excel Rubber Ltd. v. Commissioner of C. Ex., Hyderabad. However, the Tribunal found that the issue was covered by the decision in Sudhir Papers Ltd. v. Commissioner of C. Ex., Bangalore-1, where the Hon'ble High Court of Karnataka held that issuing credit notes and passing on benefits entitles the assessee to a refund. As the refund claim arose from provisional assessment under Rule 7(3) of the Central Excise Rules, 2002, the Tribunal set aside the impugned order, allowing the appeal with consequential relief to the appellants.