2007 (10) TMI 423 - HC - Central Excise

Provisional assessment - refund - unjust enrichment - Assessment of goods on provisional basis on the ground that the quantum of deductions e.g. cash discount, quantity discount and rate difference were not known at the time of removal of goods which came to be known at a later date - request for provisional assessment was granted, refund held by the Commissioner (Appeals) as well as the Tribunal that once it has been proved as a fact that incidence of tax has not been passed on to the consumer then the refund by credit notes has to go back to them only. In such a case the principle of unjust enrichment would not be attracted because the duty has not been collected and pocketed by the assessee-respondent, diverting such an amount to the Consumer Welfare Fund would be wholly unauthorized and Article 265 of the Constitution would make such an order wholly unconstitutional, appeal filed by the revenue-appellant is without any substance and the same is accordingly dismissed.

Summary

Issues:
Provisional assessment for goods, refund amount due to assessee, burden of duty not passed on, Consumer Welfare Fund, unjust enrichment, constitutionality of diverting refund.

Analysis:
The judgment involves a dispute regarding the refund amount of Rs. 347679/- due to the assessee-respondent after provisional assessment of goods for the period from 1-4-2002 to 31-3-2003. The Commissioner had granted provisional assessment based on the assessee's request due to unknown deductions at the time of goods removal. Subsequently, the final assessments led to the refund amount, which was to be credited to the Consumer Welfare Fund if the burden of duty was passed on. The adjudicating authority ordered the refund to be credited to the Fund, leading to an appeal by the revenue-appellant and cross-objections by the assessee-respondent.

The Commissioner and the Tribunal, in their earlier orders, emphasized that if the tax burden was not passed on to the consumer, the refund should rightfully go back to the assessee-respondent. They held that in such cases, the principle of unjust enrichment does not apply as the duty was not collected by the assessee. The diversion of the refund to the Consumer Welfare Fund was deemed unauthorized, and it was argued that such an action would be unconstitutional under Article 265 of the Constitution.

The High Court, after considering the arguments, dismissed the appeal filed by the revenue-appellant. The Court concurred with the Commissioner and Tribunal's findings that in cases where the tax burden was not transferred to the consumer, the refund should be returned to the assessee. The Court highlighted that diverting the refund to the Consumer Welfare Fund in such circumstances would be unconstitutional, emphasizing the importance of Article 265 in ensuring the legality of such actions. Therefore, the Court upheld the decision that the refund amount should be rightfully returned to the assessee-respondent, and not diverted to the Consumer Welfare Fund.