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2011 (3) TMI 1214 - AT - Central ExciseProvisional assessment - refund of security deposit by way of bank guarantee encashed by the department - whether there is requirement of filing a refund claim in the prescribed form? - unjust enrichment - Held that - The period involved in this case is 1992-97 and the refund was due to the party under Rule 9 (B) (5) of the Central Excise Rules, 1944 and the provisions on unjust enrichment did not apply to the said rules at the relevant time. Therefore, the department should have suo motu refunded the amount paid in excess on the basis of a simple letter from the assessee. As held in the case of in the Oswal Agro Mills 1994 (2) TMI 57 - SUPREME COURT OF INDIA the provisions of Section 11B is not attracted when refund arises due to encashment of bank guarantee. Thus the assessee was entitled to refund on the basis of simple letter rather than following the detailed procedure prescribed under Section 11B of the Central Excise Act, 1944. Accordingly allow the appeal filed by the party with consequential relief, if any.
Issues:
1. Refund of excess duty paid due to encashment of bank guarantee during pending appeal. 2. Applicability of Section 11B of the Central Excise Act, 1944 to the refund claim. 3. Doctrine of unjust enrichment in the context of refund arising from bank guarantee encashment. Analysis: Issue 1: Refund of excess duty paid due to encashment of bank guarantee during pending appeal The case involved an appeal against the rejection of a refund claim by the Assistant Commissioner, who had encashed the bank guarantee during the pendency of the appeal. The appellant contended that the encashment of the bank guarantee constituted a pre-deposit of duty, entitling them to a refund without filing a formal claim. The Tribunal noted that the encashment of the bank guarantee during the pendency of the appeal was against CBEC instructions, which prohibited coercive actions during the first appellate stage. The Tribunal emphasized that the appellant was entitled to a refund under Rule 9(B)(5) of the Central Excise Rules, 1944 without the need for a separate refund claim under Section 11B. Issue 2: Applicability of Section 11B of the Central Excise Act, 1944 to the refund claim The appellant argued that the encashment of the bank guarantee did not require a formal refund claim under Section 11B, citing judicial precedents that supported their position. The Tribunal agreed with the appellant, highlighting that the provisions of Section 11B were not attracted when a refund arose due to the encashment of a bank guarantee. The Tribunal referenced the Oswal Agro Mills case, which clarified that the amount secured by a bank guarantee cannot be considered as paid to the Revenue, thus exempting it from the requirements of Section 11B. Issue 3: Doctrine of unjust enrichment in the context of refund arising from bank guarantee encashment The Tribunal considered the argument regarding the doctrine of unjust enrichment raised by the appellant. The appellant contended that the doctrine did not apply to refunds arising from the encashment of bank guarantees. The Tribunal reviewed relevant judicial pronouncements and held that the refund due to the appellant under Rule 9(B)(5) was not subject to the doctrine of unjust enrichment. The Tribunal concluded that the appellant was entitled to a refund based on a simple letter, in line with the judicial precedents and without the need for formal procedures under Section 11B. In conclusion, the Tribunal allowed the appeal filed by the party, granting them the refund of the excess duty paid due to the encashment of the bank guarantee during the pendency of the appeal. The decision was based on the interpretation of relevant rules, judicial pronouncements, and the exemption of such refunds from the requirements of Section 11B, as established by legal precedents.
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