2011 (4) TMI 900 - AT - Central Excise

Cable Jointing Kits (CJK) manufactured - whether the respondents had right to realise the duty from the buyers on CJK when such goods were not manufactured and were not dutiable as held by the Tribunal and affirmed by the Apex Court - Held that - As during the period of dispute though no duty was payable on the CJK, the respondents paid the duty on the same. There is no dispute that the duty so paid by the respondent had been recovered from their customers. It is not the case of the department that the amount collected by the respondent as duty in respect of the clearances of CJK from their customers was not paid to the Government since the amount collected in respect of sale of CJKs as excise duty was paid by the respondent to the Government and, as such, there is no contravention of the provisions of Section 11 D, the question of asking them to pay this amount to the Government does not arise. Entitlement to adjustment of the duty payable on the intermediate products against the duty paid on CJKs which were not dutiable - disallowance on unjust enrichment - Held that - As the amount representing duty collected by the respondent was paid by them to the Government and by the process of adjustment, it is not being refunded to the respondent. The process of adjustment of duty paid on CJK on which no duty is payable, towards duty liability in respect of the intermediate products, on which duty is payable, amounts to just changing the head under which the duty had been paid and so long as the duty is not being refunded to the respondent, there would not be any unjust enrichment - there is no bar on adjustment of the duty paid in respect of the non-excisable item, towards the duty liability in respect of the dutiable product and no unjust enrichment takes place as the amount paid by the respondent to the Government as excise duty on CJK, has remained with the Government - in favour of assessee.

Summary

Issues Involved:
1. Right to realize duty from buyers on non-manufactured and non-dutiable goods (CJK).
2. Obligation to deposit duty realized on non-dutiable goods into the treasury.
3. Entitlement to adjust duty payable on intermediate goods against duty paid on non-dutiable goods (CJK).

Comprehensive Issue-Wise Detailed Analysis:

1. Right to Realize Duty from Buyers on Non-Manufactured and Non-Dutiable Goods (CJK):
The Tribunal addressed whether the respondent had the right to realize duty from buyers on CJK, which were not manufactured and not dutiable as held by the Tribunal and affirmed by the Apex Court. The Tribunal found that prior to the judgment, the respondent was paying duty on CJK, treating them as excisable. The respondent continued paying duty even after the favorable judgment. Since central excise duty is an indirect tax, the respondent could recover the same from customers. The Tribunal concluded that the respondent had the right to realize duty from buyers on CJK during the period they were paying duty.

2. Obligation to Deposit Duty Realized on Non-Dutiable Goods into the Treasury:
The Tribunal examined whether the respondent should deposit the duty realized on CJK into the treasury following the Apex Court's ratio in Sahakari Khand Udyog Mandal Ltd. The Tribunal noted that the respondent paid the duty collected from customers to the Government, thus complying with Section 11 D of the Central Excise Act, 1944. Since the amount collected as duty was paid to the Government, there was no contravention of Section 11 D, and the respondent was not required to deposit any additional amount into the treasury.

3. Entitlement to Adjust Duty Payable on Intermediate Goods Against Duty Paid on Non-Dutiable Goods (CJK):
The Tribunal considered whether the respondent was entitled to adjust the duty payable on intermediate products against the duty paid on CJK. The department argued that such adjustment would amount to a refund, resulting in unjust enrichment. However, the Tribunal found that unjust enrichment occurs when an amount representing duty is collected from customers and either not paid to the Government or refunded to the assessee. In this case, the duty collected was paid to the Government, and no refund was being sought, only an adjustment of the duty paid on CJK against the duty liability on intermediate products. The Tribunal concluded that this adjustment did not amount to unjust enrichment and was permissible, agreeing with the Member (Technical).

Conclusion:
The Tribunal ruled that the respondent had the right to realize duty from buyers on CJK, was not required to deposit additional amounts into the treasury under Section 11 D, and was entitled to adjust the duty payable on intermediate products against the duty paid on CJK. The reference was disposed of accordingly.