2011 (9) TMI 596 - AT - Central Excise

Interest on Refunds - Held That - When refund was granted by Tribunal but subject to examination by original adjudicating authority for unjust enrichment original adjudicating authority asked for documentary evidences which was submitted only on 28/11/2008 and refund sanctioned on 15/01/2009. Thus refund application completed on 28/11/2008 and refund granted within 3 months, therefore question of grant of interest does not arise at all. Unjust Enrichment - Held That - Refund sanctioning authority has to necessarily examine the invoices issued to the customer to determine the duty incidence that has been passed on to the customers and compare it with the duty amounts that has been paid and only that amount which has not been passed on to the customers and which has been borne by the assessee is liable to be refunded. Certificate by Chartered shall not be conclusive.

Summary

Issues:
1. Refund claim for excess duty paid and unjust enrichment examination.
2. Entitlement to interest on delayed refund payment.
3. Validity of Commissioner (Appeals) orders.
4. Verification of duty burden passed on to customers for refund claim.

Issue 1: Refund claim for excess duty paid and unjust enrichment examination:
M/s. Finolex Cables Limited filed a refund claim for excess duty paid, which was initially rejected by the Assistant Commissioner but later approved by the CESTAT. However, the issue of unjust enrichment was not examined by the lower authorities. The Tribunal remanded the matter to the original adjudicating authority to assess unjust enrichment. The Assistant Commissioner, based on a Chartered Accountant's certificate, sanctioned the refund claim. The Commissioner (Appeals) remanded the matter due to lack of findings on the duty payment in the profit and loss account. The Revenue also appealed, arguing that duty burden passed on to customers was not verified. The Tribunal found the refund application complete only after the submission of evidence in 2008 and rejected the appeal by M/s. Finolex Cables Limited.

Issue 2: Entitlement to interest on delayed refund payment:
The assessee claimed interest on delayed refund payment under Section 11BB of the Central Excise Act, 1944. The Tribunal clarified that interest is payable if the refund is not issued within three months of the application. In this case, the refund was sanctioned within the required timeframe after complete documentation in 2008, hence no interest was due.

Issue 3: Validity of Commissioner (Appeals) orders:
The Commissioner (Appeals) passed conflicting orders on the same issue, leading to confusion. The Tribunal held that the Commissioner lacked the authority to remand the case back to the original authority, thus setting aside both orders.

Issue 4: Verification of duty burden passed on to customers for refund claim:
The Revenue contended that the duty burden passed on to customers was not adequately verified before refund approval. The Tribunal agreed, stating that invoices from the depot should have been examined to determine the duty incidence passed on to customers. The matter was remanded to the Assistant Commissioner for proper verification.

In conclusion, the Tribunal set aside the Commissioner (Appeals) orders, rejected the appeal by M/s. Finolex Cables Limited for interest on delayed refund, and allowed the department's appeal for remand to verify duty burden passed on to customers.