2013 (8) TMI 792 - AT - Central Excise

Provisional Assessment - Refund Claim - Claim of interest - rejection of refund claim on the ground that the appellant did not challenge the order finalizing the provisional assessment - Held that - the refund claim could not have been rejected on the ground that the finalization order has not been challenged. - No doubt that there are no estoppels in statutory matters. Nevertheless, it is the duty of the officers also to advice the assessee properly. Having returned the refund claim with an observation that it is premature, which should have been filed after finalization of the assessment, the rejection of the refund claim after finalizing on the ground that the assessment order was not challenged, to say the least is illogical and in view of the observations made is illegal also since the Assistant Commissioner who is implementing the Central Excise Act and Rules did not even bother to follow the rules and provisions of the Act before making such observations. - Decided in favor of assessee. Regarding interest on refund - Held that - According to Rule 7(5) of Central Excise Rules, 2002, where the assessee was entitled to refund consequent to order of final assessment under sub-rule (3), subject to this sub-rule (6), provides for verification of unjust enrichment, there shall be paid an interest on such refund at the rate specified by the Central Government by Notification issued under Section 11BB of the Act from the first day of the month succeeding the month by which such refund is determined, till the date of refund. Unjust Enrichment Opportunity to Produce evidence - Whether the AC was correct in taking a view that refund was not admissible on the ground of unjust enrichment at the time of finalization of the assessment in the absence of any evidence produced by the assessee or without giving an opportunity to the assessee - Held that - besides the CA certificate which itself contains the relevant details, the appellant had produced direct sales register, the details of discount passed on and also an affidavit by the DGM (works). Issuance of Credit Notes - The appellants have submitted documents for finalization within three months from December 31st, 2010 and therefore the credit notes were issued much before the two years period and further, from the ledgers and the documents produced, it was quite clear that there cannot be any doubt about the passing on the benefit of discount to the dealers - Refund allowed - Decided in favor of Assessee.

Issues Involved:
1. Whether the refund claim can be rejected on the ground that the appellant did not challenge the order finalizing the provisional assessment.
2. Whether the refund claim can be rejected on the ground of unjust enrichment.

Issue-wise Detailed Analysis:

1. Non-challenge of Provisional Assessment Order:

The appellant's refund claim was rejected because they did not challenge the order finalizing the provisional assessment for November and December 2010. The lower authorities concluded that since the appellant did not contest the finalization order, the refund claim could not be considered valid. The Assistant Commissioner had noted that the appellant failed to demonstrate that the duty element claimed as a refund was not passed on to the customers.

In March 2011, the appellant filed a refund claim for clearances made in November and December 2010. The department initially returned the claim, stating it was premature as the provisional assessment was not finalized. Subsequently, the provisional assessment was finalized in July 2011, determining the appellant was eligible for a refund of Rs. 2,04,310/- for factory gate clearances but simultaneously noted that no evidence was provided to show the duty burden was not passed on. This order was not challenged by the appellant and became a basis for rejecting the refund claim filed in October 2007.

The Tribunal noted that under Rule 7(5) of the Central Excise Rules, 2002, the refund consequent to the final assessment is subject to verification of unjust enrichment. The Assistant Commissioner's conclusion that the refund was inadmissible due to unjust enrichment without giving the appellant an opportunity to produce evidence was deemed incorrect. The Tribunal emphasized that the eligibility for a refund should not have been determined at the finalization stage, as per Section 11B(3) of the Central Excise Act, 1944, which mandates that no refund shall be made except as provided in sub-section (2).

The Tribunal found the rejection of the refund claim on the ground that the finalization order was not challenged to be illogical and illegal. It was highlighted that the department had previously returned the refund claim as premature, implying it should be filed post-assessment finalization. Therefore, rejecting the claim on the basis that the finalization order was not contested was contradictory and invalid.

2. Unjust Enrichment:

The appellant's refund claim was also rejected on the grounds of unjust enrichment. The Chartered Accountant (CA) certificate provided by the appellant indicated that additional discounts were allowed and detailed the transactions, supported by the sales register and an affidavit from the Deputy General Manager (DGM) (Works). The original adjudicating authority found these documents insufficient to conclude that the duty burden was not passed on to the customers.

The Tribunal referred to the Rajasthan High Court's decision in A.K. Spintex Ltd., which stated that the presumption of unjust enrichment is rebuttable upon the production of evidence by the assessee. The Tribunal noted that the authorities failed to examine the merits of the appellant's claim and did not conduct a proper verification of the evidence provided. It was highlighted that the authorities could have verified the claims with the dealers or examined the records more thoroughly.

The Tribunal found that the appellant had provided sufficient evidence to rebut the presumption of unjust enrichment. The CA certificate, sales register, and affidavit collectively demonstrated that the duty burden was not passed on to the customers. The Tribunal criticized the lower authorities for not specifying what additional evidence was required and for not conducting a detailed verification of the claims.

Order-in-Appeal Consideration:

The Tribunal reviewed the Order-in-Appeal and found inconsistencies and lack of clarity in the Commissioner (A)'s observations. The Commissioner (A) mentioned that the appellant did not produce debtors' ledgers but did not explain why these were necessary or how they would affect the unjust enrichment determination. The Tribunal noted that the Commissioner (A) failed to provide a coherent rationale for considering the appeal time-barred and did not properly address the issues raised.

Conclusion:

The Tribunal allowed the appeal, concluding that the grounds for rejecting the refund claim were invalid. The appellant was found eligible for the refund, and the appeal was allowed with consequential relief. The Tribunal emphasized the need for proper examination and verification of evidence before rejecting refund claims on the grounds of unjust enrichment.

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