2014 (2) TMI 328 - AT - Central Excise

Refund claim u/s 11B - negative price variation - Unjust enrichment - Held that - refund can be granted to the assessee in a situation where the assessments were not made provisional but the price of excisable goods was reduced downward after clearance of the goods as per price variation clause which was in existence in the contract under which goods were being cleared and the buyers adjusted the amount. There are sales prices to be paid on the goods subsequently sold - appellants have taken a categorical stand that on account of negative price variation they have issued the credit notes to their customers by crediting the account of the buyers in their books of accounts. This amount includes incidence of duty also - it can be safely concluded that duty incidence does not stand passed on to the buyers and as such are not hit by the provisions of unjust enrichment - Following decision of CCE Ghaziabad vs. Mahavir Cylinders 2013 (6) TMI 509 - CESTAT NEW DELHI - Decided in favour of assessee.

Summary

Issues: Refund claim rejection on merits, limitation, unjust enrichment

Refund Claim Rejection on Merits:
The appellants, manufacturers of electric transformers, filed a refund claim under section 11 B of the Central Excise Act, which was rejected by lower authorities citing non-resort to provisional assessment under Rule 7 of Central Excise Rules, 2002. The lower authorities held that duty paid at the time of clearance should be considered correct duty, and subsequent price reduction does not entitle refund. However, referencing various decisions, it was established that non-observance of Rule 7 does not make the assessment final if there is a retrospective downward price reduction. The Tribunal's decision in a specific case supported the grant of refund when the price of goods decreased post-clearance due to a price variation clause in the contract. Consequently, the refund claim was allowed on merits.

Limitation:
Regarding limitation, it was noted that except for one invoice, the entire refund claim was considered time-barred by the lower authorities. The advocate did not contest the refund claim for the mentioned invoice, and since the remaining claim fell within the limitation period, it was held to be admissible. Thus, the refund claim was deemed within the limitation period.

Unjust Enrichment:
The issue of unjust enrichment was extensively discussed, citing precedents and decisions. The Tribunal's analysis in a specific case highlighted that where buyers had taken Cenvat credit on initial excise duty paid, the aspect of unjust enrichment was considered. Various judgments were referenced to support the contention that the appellants did not pass on the duty incidence to buyers, thus not falling under the purview of unjust enrichment. The Commissioner (Appeals) was criticized for not following a relevant Tribunal decision due to an ongoing departmental appeal. The appellants' issuance of credit notes to customers, including duty incidence, was deemed as evidence that the duty burden was not transferred to buyers. Consequently, it was concluded that the appellants were not affected by the provisions of unjust enrichment. The impugned order was set aside, and the appeal was allowed in favor of the appellants with consequential relief.

In conclusion, the judgment addressed the rejection of the refund claim on merits, the issue of limitation, and the aspect of unjust enrichment, providing a detailed analysis and referencing relevant legal precedents to support the decision in favor of the appellants.