2014 (2) TMI 445 - HC - Central Excise

Denial of refund claim - Bar of limitation - Whether Tribunal was justified in holding that the refund claim is barred by limitation except the only small part thereof which forms part of the endorsement in the personal Reserve Account - Held that - where a person proposes to contest his liability by way of appeal, revision in the higher courts, he would naturally pay duty, whenever he does, under protest. It is difficult to imagine that a manufacturer would pay the duty without protest even when he contests levy of duty, its rate, classification or any other aspect. If one reads second proviso to sub-section (1) of Section 11B along with definition of relevant date , there is no room for any apprehension - no refund shall be ordered unless claimant establishes that he has not passed on the burden to others. Tribunal committed no error in recording the findings that the claim was barred by time, as even on the procedure prevalent prior to Mafatlal s case, Rule 223B was not fully complied with. If it is necessary to show that burden has not been passed on to the consumer, Rule 223B had to be complied with, and in that case not only endorsement in the PLA account but also gate passes should have indicated that the passes have been issued under protest - Decided against assessee.

Summary

Issues:
1. Interpretation of refund claim limitation period.
2. Application of undue enrichment principle.
3. Compliance with Central Excise Rules regarding duty paid under protest.
4. Burden of proof on claimant for refund.
5. Consumer Welfare Fund allocation.

Interpretation of Refund Claim Limitation Period:
The case involved a dispute over the refund claim for duty paid on Gummed paper Tape. The Tribunal held that the refund claim was mostly barred by limitation, except for a small part related to duty paid under protest. The appellant's refund claim covered a period from 1-3-1971 to 26-2-1986. The Asstt. Commissioner found an amount payable under Section 11B, which was to be credited to the Consumer Welfare Fund. The Tribunal concluded that the claim was time-barred for most of the period, except for a specific duration when duty was paid under protest, as per the Central Excise Rules.

Application of Undue Enrichment Principle:
The Tribunal referred to the principle of undue enrichment, emphasizing the importance of contesting duty liability under protest. It highlighted the significance of complying with the law after the Supreme Court's decision in Mafatlal Industries Ltd. The Tribunal noted that a manufacturer contesting duty would naturally pay under protest. The amended Section 11B of the Central Excise Act required claimants to establish that they had not passed on the burden to others before a refund could be ordered.

Compliance with Central Excise Rules Regarding Duty Paid Under Protest:
The Tribunal observed that the endorsement on the PLA account, as required by Rule 223B of the Central Excise Rules, was not fully complied with. The rule mandated that duty payable under protest should be endorsed on various documents, including gate passes. Non-compliance with Rule 223B raised questions about the burden not being passed on to the consumer, crucial for refund eligibility.

Burden of Proof on Claimant for Refund:
The Supreme Court's stance was clear that no refund would be granted unless the claimant demonstrated that the burden had not been transferred to others. The Tribunal's decision aligned with this principle, emphasizing the need for proper compliance with rules and procedures to support refund claims and avoid passing on the burden to consumers.

Consumer Welfare Fund Allocation:
The appellant argued that even if the refund was not admissible, the amount should be directed to the Consumer Welfare Fund. The Tribunal's findings favored the Revenue, rejecting the appellant's claim due to time limitations and non-compliance with procedural requirements. The judgment upheld the Tribunal's decision, finding no grounds to interfere with its conclusions, ultimately ruling in favor of the Revenue and against the appellant-assessee.