2014 (2) TMI 877 - AT - Central Excise

Rejection of refund claim - subsequent fluctuation in the prices - issuance of credit notes - Unjust enrichment under section 11B of the Central Excise Act - Held that - subsequent reduction in prices by passing on higher discounts to the customers after the clearance of the goods cannot alter the excise duty liability of the appellant M/s Videocon - Once the assessee has cleared the goods on the classification and price indicated by him at the time of the removal of the goods from the factory gate, the assessee becomes liable to payment of duty on that date and time and subsequent reduction in prices for whatever reason cannot be a matter of concern to the Central Excise Department as the liability to payment of excise duty was concerned. This is the view which was taken by the Tribunal in the case of Indo Hacks Ltd. v. Collector of Central Excise, Hyderabad - 1985 (2) TMI 137 - CEGAT, NEW DELHI and it seems to us that the Tribunal s view that the duty is chargeable at the rate and price when the commodity is cleared at the factory gate and not on the price reduced at a subsequent date is unexceptionable. Besides as rightly observed by the Tribunal the subsequent fluctuation in the prices of the commodity can have no relevance whatsoever so far as the liability to pay excise duty is concerned - Decided against assessee.

Issues Involved:
1. Eligibility for refund of Rs. 1,07,98,905/-.
2. Eligibility for payment of interest on the refund.
3. Application of unjust enrichment.
4. Retrospective revision of price declarations.
5. Relevance of credit notes in overcoming the bar of unjust enrichment.
6. Provisional assessment under Rule 9B of the Central Excise Rules, 1944.
7. Legal precedents and their applicability.

Detailed Analysis:

1. Eligibility for Refund of Rs. 1,07,98,905/-:
The core issue was whether the appellant, M/s. Videocon International Ltd., was eligible for a refund of Rs. 1,07,98,905/-. The Tribunal noted that the appellant had initially declared lower discounts in their price declarations filed under Rule 173C of the Central Excise Rules, 1944. Later, they claimed higher discounts retrospectively and filed revised price declarations. The Tribunal found contradictions in the appellant's arguments regarding a communication gap between the factory and depots about the discounts. The Tribunal concluded that the higher discounts were not known in advance and thus, the revised price declarations could not be applied retrospectively. Consequently, the refund claim was deemed ineligible.

2. Eligibility for Payment of Interest on the Refund:
Since the primary refund claim was rejected, the issue of eligibility for interest on the refund became moot. The Tribunal did not grant any interest as the refund itself was not allowed.

3. Application of Unjust Enrichment:
The Tribunal examined whether the refund claim was barred by the principle of unjust enrichment. It was argued by the appellant that the issuance of credit notes to customers for the differential amount should negate the unjust enrichment clause. However, the Tribunal relied on precedents such as the Larger Bench decisions in S. Kumars Ltd. and Grasim Ind. (Chemical Division), which held that post-clearance adjustments like credit notes do not overcome the bar of unjust enrichment. Therefore, the refund was rejected on this ground as well.

4. Retrospective Revision of Price Declarations:
The Tribunal emphasized that price declarations under Rule 173C are meant to be prospective, not retrospective. It cited the Supreme Court's decision in Rainbow Industries (P) Ltd., which held that revisions in price declarations are only effective prospectively. Thus, the revised price declarations filed by Videocon on 17-6-97 could not apply retrospectively from October 1996 onwards.

5. Relevance of Credit Notes in Overcoming the Bar of Unjust Enrichment:
The Tribunal discussed various cases, including the hon'ble Apex Court's ruling in Grasim Industries Ltd. and Sangam Processors (Bhilwara) Ltd., which established that issuing credit notes after the clearance of goods does not help in overcoming the bar of unjust enrichment. The Tribunal held that the issuance of credit notes by Videocon did not negate the principle of unjust enrichment.

6. Provisional Assessment under Rule 9B of the Central Excise Rules, 1944:
The Tribunal noted that Videocon did not opt for provisional assessment under Rule 9B, which allows for duty assessment when the value of goods is uncertain. Since Videocon did not follow this procedure, their claim for a refund based on revised price declarations was further weakened.

7. Legal Precedents and Their Applicability:
The Tribunal analyzed several legal precedents cited by both parties. It noted that the decisions in Adison & Co. and A.K. Spintex were not applicable to the present case due to different factual situations and the pending appeal in the Supreme Court. The Tribunal also highlighted the Supreme Court's decision in MRF Ltd., which confirmed that subsequent price reductions do not affect the excise duty liability determined at the time of removal of goods.

Conclusion:
The Tribunal allowed the appeals filed by Revenue, rejecting the refund claim of Rs. 1,07,98,905/- and the associated interest claim by M/s. Videocon International Ltd. The decision was based on the principles of unjust enrichment, the prospective application of price declarations, and the non-applicability of cited legal precedents to the specific facts of the case.

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