2011 (8) TMI 989 - AT - Central Excise

Denial of refund claim - Unjust enrichment - Held that - there was no such exchange of debit notes and credit notes. Of course credit notes or cheques were issued by the assessee to their dealers. But the dealers did not reciprocate with debit notes. In this scenario it cannot be held that the incidence of duty was actually passed on to the dealers. The burden was on the assessee under Section 12B of the Central Excise Act to establish that the burden of duty claimed as refund had been passed on to the buyers (dealers). There is nothing on record to indicate that this burden was discharged beyond the pale of doubt. Clearly therefore the bar of unjust enrichment would operate against the assessee - mere issuance of credit notes by a refund claimant (assessee) subsequent to clearance of goods would not obliterate the bar of unjust enrichment - Following decision of S. Kumar s Ltd. v. CCE Indore 2003 (2) TMI 85 - CEGAT NEW DELHI - Decided in favour of Revenue.

Summary

Issues:
Appeals against grant of refunds to the respondent based on timely payment discounts; Unjust enrichment in refund claims; Interpretation of relevant case law on unjust enrichment.

Analysis:
1. The appeals were filed by the Revenue against the grant of refunds to the respondent, relating to three specific refund claims. The respondent had cleared products to dealers, granting a 3% timely payment discount, for which they later claimed a refund of the duty paid on the discounted amount. The original authority allowed the refunds without unjust enrichment, as evidence showed that the dealers did not pass on the benefit to their customers.

2. The orders of the original authority were challenged by the Revenue before the Commissioner (Appeals), who upheld the decision based on relevant case law, including the judgment of the Hon'ble High Court of Rajasthan and decisions of the Tribunal. The Revenue, however, argued that the High Court's judgment was distinguishable, emphasizing the issue of unjust enrichment and citing various legal precedents to support their position.

3. The respondent's counsel relied on previous Tribunal decisions in their favor and the High Court's judgment cited by the lower appellate authority. The Tribunal considered the submissions and case law from both sides, focusing on the issue of unjust enrichment. The Tribunal found that the burden of duty claimed as a refund had not been proven to be passed on to the buyers, indicating that unjust enrichment would apply.

4. The Tribunal referred to the High Court's judgment involving the exchange of debit and credit notes between the seller and the buyer, which was not the case in the present situation. As the dealers did not reciprocate with debit notes, the Tribunal concluded that the burden of duty had not been passed on to them. The Tribunal highlighted the requirement under Section 12B of the Central Excise Act to establish the passing on of the duty burden, which was not fulfilled in this case.

5. The Tribunal aligned its decision with the precedent set by the Larger Bench, emphasizing that the mere issuance of credit notes by the assessee after goods clearance did not remove the bar of unjust enrichment. Consequently, the Tribunal set aside the impugned orders and allowed the appeals filed by the Revenue, emphasizing the importance of the precedent in determining the outcome of the case.