2012 (1) TMI 111 - AT - Central Excise

Waiver of pre deposit - Denial of refund claim - Unjust enrichment - Held that - duty for the entire month of April, 2010 had been paid in the beginning of month - 5th April, 2010 at the rate of duty in force at that time. The rate of duty was reduced only w.e.f. 13-4-2010. In view of this, we are of prima facie view that in respect of clearances w.e.f. 13th April, 2010 the appellant could not have recovered duty at the higher rate from their customers. We find that the Tribunal in its judgments in cases of Shri Rajendra Rolling Mills v. C.C.E., Ahmedabad reported in 2004 (2) TMI 138 - CESTAT, MUMBAI and C.C.E., Mumbai-V v. Shree Ram Textile reported in 2005 (9) TMI 154 - CESTAT, MUMBAI has held that the provision of Section 11B are not applicable for refund of excess duty paid under compounded levy scheme. We, therefore, of prima facie view that in this case the refund claim is not hit by principle of unjust enrichment. The requirement of pre-deposit of Cenvat credit demand and interest is, therefore, waived for hearing of the appeal and recovery thereof is stayed till the disposal of the appeal - Stay granted.

Summary

Issues:
1. Refund of excess duty paid under compounded levy scheme.
2. Applicability of Section 11B of Central Excise Act regarding unjust enrichment.
3. Requirement of pre-deposit of Cenvat credit demand and interest.

Analysis:
1. The appellant, engaged in manufacturing chewing tobacco chargeable to Central Excise duty, paid excess duty due to a reduction in duty rates. The appellant applied for a refund under Rule 9 of the Compounded Levy Rules, which allows for refunds in specific cases. The Assistant Commissioner sanctioned the refund, but the Commissioner (Appeals) reversed this decision, citing unjust enrichment. The appellant filed an appeal against this decision.

2. The appellant argued that the Compounded Levy Rules are self-contained and that Section 11B of the Central Excise Act, concerning unjust enrichment, does not apply. They relied on precedents where the Tribunal held that Section 11B does not apply to refunds under a compounded levy scheme. The appellant contended that the duty under the scheme is akin to a deposit and does not involve passing on the incidence to third parties. The Departmental Representative opposed the waiver of pre-deposit, citing the principle of unjust enrichment upheld by the Supreme Court.

3. The Tribunal noted that the duty for April 2010 was paid before the rate reduction on April 13, 2010. It was observed that the appellant could not have recovered the higher duty rate from customers for clearances post rate reduction. Referring to previous judgments, the Tribunal held that Section 11B does not apply to refunds under a compounded levy scheme. Consequently, the Tribunal waived the pre-deposit requirement for hearing the appeal and stayed the recovery pending appeal disposal. This decision was pronounced in open court.

This judgment addresses the issues of refund under a compounded levy scheme, the application of Section 11B regarding unjust enrichment, and the pre-deposit requirement for Cenvat credit demand and interest. The Tribunal's decision provides clarity on the refund process under the specific scheme and the principle of unjust enrichment in such cases.