2014 (11) TMI 705 - AT - Central Excise

Waiver of pre deposit - recovery of refund claim - refund claim was sanctioned earlier - Bar of unjust enrichment - whether the refund claim is hit by bar of unjust enrichment - assessee were able to recover the full cost of production including excise duty with surplus - Held that - Prima facie while as per the principle of unjust enrichment, the refund can not result in double benefit to an assessee i.e. refund of excise duty paid as well as recovery of that duty from the customer, the refund should also not result in double loss to the Government i.e. refunding duty to the assessee and also permitting the same amount of cenvat credit to the assessee s customers and for the purpose of refund to an assessee of excess duty paid by him what is relevant is whether or not he had recovered an amount representing the duty from his customers and it is not relevant whether the total price charged by the assessee from his customers i.e. basic price plus excise duty is less than the cost of production and for this reason he had suffered losses. This issue also requires in-depth examination at the stage of final hearing. Therefore at this stage, it cannot be said that the Appellant have prima facie case in their favour. On deposit of this amount within the stipulated period, the requirement of pre-deposit of balance amount of duty demand and interest shall stand waived and recovery thereof stayed - Partial stay granted.

Summary

Issues Involved:
1. Eligibility for exemption notification no.36/87-CE.
2. Applicability of the principle of unjust enrichment.
3. Validity of refund claims and interest thereon.
4. Requirement of pre-deposit for hearing the appeal.

Issue-Wise Detailed Analysis:

1. Eligibility for Exemption Notification No.36/87-CE:
The appellant, a cement manufacturer, claimed a concessional duty rate under notification no.36/87-CE for their plant at Chanderia, Rajasthan, for the period from March 1987 to March 1990. Initially, their claims were rejected by the Assistant Commissioner, but upon appeal, the Commissioner (Appeals) ordered a de novo adjudication. The Tribunal dismissed the department's appeal against this order. Despite further rejections and appeals, the Tribunal ultimately upheld the appellant's eligibility for the exemption.

2. Applicability of the Principle of Unjust Enrichment:
The core dispute was whether the refund claim was barred by the principle of unjust enrichment. The appellant argued that since the duty was paid under protest before the introduction of provisions regarding unjust enrichment in Section 11 B and Chapter IIA, these provisions did not apply. They cited the Supreme Court's judgment in Mafatlal Industries Ltd. However, the Supreme Court later clarified that the principle of unjust enrichment applies even if the duty was paid under protest. The Assistant Director (Cost) reported that the appellant could not recover their cost of production during certain years, suggesting they bore the duty incidence. The Tribunal noted that the invoices showed the duty separately, enabling customers to claim Modvat credit, which could imply the duty incidence was passed on to customers.

3. Validity of Refund Claims and Interest Thereon:
The Assistant Commissioner initially sanctioned the refund but credited most of it to the Consumer Welfare Fund, citing that the appellant did not bear the duty incidence. The Tribunal later directed the refund with consequential relief, but the Supreme Court remanded the matter to reassess unjust enrichment. The Commissioner concluded that the refund was erroneously granted and ordered its recovery. The Tribunal observed that the appellant recovered the full cost of production, including excise duty, in certain years, indicating potential unjust enrichment.

4. Requirement of Pre-Deposit for Hearing the Appeal:
The Tribunal directed the appellant to deposit Rs. 2,00,00,000 within eight weeks as a pre-condition for hearing the appeal. This decision was based on the prima facie assessment that the appellant did not have a strong case, considering the recovery of excise duty from customers and the implications of the Assistant Director (Cost)'s report.

Conclusion:
The Tribunal concluded that the appellant must deposit Rs. 2,00,00,000 for the appeal to be heard, considering the complexities around unjust enrichment and the recovery of duty from customers. The stay application was disposed of with this directive, and compliance was to be reported on 11.09.2014.