2015 (1) TMI 722 - AT - Central Excise

Refund claim - refund claim for the duty paid by M/s. Patel Stationers Pvt. Limited on the mixture of natural Graphite and natural Bentonite (clay) for the period March 2006 to December 2006 - adjudicating authority rejected the refund claim on the ground that mixture of natural Graphite and natural Bentonite (clay) is excisable and M/s. Patel Stationers Pvt. Limited has rightly paid the duty - Held that - On perusal of the records, it is revealed from the order of the Commissioner (Appeals) that the mixture of graphite and clay is not bought or sold in the market. The ld. Advocate submits that this mixture has a short life and used captively in the manufacture of pencil lead which attracts Nil rate of duty. The Commissioner (Appeals) observed that the appellant availed the exemption notification and, therefore, it will be treated as excisable goods. In this context, the ld. Advocate contended that, inadvertently, they availed exemption notification and thereafter they contested the excisability of the goods. It is well settled that no product is goods unless shown to be marketable by the department. In the case of United Phosphorous Ltd. (2000 (4) TMI 38 - SUPREME COURT OF INDIA), the Hon ble Supreme Court observed that mere specification in the Dictionary, Excise Tariff and Drawback Schedule is of no consequence. - The lower authorities should have examined the issue on unjust-enrichment and the appellant should be given an opportunity to substantiate their case on the eligibility to refund claim and on unjust-enrichment. - Decided in favour of assessee.

Summary

Issues involved:
1. Classification of a mixture of natural Graphite and natural Bentonite (clay) under Central Excise Tariff Act, 1985.
2. Rejection of refund claim for duty paid on the mixture by a job worker.
3. Just-enrichment and eligibility of the refund claim.

Detailed Analysis:
1. The judgment revolves around the classification issue of a mixture of natural Graphite and natural Bentonite (clay) under the Central Excise Tariff Act, 1985. The appellant, engaged in manufacturing Pencils, used a job worker to manufacture Pencil Lead from the mentioned mixture. The Revenue contended that the mixture should be classified under a different heading, imposing Central Excise duty. The lower authorities rejected the refund claim based on this classification dispute.

2. The appellant argued that a previous Tribunal decision, upheld by the Hon'ble Supreme Court, established that the mixture in question did not amount to manufacture, making it eligible for a refund. The Tribunal's decision emphasized that marketability is a crucial factor, and since the mixture was not bought or sold in the market but used captively for pencil lead manufacturing, it should not be considered excisable goods. The Supreme Court upheld this view, supporting the appellant's claim for a refund.

3. The judgment ultimately set aside the impugned order, allowing the appeal on merits. It directed the adjudicating authority to re-examine the eligibility for the refund claim, address the issue of unjust-enrichment, and consider other relevant aspects. The appellant was granted an opportunity to substantiate their case further on the eligibility for the refund claim and unjust-enrichment, ensuring a comprehensive review of all pertinent issues.

In conclusion, the judgment primarily focuses on the classification of a mixture under the Central Excise Tariff Act, the rejection of a refund claim, and the considerations of unjust-enrichment and refund eligibility. The decision highlights the importance of marketability in determining excisability and provides a detailed analysis of the legal precedents supporting the appellant's position.