2015 (9) TMI 877 - HC - Central Excise

Refund of the differential amount - Trade discount - provisional assessment - Held that - Order of provisional assessment was made on 13-2-1995 and Excise duty so determined was paid. At the stage of passing of final order of assessment, the appellant placed before the Deputy Commissioner, the particulars of the discounts given by it in the relevant forms. The Deputy Commissioner was satisfied about the permissibility of such discounts, having regard to the purport of the law, as it stood then. The order holding that the discounts are in accordance with law has become final. It is only at the stage of refund of the differential amount, that certain controversy has arisen. - The manufacturer was found to have collected the amount, representing the excise duty and when the question of refund on the basis of an order passed in the appeal arose, the plea as to unjust enrichment was taken into account. Once the manufacturer has collected the component of excise duty, refund on account of the adjudication at a subsequent stage was found to be linked with the feasibility of passing on the benefit to the end customer. Such a situation does not obtain in the instant case. The trade discount was given to a wholesaler and not in the course of any retail sale. Further, it was paid at the prescribed point of sale, namely, at the stage of removal of goods from the place of manufacture as well as the depot, in favour of the wholesaler. The order passed by the Deputy Commissioner on 30-12-2002 in this behalf, became final. The hurdle in the context of refund, namely, identification of the end customer from whom the component of excise duty does not arise in this case. The particulars furnished under Rules 173C and 173G contained the names of the persons who were extended the trade discounts. Since it was in the form of a credit note, it becomes clear that the corresponding burden did not pass on to the end customer. - Decided in favour of assessee.

Issues:
1. Provisional assessment under Rule 9B of the Central Excise Rules, 1944.
2. Claim for refund of differential amount due to trade discounts.
3. Disallowance of refund based on the timing of trade discounts.
4. Interpretation of Section 11B of the Central Excise Act.
5. Applicability of the principle of unjust enrichment.
6. Comparison with previous judgments and their impact on the case.
7. Identification of end customer for excise duty refund.
8. Judicial precedent on the denial of refund based on unjust enrichment.

Issue 1: Provisional Assessment under Rule 9B:
The appellant, a manufacturer of pesticides, underwent provisional assessment under Rule 9B of the Central Excise Rules, 1944, on 13-2-1995, for which excise duty was paid. Subsequently, final assessment was conducted, and trade discounts were given to promote sales.

Issue 2: Claim for Refund of Differential Amount:
Upon final assessment, the appellant submitted a claim for refund of the differential amount based on the discounts given. The Deputy Commissioner initially allowed the claim, but later issued a show cause notice disallowing the refund under Section 11B of the Act, leading to a rejection of the claim.

Issue 3: Disallowance of Refund Based on Timing of Trade Discounts:
The Deputy Commissioner disallowed the refund claim citing that trade discounts were given after the clearance of goods, not falling within the ambit of Section 11B. The Commissioner of Customs & C. Excise reversed this decision, which was further challenged before the CESTAT.

Issue 4: Interpretation of Section 11B of the Act:
The controversy arose regarding the interpretation of Section 11B concerning the timing of trade discounts and its impact on the eligibility for a refund of excise duty.

Issue 5: Principle of Unjust Enrichment:
The CESTAT relied on the principle of unjust enrichment, as seen in previous judgments, to disallow the refund claim. The appellant argued that the trade discounts did not result in unjust enrichment as they were passed on to wholesalers and not end customers.

Issue 6: Comparison with Previous Judgments:
The CESTAT's decision was influenced by previous judgments like S. Kumar Ltd. v. Commissioner of Central Excise, Indore, which dealt with unjust enrichment based on the passing on of benefits to end customers.

Issue 7: Identification of End Customer for Excise Duty Refund:
In this case, the challenge was to identify the end customer to determine if the excise duty burden was passed on. The details provided by the appellant indicated that the burden did not reach the end customer due to the nature of trade discounts.

Issue 8: Judicial Precedent on Denial of Refund:
The High Court referenced A.P Paper Mills Limited v. Commissioner of Central Excise and Sudhir Papers Ltd. v. Commissioner of C. Ex., Bangalore, to support the appellant's claim that the refund cannot be denied based on the principle of unjust enrichment. The Court allowed the appeal, considering the unique circumstances of the case and the absence of unjust enrichment.

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