2015 (11) TMI 371 - AT - Central Excise

Refund - unjust enrichment - excess payment of duty due to valuation dispute - appellant then paid duty on the value determined under section 4A for the period 19.11.2002 to 15.12.2003 under protest - later it was held that duty was payable on value u/s 4 - Whether the appellant is eligible for refund of differential duty - Held that - Amount provided by HLL to the Appellant Company were given as unsecured loan , vide clear understanding, obligation and undertaking on the part of the Appellant Company that upon final decision on merits relating to the correct amount of duty payable, the refund of differential duty so made, would be returned by the Appellant Company to HLL. - We do not find any whisper about an agreement/undertaking between the appellant and the department whereby the department has agreed to refund the differential duty to the appellant unconditionally. - From the perusal of sub-section (2) of section 11B, we find that sub-section (2) lays down the conditions to be fulfilled to be eligible for refund of duty. Sub-section (3) makes clear that notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court, the refund shall be made only if the condition stated in sub-section (2) are fulfilled. Clause (d) of sub-section (2) provides that the manufacturer has to establish that the incidence of such duty has not passed on to any other person. If the incidence of duty is passed on to any other person, the claim of refund would be hit by the bar of unjust enrichment. The provision of law as stated above makes it clear that it is burden of the appellant/applicant to establish that the incidence of duty has not been passed on any other persons. In view of sub-section (3) of section 11B, the first leg of argument of the appellant fails. The goods manufactured by the appellant was sold to HLL in terms of the agreement entered into between them. HLL in turn sells the products to redistributors/stockist, who are large wholesalers of the various confectionary products and other products. The redistributors/stockist have the option of selling directly to the wholesalers in an area which are not directly covered by the redistributors/stockiest. In such situation, it is for the appellant to establish with documents that the incidence of duty has not been passed on to any other person. - if in the invoices raised by the Appellant to HLL, the higher duty paid on the value determined under section 4A had been mentioned and the Appellant had received only the lower amount of duty paid on the value determined under section 4, and the difference between the duty payable under section 4 and the higher duty payable under section 4A had been received by the Appellant from HLL in the form of a loan which had been utilized by the appellant to pay the higher duty to the Department, and which in terms of legally enforceable Agreement of the appellant with HLL was to be returned to HLL as soon as the Appellant gets refund of the excise duty; the refund would not be hit by the bar of unjust enrichment. - Matter remanded back - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for refund of differential duty.
2. Determination of valuation under Section 4 or Section 4A of the Central Excise Act, 1944.
3. Applicability of the bar of unjust enrichment on the refund claim.

Issue-wise Detailed Analysis:

1. Eligibility for Refund of Differential Duty:
The appellant, a job work manufacturer for HLL, sought a refund of differential duty amounting to Rs. 1,88,57,557/-. Initially, the appellant paid duty under Section 4 of the Central Excise Act, 1944, but the Department contended that the value should be determined under Section 4A, leading to a higher duty payment under protest. The appellant filed a writ petition, and the High Court stated that if the valuation dispute was resolved in favor of the appellant, they would be entitled to a refund. However, the Tribunal noted that the High Court did not address the issue of unjust enrichment or the appellant's eligibility for a refund under the law.

2. Determination of Valuation under Section 4 or Section 4A:
The valuation dispute centered on whether the duty should be assessed under Section 4 or Section 4A of the Central Excise Act. The Assistant Commissioner initially ruled in favor of Section 4A, but the Commissioner of Central Excise later decided the valuation issue in favor of the appellant, supporting the use of Section 4. The Tribunal upheld this decision, confirming that the valuation should be done under Section 4, not Section 4A.

3. Applicability of the Bar of Unjust Enrichment:
The refund claim was rejected by the Assistant Commissioner on the grounds of unjust enrichment, asserting that the appellant failed to prove that the incidence of duty was not passed on to the customer. The appellant argued that the differential duty was paid using an unsecured loan from HLL, which would be returned upon receiving the refund. The Tribunal emphasized that under Section 11B of the Central Excise Act, the appellant must establish that the duty incidence was not passed on to another person to be eligible for a refund. The Tribunal found that the authorities below had not adequately examined whether HLL absorbed the higher duty and remanded the case for de novo adjudication to determine the issue of unjust enrichment, directing the Assistant Commissioner to allow the appellant to present further evidence.

Conclusion:
The Tribunal set aside the impugned order and remanded the case back to the Assistant Commissioner for re-evaluation, specifically to determine whether the refund claim is barred by unjust enrichment, after giving the appellant an opportunity for a personal hearing and to present additional evidence.