2016 (11) TMI 1581 - HC - Central Excise

Refund claim - excess Excise Duty paid - payment made under protest - Classification of goods - blended yarn made from viscose fibre and non-cellulosic soft waste - rejection of refund on the ground of time limitation and unjust enrichment. Held that - Taking into consideration the issue which is concluded against the department it is only to cause harassment to the assessee who has paid tax under the higher tax slab and from the record more particularly, the observations which are made by the Tribunal it is very clear that the higher tax was borne by the assessee. In view of the settled position, this is only question of fact and not question of law, therefore, the assessee was entitled for the refund. Even in this reference, stay application was not pressed even then even after 7 years, refund is not made for which the assessee was entitled for - This case is required to be viewed seriously. The case of 2002 was dismissed in default and frequent change of counsel resulting the fact that industry was required to be disposed of manufacturing unit and the man is ruined - thus the cost of ₹ 50,000/- is imposed on the Central Government in the appeal. Appeal dismissed - decided against Revenue.

Issues Involved:

1. Classification of blended yarn under Chapter Heading 55.05 vs. 55.06.
2. Refund claims for excess excise duty paid.
3. Application of the doctrine of unjust enrichment.
4. Time-bar protection under Rule 233B of the Central Excise Rules, 1944.
5. Adequacy of evidence provided by the assessee to prove non-passing of duty burden to buyers.
6. Compliance with judicial discipline and procedural fairness.

Issue-Wise Detailed Analysis:

1. Classification of Blended Yarn:
The primary issue was whether the blended yarn manufactured by the assessee should be classified under Chapter Heading 55.05 or 55.06 of the Central Excise Tariff Act, 1985. The department argued for classification under 55.06, which attracted a higher excise duty rate compared to 55.05. The Tribunal, supported by the Board's Circular No. 23/90, clarified that the yarn made from viscose staple fibre and non-cellulosic soft waste (NCSW) should be classified under Heading 55.05, favoring the assessee.

2. Refund Claims for Excess Excise Duty Paid:
The assessee filed multiple refund claims amounting to ?2,36,92,046/- for the excess duty paid under protest from January 1986 to November 1990. The claims were initially rejected by the Assistant Collector but later deemed eligible for refunds on merits by the Collector (Appeals), subject to the provisions of unjust enrichment under the Central Excise and Customs Laws (Amendment) Act, 1991.

3. Application of the Doctrine of Unjust Enrichment:
The adjudicating authority found that the assessee failed to prove that the duty incidence had not been passed on to the buyers. Despite submitting various documents, including customer letters, affidavits, sales journals, and balance sheets, the Assistant Commissioner credited the refund claims to the Consumer Welfare Fund, citing unjust enrichment. The Tribunal, however, supported the assessee, stating that the evidence provided was sufficient to rebut the presumption of unjust enrichment.

4. Time-Bar Protection under Rule 233B:
The assessee contended that the claims were not time-barred as they were made under protest following the procedure prescribed under Rule 233B of the Central Excise Rules, 1944. The adjudicating authority and the Tribunal upheld this contention, allowing the claims to proceed.

5. Adequacy of Evidence Provided by the Assessee:
The assessee provided extensive documentation to support their claim that the excess duty burden was not passed on to the buyers. This included affidavits, customer letters, sales journals, balance sheets, and Chartered Accountant certificates. The Tribunal found this evidence credible, noting that the selling prices remained unchanged despite the higher duty rate, and the differential duty was shown as "claims receivable" in the balance sheets.

6. Compliance with Judicial Discipline and Procedural Fairness:
The judgment emphasized the importance of judicial discipline and adherence to higher appellate authority orders. The Supreme Court's decision in Union of India v. Kamlakshi Finance Corporation Ltd. was cited, underscoring that lower authorities must follow the orders of higher appellate bodies. The prolonged delay in processing the refund and the frequent change of counsel were criticized, highlighting procedural lapses and the resultant hardship to the assessee.

Conclusion:
The High Court dismissed the department's appeal, affirming the Tribunal's decision in favor of the assessee. The court directed the refund amount to be paid within three months, along with interest, and imposed a cost of ?50,000 on the Central Government for the undue delay and procedural unfairness. The judgment reinforced the principles of judicial discipline and procedural fairness, ensuring that the assessee's rights were upheld.

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