2006 (8) TMI 170 - AT - Central Excise

Refund - notional interest on the advance amount taken from the customers - invoice value did not include any such amount of notional interest, which was not payable and which could never be added in the value of the goods - when the transaction took place, excise duty was paid by the customers on the invoice value, there was no other amount payable by the customers refund of this interest is entitled

Summary

Issues:
1. Whether the amount of refund payable to the assessee should be diverted to the consumer welfare fund under Section 11B read with Section 12C of the Central Excise Act, 1944 on the ground of unjust enrichment.

Analysis:
The appeal was filed by the Revenue against the Order-in-Appeal directing that the amount of refund payable to the assessee should be diverted to the consumer welfare fund under Section 11B read with Section 12C of the Central Excise Act, 1944 on the ground of unjust enrichment. The demand against the assessee was regarding the non-inclusion of notional interest accrued for advances in the assessable value, resulting in short payment of duty. The assessee succeeded in the appeal against the demand and claimed a refund. However, the Deputy Commissioner held that the refund was "hit by unjust enrichment" as the amount paid was shown as expenditure in the profit and loss account. The Appellate Commissioner disagreed, stating that the amount treated as a pre-deposit under Section 35F of the Act could not have been passed on to any other person, thus unjust enrichment did not apply.

The Revenue argued that under Section 12B of the Act, there was a presumption that the amount was passed on, and the assessee failed to provide evidence to rebut this presumption. Referring to a High Court decision, the Revenue contended that all refunds, except those related to unconstitutional levies, are governed by Section 11B of the Act. On the other hand, the respondent-assessee supported the findings of the Commissioner (Appeals), stating that the entry in the expenditure account was made after the amount was deposited pursuant to the order-in-original. The notional interest on advance amount was held to be not includible in the assessable value based on a Supreme Court decision, thus no passing on of the duty incidence occurred.

The notional interest on the advance amount was found to be not includible in the assessable value. The invoice value paid by customers to the assessee did not include this notional interest, which was not payable and could not be added to the goods' value. The excise duty was paid by customers on the invoice value, and the subsequent payment made by the assessee was treated as a pre-deposit for the appeal. This subsequent payment could not be considered as passing on the burden of erroneously fixed additional excise duty retrospectively from the date of the transactions. The Court found no reason to interfere with the Commissioner (Appeals) order, leading to the dismissal of the appeal.