2008 (5) TMI 212 - AT - Central Excise

Duty collected by the assessee from customers subsequently refunded to them by issuance of Credit notes principle of unjust enrichment applicable - refund deniable - duty refunded to assessee was paid back to the Revenue in terms of the appellate authorities decision within 3 months from the passing of Asst. Commissioner s order - Revenue claiming interest right from the date of refund is not justified as liability to pay back the refunded arose with the passing of the CCE s order

Summary

Issues: Refund claim on duty paid under protest, unjust enrichment, interest liability.

Refund Claim on Duty Paid Under Protest: The case involved M/s. Orion Steel Corporation and M/s. Orion Wire Mfg. Company engaging in redrawing wire of thinner gauge from duty-paid wire of thicker gauge. Initially paying duty under protest, they later filed a refund claim. The Asst. Commissioner initially sanctioned the refund but credited it to the consumer welfare fund. Upon appeal, the Commissioner (Appeals) remanded the matter for fresh adjudication due to duty being refunded to customers via credit notes. Subsequent proceedings saw the Asst. Commissioner rejecting the refund claim citing a Tribunal judgment and the Revenue appealing against remand orders. After multiple rounds of appeals and remands, the refund was eventually sanctioned during de novo adjudication.

Unjust Enrichment: The issue of unjust enrichment, as per Section 11B of the Central Excise Act, was a key point of contention. The Larger Bench's decision in the case of M/s. Grasim Ind. (Chemical Division) clarified that duty refunded to customers via credit notes triggers unjust enrichment provisions. Consequently, the Commissioner (Appeals) allowed the Revenue's appeal on this basis, leading to the rejection of earlier appeals by the Revenue and one of the assessees accepting the decision and repaying the refunded amount.

Interest Liability: The final issue revolved around interest liability. The Revenue sought interest from the date of refund, despite the refund being granted initially and repaid within three months of the Commissioner (Appeals)' decision. The Tribunal held that interest liability only arose post the Commissioner (Appeals)' order reversing the original decision. As the amount was repaid within the stipulated time, the interest claim by the Revenue was deemed unjustified, resulting in the allowance of the appeal related to interest liability.

In conclusion, the Tribunal dismissed two Revenue appeals as infructuous, rejected an appeal by M/s. Tensile Wire Mfg. Company, and allowed an appeal by M/s. Orion Steel Corporation by setting aside the interest confirmation. The judgment clarified the application of unjust enrichment principles, upheld the decision on refund claims, and determined interest liability based on the timeline of repayments post-appellate decisions.