2008 (6) TMI 152 - AT - Central Excise

Refund - held that credit availed by the assessee could not have been recovered while granting refund without issuance of a SCN - once the classification list was approved whether after affording an opportunity of hearing or without opportunity of hearing, the assessment cannot be held to be provisional - quantum of profit is much more than the duty payable, hence price remained the same by cutting the profits only, is not sufficient to establish that incidence of duty has not been passed on

Issues Involved:
1. Eligibility of composite articles of plastic for exemption under Notification 132/86.
2. Entitlement to refund of duty paid under protest.
3. Applicability of Rule 57F(3) and Rule 57C of the Central Excise Rules, 1944.
4. Doctrine of unjust enrichment.
5. Provisional assessment status.

Issue-wise Detailed Analysis:

1. Eligibility of Composite Articles of Plastic for Exemption under Notification 132/86:
The respondents, engaged in manufacturing composite articles of plastic, claimed exemption under Notification 132/86. Initially, the classification list was approved, but objections were raised later. The Assistant Commissioner, after de novo proceedings, held that the respondents were eligible for complete exemption under Notification 132/86 and finalized the classification list accordingly.

2. Entitlement to Refund of Duty Paid Under Protest:
Following the Assistant Commissioner's decision, the respondents filed a refund claim for Rs. 70,50,149.48 for the duty paid from 17-11-86 to 11-9-88. The claim was rejected by the Assistant Commissioner on several grounds, including clerical errors, ineligibility for MODVAT credit, and unjust enrichment. The Commissioner (Appeals) partially allowed the refund, stating that without a show cause notice, the MODVAT credit could not be denied. The Tribunal upheld this view, referencing the Tribunal's decision in Pratap Rajasthan Copper Foils and the Bombay High Court's ruling in Western Bengal Coal Fields.

3. Applicability of Rule 57F(3) and Rule 57C of the Central Excise Rules, 1944:
The revenue argued that under Rule 57F(3), cash refunds are only permissible for unutilized MODVAT credit on inputs used in exported goods. Since the final products were exempt, MODVAT credit was inadmissible under Rule 57C. The Tribunal agreed that the refund of Rs. 28,99,754.35 could not be denied without a show cause notice, aligning with the Western Bengal Coal Fields case.

4. Doctrine of Unjust Enrichment:
The Assistant Commissioner rejected the refund claim on the grounds of unjust enrichment, asserting that the respondents passed on the duty to customers. The Commissioner (Appeals) disagreed, citing that the price remained constant before and after duty imposition, and assessments were provisional, thus unjust enrichment did not apply. The Tribunal, however, held that the assessments were not provisional and that the doctrine of unjust enrichment applied. The Tribunal referenced the Supreme Court's decision in Mafatlal Industries Ltd. and Madras High Court's ruling to conclude that the respondents had passed on the duty to customers by reducing their profit margins.

5. Provisional Assessment Status:
The respondents argued that the assessments were provisional, invoking the Supreme Court's decision in Samrat International. The Tribunal found no evidence of provisional assessment, noting that the classification list was approved on 8-12-86. The Tribunal supported its view with the MRF Ltd. and Metal Forgings cases, concluding that the assessments were final, and the doctrine of unjust enrichment applied.

Conclusion:
The Tribunal concluded that the refund of Rs. 28,99,754.35 could not be denied without a show cause notice. However, it rejected the entire refund claim of Rs. 70,50,149.48 on the grounds of unjust enrichment, as the duty incidence was passed on to the customers. The revenue's appeal was allowed on these grounds.

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