2009 (4) TMI 65 - HC - Central Excise

Notification No. 1/93-CE - S.S.I exemption - After the goods had been cleared and the excise duty had been paid, the manufacturer filed a claim, claiming that it is entitled to benefit of this notification and therefore, a portion of the excise duty paid may be refunded - refund is subject to provisions of unjust enrichment, so not allowable - Since the customers who have ultimately paid the duty cannot be identified, there is no reason why the manufacturer who has collected the excise should be given the benefit of this notification.

Summary

Issues:
Entitlement for exemption under Notification No.1/93-CE dated 28.2.1993 and consequential refund of excise duty.

Analysis:
The respondent, a manufacturer of various products, claimed the benefit of Notification No. 1/93-CE, which provided S.S.I exemption from excise duty effective from 1.4.1993. This notification granted concessions to manufacturers with total clearances not exceeding 200 lacs. The benefits were applicable up to clearances of 75 lacs in three slabs. Despite not initially claiming the notification's benefits, the manufacturer paid the full excise duty on cleared goods. Subsequently, the manufacturer sought a refund based on the notification, a claim contested by the department. The contention was that refunding the excise duty would lead to undue enrichment of the manufacturer. While authorities up to the Commissioner (Appeals) supported the department's stance, the CEGAT ruled in favor of the manufacturer, emphasizing that being covered under the notification entitled the manufacturer to its benefits, subject to unjust enrichment provisions.

After the goods left the manufacturer's control, the practicality of identifying and reimbursing individual customers who already paid the higher excise duty became questionable. The manufacturer, by opting to pay the full excise duty and clear the goods without availing the notification benefits initially, had likely passed on the duty burden to distributors, wholesalers, and ultimately customers. Granting a refund at this stage would result in unjust enrichment for the manufacturer, as it had already recovered the excise duty from customers. The court viewed the manufacturer's attempt to claim a refund as a tactic to avoid passing on the duty reduction to customers, given the impossibility of identifying individual payers. Consequently, the court ruled in favor of the revenue, denying the manufacturer the benefit of the notification and upholding the department's stance on the matter. The Excise Reference was answered in favor of the revenue and against the manufacturer.