2016 (10) TMI 511 - HC - Central Excise

Eligibility of refund - unjust enrichment - raising credit notes - Held that - We are of the opinion that if the present assessee relies on the credit notes raised on the dealer, then, an opportunity should be given to it to establish and prove that in pursuance thereof the duty burden which was passed on to the buyer has not eventually fallen on the said buyer on account of this arrangement. Thus, if the dealer has been found to be recovering the amounts or having given credit to the buyer, then, whether the raising of the credit notes would negate the presumption raised in Section 12B of the Act or not is an issue or matter required to be examined by the Tribunal. The appeal of the assessee is restored to the file of the Tribunal only for examining the issue highlighted above and in accordance with law.

Summary

Issues:
1. Whether the CESTAT correctly considered the passing on of duty to the customer for eligibility of refund?
2. Whether the CESTAT appropriately relied on the Madras High Court ruling in the absence of a stay by the Supreme Court?

Analysis:

Issue 1: Passing on of Duty to Customer for Refund Eligibility
The appellant, engaged in manufacturing motor vehicles, sought a refund of excess duty paid and clearance on a provisional assessment basis. The Assistant Commissioner confirmed the refund but directed it to the Consumer Welfare Fund, citing the duty incidence passed on to buyers. The First Appellate Authority dismissed the appeal, leading to the matter being taken to CESTAT. The CESTAT allowed the appeal based on the Madras High Court ruling in Addison & Co. case. However, the appellant argued that the duty incidence was passed on to dealers through credit notes, making them ineligible for a refund due to unjust enrichment. The High Court noted the Supreme Court's analysis of Section 11B, stating that if duty was passed on to buyers, the statutory presumption of unjust enrichment applies.

Issue 2: Reliance on Madras High Court Ruling
The appellant contended that the Madras High Court's ruling in Addison & Co. case was overruled by the Supreme Court in a later judgment. The High Court acknowledged this and emphasized that the matter should be reconsidered by the Tribunal in light of the Supreme Court's decision. It highlighted the need for the Tribunal to examine whether the duty burden passed on to buyers through credit notes negates the presumption of unjust enrichment. The High Court allowed the appeal, quashed the CESTAT's order, and remanded the case to the Tribunal for a fresh decision based on a thorough examination of the facts and circumstances.

In conclusion, the High Court's judgment focused on the passing on of duty to customers and the significance of the Supreme Court's ruling in reevaluating the case. The decision highlighted the need for a detailed examination by the Tribunal to determine the impact of credit notes on the duty burden passed on to buyers, ensuring a fair and just resolution in accordance with the law.