2016 (11) TMI 236 - HC - Central Excise

Refund - Unjust enrichment - Provisional assessment - There is thus no dispute that the appellant has, in fact, remitted excess excise duty which has been duly quantified and determined to be refundable - Held that - a mandatory exercise that is to be undertaken by a manufacturer in order to establish nil unjust enrichment. While this may be easier achieved in cases where the transaction is direct as between the manufacturer and end-user, the level of difficulty increases with the number of intermediaries involved - Appeal allowed by way of remand.

Summary

Issues:
Challenge to order of Customs, Excise and Service Tax Appellate Tribunal regarding excise duty refund due to duty paid provisionally at the time of clearance of goods on stock transfer being higher than the excise duty finally assessed because of grant of various discounts through credit notes.

Analysis:
1. The Appellant, engaged in manufacturing keyboards, printers, and parts, follows a modus operandi where clearances are made from the factory to branch office at a declared price, which could vary at the time of actual sale due to market exigencies and distributor discounts issued through credit notes. An order-in-original passed by the Assistant Commissioner of Central Excise finalized the provisional assessment, noting the pricing differences after considering credit notes issued.

2. The Assessing Authority found an excess payment of excise duty by the Appellant, quantified at a figure, and determined it to be refundable. However, the claim was rejected on the grounds of possible unjust enrichment, leading to the order for refund to be paid to the Consumer Welfare Fund as the Appellant was deemed not entitled to it.

3. The Commissioner of Central Excise (Appeals) and Customs, Excise and Service Tax Appellate Tribunal upheld the rejection of the refund claim. The issue was decided based on a Supreme Court judgment regarding entitlement for refund on the basis of credit notes and the aspect of unjust enrichment.

4. The Supreme Court judgment clarified that the Assessee is entitled to file a claim for refund based on credit notes for discounts issued, and the burden is on the manufacturer to establish that the duty incidence was not passed on to any person until the goods reach the end user to avoid unjust enrichment.

5. The judgment emphasized the need for a manufacturer to undertake a mandatory exercise to establish nil unjust enrichment, especially in cases involving multiple intermediaries. The assessment was remanded to the Assessing Officer to determine the refund issue after providing the Appellant with an opportunity to establish no undue enrichment, as per the Supreme Court's guidelines.

In conclusion, the judgment addressed the issue of excise duty refund arising from provisional duty payments and credit notes, highlighting the importance of proving no unjust enrichment to claim the refund, as per the Supreme Court's directives.