2016 (12) TMI 786 - AT - Central Excise

Whether duty collected without authority of law is exempted from the requirement of ascertainment of having borne the incidence of duty in disposing off claim for refund of this amount and, if not, whether the competent authority did comply with statutory requirements thereon? - Held that - The proper course of action to be pursued when the applicant for refund has not been able to satisfy that duty collected without authority of law has not been passed on to customers is to sanction the refund and credit it to the Fund. For having failed to notice this departure from legality and propriety and for not remedying the flaw, the impugned order is liable to be set aside - It is surprising that the authorities empowered to review the two orders also failed to enable the necessary rectification despite being mandated to call for and examine orders-in-original and orders-in-appeal to ascertain their legality and propriety. Apparently, an order that was not detrimental to revenue, no matter its abundance of illegality, is justification sufficient for disregarding statutorily mandated obligations. We suggest that the Central Board of Excise & Customs issue suitable instructions to its field formations to avoid recurrence of such blatant disinclination to discharge duties of office. We set aside the impugned order and restore the refund application to the competent authority to examine, issue appropriate notice, if warranted, and pass fresh orders in accordance with the law - appeal allowed by way of remand.

Issues Involved: Determination of whether duty collected without authority of law is exempted from the requirement of ascertainment of having borne the incidence of duty in disposing off claim for refund and compliance of statutory requirements by the competent authority.

Analysis:
1. Background and Facts: The appeal by M/s NRC Limited challenged an order-in-appeal dated 28th February 2005 of Commissioner of Central Excise (Appeals), Mumbai -IV regarding the refund of duty collected without authority of law. The appellant, a manufacturer of various products, paid duty "under protest" due to a notice demanding duty. The claim for refund was rejected based on the assertion that the duty had been passed on to customers.

2. Contentions: The appellant argued that duty collected without authority of law should not be subject to the requirements of section 11B of the Central Excise Act, 1944, as it is akin to a deposit. Various legal precedents were cited to support this argument.

3. Rejection Grounds: The claim for refund was rejected solely on the basis that the burden of duty had not been proven to be borne by the appellant, as indicated in an internal communication endorsing the recovery of duty from customers.

4. Judicial Analysis: The Tribunal found that the rejection lacked a detailed scrutiny and failed to provide a notice to the appellant to present evidence. The failure to notify the grounds of rejection invalidated the decision, as the burden was not placed on the appellant adequately.

5. Legal Amendments: The Tribunal highlighted the amendments to section 11B of the Central Excises and Salt Act, 1944, which required proof of duty incidence borne by the applicant for refund. The original authority failed to consider the impact of these amendments on the refund claim.

6. Refund Procedure: The Tribunal emphasized that refunds should be sanctioned and credited to the Consumer Welfare Fund if duty was collected in excess of that authorized by law. The rejection of the refund claim without proper justification was deemed contrary to the law.

7. Remedy and Recommendations: The Tribunal set aside the impugned order and directed the competent authority to re-examine the refund application within three months, emphasizing the importance of following legal procedures and rectifying flaws in the decision-making process.

In conclusion, the judgment highlighted the necessity for authorities to adhere to legal requirements, provide proper notices, and ensure refunds are handled in accordance with the law to uphold fairness and legality in such matters.

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