2017 (1) TMI 755 - AT - Central Excise

Refund claim - unjust enrichment - N/N. 125/84-CE dated 26.05, 1984 - duty paid on cotton yarn on which exemption was available - Held that - reliance placed in the case of Commissioner of Central Excise, Belgaum Vs. Jineshwar Malleable & Alloys 2011 (11) TMI 420 - KARNATAKA HIGH COURT , where it was held that if credit notes are raised and benefit is passed on to the customers, thus, not passing on burden on customers, the assessee is entitled to refund of the same. It is undisputed that the appellant initially recovered Central Excise duty and subsequently through credit notes refunded recovered duty to the accounts of buyers and therefore, established that duty incidence which was passed on to the buyers was withdrawn and recovered by the appellant - appellant is entitled for refund - appeal allowed - decided in favor of appellant.

Summary

Issues:
Claim for refund of erroneously paid duty on Cotton Yarn under exemption Notifications, rejection on grounds of unjust enrichment, appeal before Ld. Commissioner (Appeals) and Tribunal, contention of passing duty burden to buyers, issuance of credit notes, interpretation of judicial pronouncements on refund eligibility.

Detailed Analysis:

1. Claim for Refund under Exemption Notifications:
The appellant, a manufacturer of Cotton Yarn and Cotton Knitted Fabrics, claimed erroneously paid duty on Cotton Yarn used in fabric manufacture sold at Nil rate under exemption Notifications. Refund application filed in 1997 was rejected on unjust enrichment grounds. Appeal before Ld. Commissioner (Appeals) led to rejection based on duty burden passing to buyers.

2. Unjust Enrichment and Rejection of Refund:
The Ld. Commissioner (Appeals) held that duty burden was passed to buyers, rejecting the refund appeal. Tribunal remanded the case to examine unjust enrichment. Original Authority rejected refund application, citing burden passing to customers. Ld. Commissioner (Appeals) upheld this rejection due to lack of evidence of excess duty collection or refund to customers.

3. Contention of Passing Duty Burden to Buyers:
Appellants claimed issuing credit notes post charging Excise duty in invoices to buyers in 2000, totaling significant amounts. They argued that issuing credit notes withdrew the duty burden passed to buyers, making them eligible for refund, referencing judicial pronouncements supporting this stance.

4. Judicial Interpretations and Eligibility for Refund:
Considering the appellant's issuance of credit notes refunding recovered duty to buyers, the Tribunal found duty incidence withdrawn from buyers, entitling the appellant to refund. Citing judicial precedents, including decisions from High Courts, the Tribunal ruled in favor of the appellant's refund claim, emphasizing the importance of credit notes in reversing or not passing on the duty burden.

5. Decision and Relief Granted:
Based on the judicial pronouncements and the appellant's actions in issuing credit notes, the Tribunal allowed the appeal, granting the appellant the refund and consequential relief as per the law. The judgment highlighted the significance of credit notes in demonstrating the withdrawal of duty burden from buyers and the appellant's eligibility for refund in such cases.

This comprehensive analysis of the legal judgment showcases the progression of the case, the key arguments presented, the interpretation of relevant legal principles, and the final decision granting the appellant the refund based on the established facts and judicial precedents.