2017 (1) TMI 799 - AT - Central Excise

Refund claim - discount - unjust enrichment - agreement for discount entered later after transaction took place, on 19/01/2004, and refund sought for the discount on transactions covered during period from 01/12/2003 to 28/02/2004 - rejection on the ground that the discount was not admissible to the appellant - Held that - Hon ble Supreme Court has held in the case of Purolator India Ltd. Versus Commissioner of Central Excise, Delhi-III 2015 (8) TMI 1014 - SUPREME COURT , that the transaction value should be known at the time of removal - in the instant case the duty incidents has been passed on to the customers, before 19/01/2004 and the discounted value shall be admissible only with effect from 19/01/2004 - the appellant will be entitled for refund & interest on the refund with effect from 19/01/2004 - appeal allowed by way of remand.

Summary

Issues: Appeal against denial of refund due to unjust enrichment and admissibility of discount on High Speed Diesel (HSD) by M/s. Indian Oil Corporation Ltd.

Analysis:
1. Unjust Enrichment Issue:
The appellant, M/s. Indian Oil Corporation Ltd., filed an appeal against the denial of a refund claimed through an application dated 30/11/2004 for the Central Excise duty component involved in a discount agreement with M/s U.P. State Road Transport Corporation (UPSRTC). The Original Authority rejected the refund application citing unjust enrichment. The Commissioner (Appeals) held that the refund was not hit by unjust enrichment but deemed the discount inadmissible, leading to the rejection of the appeal. The appellant argued that the discount was applicable for the entire supply period, supported by a certificate from the purchaser and a letter from UPSRTC. The Tribunal noted the Supreme Court's stance that transaction value should be known at the time of removal and concluded that duty incidents had been passed on to customers before 19/01/2004, making the discounted value admissible only from that date. The Tribunal remanded the case back to the Original Authority for the subsequent period from 19/01/2004, allowing the appeal by way of remand and granting refund and interest from that date as per the law.

2. Admissibility of Discount Issue:
The appellant contended that the discount agreement with UPSRTC, effective from a retrospective date of 01/12/2003, applied for the entire supply period, and adjustments were made through credit notes. The appellant relied on a ruling by the High Court of Karnataka to support their position. However, the Departmental Representative argued that discounts known at or prior to the clearance of goods should be considered for deduction from the sale price at the time of removal, emphasizing that the discount agreement was entered into on 19/01/2004. The Tribunal, aligning with the Supreme Court's stance, found that duty incidents had been passed on to customers before 19/01/2004, making the discount admissible only from that date. Consequently, the Tribunal allowed the appeal by remanding the case for the subsequent period from 19/01/2004 and granted refund and interest from that date as per legal provisions.