2008 (8) TMI 314 - AT - Central Excise

Refund of Excise Duty SSI unit paid the duty without availing concessional rate of duty under notification no, 1/93 CE Unit returned the excess duty amount received from its buyers through cheques Held that department is not concerned with the post clearance adjustments between the assessee and its buyers such as the assessee raising credit notes on its buyers or paying any amount to them by cheque/cash. Assessee cannot escape the bar of unjust enrichment in receiving refund of excess duty it paid and collected from its buyers on clearance of the goods by returning it to them. Refund is not allowed.

Summary

Issues:
1. Eligibility for refund of excess duty paid under SSI benefit.
2. Application of unjust enrichment principle in refund cases.
3. Interpretation of Section 11B of the Central Excise Act regarding post-clearance adjustments.

Analysis:

Issue 1: Eligibility for refund of excess duty paid under SSI benefit
The case involved M/s. Vanithamani Chemicals Ltd. (VCL) paying duty without availing the SSI benefit for clearances of potassium chlorate in 1996-97. Upon realizing their eligibility for the concession, VCL claimed a refund of the duty paid. The Assistant Commissioner initially sanctioned a refund, but directed it to be deposited in the Consumer Welfare Fund to prevent unjust enrichment. The Commissioner (Appeals) later ordered a refund of the excess amount paid by VCL. The Revenue challenged this order, arguing that the excess duty had been passed on to customers, making VCL ineligible for the refund.

Issue 2: Application of unjust enrichment principle in refund cases
The Revenue relied on the Mafatlal Industries case to assert that VCL had passed on the excess duty to its customers, thus disqualifying them from receiving a refund. The Tribunal noted that the department was not concerned with post-clearance adjustments between the assessee and its customers, as established in previous judgments. The principle of unjust enrichment was applied, emphasizing that refunding the excess duty to VCL would result in unjust enrichment, as the duty had already been collected from the buyers.

Issue 3: Interpretation of Section 11B of the Central Excise Act regarding post-clearance adjustments
The Judicial Member pointed out that decisions in cases like Addison & Co. and S. Kumar's Ltd. established that post-clearance adjustments, such as raising credit notes or returning amounts to buyers, did not entitle the assessee to a refund of excess duty collected at the time of clearance. The Tribunal upheld this interpretation, stating that the assessee could not escape the bar of unjust enrichment by returning the excess duty to its buyers. Consequently, the impugned order was vacated, and the original authority's decision was restored, denying the refund to VCL.

In conclusion, the Tribunal held that the principle of unjust enrichment applied in this case, preventing the refund of excess duty paid by VCL under the SSI benefit scheme. The decision underscored the importance of adhering to established legal principles and interpretations in matters of excise duty refunds.