2017 (4) TMI 892 - AT - Central Excise

De-bonding from EOU scheme - Refund claim - unjust enrichment - Held that - the duty paid by the respondent at the time of conversion is eligible for refund - In fact, when the respondent has paid duty for the second time on the goods by raising invoices, the earlier duty paid at the time of conversion becomes an extra duty and becomes a mere deposit in the hands of department - the duty paid by the respondent while de-bonding from EOU to DTA becomes a deposit in the hands of department and therefore is to be refunded to the respondent, in case the duty is paid once again at the time of clearance of goods in DTA - appeal dismissed - decided against Revenue.

Summary

Issues:
Department's appeal against refund claim sanction upheld by Commissioner (Appeals) - Refund of Central Excise duty paid twice by the assessee.

Analysis:
The case involved an appeal by the department against the order of the Commissioner (Appeals) upholding the sanction of a refund claim by the assessee. The respondents, who were earlier operating as an Export Oriented Unit (EOU), paid excise duty on finished goods in stock at the time of de-bonding from the EOU scheme. Subsequently, they cleared certain finished goods by paying Central Excise duty again, realizing later that they had paid the duty twice. The refund claim amounting to ?14,00,585/- was sanctioned by the original authority, leading to the department's appeal.

The department argued that the duty paid by the respondents at the time of de-bonding and again at the time of clearance in the Domestic Tariff Area (DTA) was collected from customers, making the refund inadmissible due to unjust enrichment. They contended that the duty paid initially at de-bonding was mandatory for conversion to a DTA unit, and refunding it would mean non-fulfillment of statutory obligations. Additionally, they claimed that the duty paid for the second time at clearance in DTA, being collected from customers, was also ineligible for refund despite being paid twice.

In response, the consultant for the respondent cited various judgments to support their claim for a refund, emphasizing that the duty was paid twice, resulting in excess payment and eligibility for a refund. The Tribunal, after hearing both sides, analyzed the situation. It acknowledged that the duty paid at de-bonding was a mandatory requirement, but the duty paid again at clearance in DTA, collected from customers, rendered the refund claim admissible. The Tribunal highlighted that the duty paid at de-bonding became an extra duty upon the second payment at clearance, essentially becoming a deposit with the department. As the duty collected from customers was central excise duty, it could be imposed only once on the goods. Therefore, the duty paid initially was to be refunded since the duty was paid again at the time of clearance in DTA.

Ultimately, the Tribunal found no infirmity in the order of the Commissioner (Appeals) and dismissed the appeal, affirming the sanction of the refund claim for the Central Excise duty paid twice by the assessee.