2018 (12) TMI 431 - AT - Central Excise

Refund claim - duty was paid under protest - disallowance of deduction claimed on account of secondary packing - whether the cost of secondary packing that is wooden crates is includable in the assessable value of the final product of the respondent? - Held that - The refund claim in the present case has arisen from the order of demand case which was decided by this Tribunal and the same was upheld by the Hon ble High Court of Gujarat. In this position the respondent is prima-facie entitled for the refund of duty paid on merit. Unjust Enrichment - Held that - Since refund in the present case is governed by the provisions of Section 11B of Central Excise Act 1944 the refund under the mandate of said law must pass the test of unjust enrichment. Appeal allowed by way of remand to reconsider the issue afresh.

Issues:
1. Disallowance of deduction claimed on account of secondary packing and demand of differential Excise Duty.
2. Refund claim for duty paid under protest on secondary packing.
3. Settlement of the issue on whether the value of secondary packing is includable in the assessable value of the final product.
4. Application of the principle of unjust enrichment to the refund claim.

Analysis:
1. The case involved a dispute regarding the disallowance of deduction claimed by the respondents for the cost of secondary packing, i.e., wooden crates, and the subsequent demand of differential Excise Duty. The Commissioner (Appeals) allowed the appeal, stating that the cost of secondary packing is not includable in the assessable value. The Tribunal upheld this decision, emphasizing that secondary packing was not done to render the product marketable. The department's appeals against these orders were dismissed, and the matter attained finality.

2. The respondents filed a refund claim for the duty paid under protest for the period March 1996 to September 1999. The Deputy Commissioner rejected the refund claim, stating that the cost of secondary packing was not eligible for deduction and that duty was not paid under protest. The Commissioner (Appeals) overturned this decision, highlighting that the department cannot challenge the issue when the Tribunal's order has been accepted. The department's appeal against this decision was dismissed by the Tribunal.

3. The issue of whether the value of secondary packing is includable in the assessable value of the final product was settled by the Hon'ble High Court of Gujarat in a related case. The Tribunal acknowledged this settlement and stated that the respondent was entitled to the refund of duty paid on the cost of secondary packing. However, the Tribunal also considered the principle of unjust enrichment, citing the Supreme Court's judgment, and remanded the case to the Adjudicating Authority for further consideration.

4. The Tribunal's decision to remand the case was based on the requirement for the refund to pass the test of unjust enrichment as per the provisions of Section 11B of the Central Excise Act, 1944. The Tribunal's approach aligned with the legal principles established by the Supreme Court, emphasizing the need for the refund process to adhere to the mandate of the law. The case was disposed of with a direction for a fresh order by the Adjudicating Authority to consider the observations made by the Tribunal.

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