2021 (10) TMI 586 - HC - Central Excise

Refund - Applicability of doctrine of unjust enrichment - provisional assessments - applicability of N/N. 45/99 CE dated 25.06.1999 - refund of duty governed by the provisions contained in proviso d e of Section 11B 2 of the Central Excise Act, 1944 or not - presumption contained in Section 12B of the Central Excise Act, 1944 applies or not in case of Provisional Assessments also - HELD THAT - Rule 9B 5 has to be read with the proviso which provides that if an assessee is entitled to refund, such refund shall not be made to him except in accordance with the procedure established under Subsection 2 of Section 11B of the Act as inserted with effect from 25.07.1999. Rule 7 6 read with the proviso provides that the duty of excise paid by the manufacturer, if he had not passed an incidence of such duty to any other person be paid to the applicant instead of crediting to the fund, the refund amount determined under Sub-rule 3 . Thus, it cannot be held that Rule 7 6 cannot be equated to Rule 9 5 inasmuch as the claim of refund is concerned. In Addison Co. Ltd., 2016 (8) TMI 1071 - SUPREME COURT , the Hon'ble Apex Court has held that the assessee has admitted the incidence of duty was originally passed on to the buyer. No material was placed on record to show that the buyer to whom the incidence of duty was passed on by the assessee did not pass it on to any other person. It has been thus held that the sine qua non for a claim for refund as contemplated in Section11-B of the Act is that the claimant has to establish that the amount of duty of excise in relation to which such refund is claimed was paid by him and that the incidence of such duty has not been passed on by him to any other person - the Hon'ble Apex Court has observed that the refund of excess duty paid can be allowed only in cases where the burden of duty has not been passed on any other person including the ultimate customer as well and moreover Hon ble Apex Court was considering the case of normal refund and not adjustment at the time of finalization of provisional assessment. Hence, it is distinguishable. Revenue cannot pick and choose the assessment years for challenging the orders having similar effect. Moreover, as observed by the First Appellate Authority, the issue of unjust enrichment has been raised for the first time on the sanction of refund order consequent on finalization of provisional assessment. The authorities have admitted that the credit notes were issued by the assessee to their dealer representing various discounts which have been actually passed on, in accordance with marketing circulars/policies. It is also observed that on verification of sample depot invoices at the time of completion of provisional assessment, that the assessee has not issued any cenvatable invoice from the depot which are prescribed document for availment of cenvat credit under Cenvat Credit Rules, 2004. Thus, it cannot be held that the assessee has not subjected to the test of unjust enrichment. The substantial questions of law in favour of the assessee and against the Revenue - appeal dismissed.

Issues Involved:
1. Applicability of the doctrine of unjust enrichment in provisional assessments.
2. Applicability of the test of unjust enrichment in view of Notification No. 45/99 CE dated 25.06.1999.
3. Governance of refund of duty under proviso [d] & [e] of Section 11B [2] of the Central Excise Act, 1944 in provisional assessments.
4. Applicability of the presumption under Section 12B of the Central Excise Act, 1944 in provisional assessments.

Issue-wise Detailed Analysis:

1. Applicability of the Doctrine of Unjust Enrichment in Provisional Assessments:
The court examined whether the doctrine of unjust enrichment applies to provisional assessments. The Revenue argued that Rule 7[6] of the Central Excise Rules, 1944 mandates that any refund determined must be credited to the fund unless the manufacturer has not passed on the duty incidence. The court noted that the Tribunal's decision in the case of Indian Telephone Industries Ltd. was based on Rule 9B[5], which was replaced by Rule 7. The court found that Rule 7[6] requires the manufacturer to pass the test of unjust enrichment, which was not the focus in the Indian Telephone Industries Ltd. case.

2. Applicability of the Test of Unjust Enrichment in View of Notification No. 45/99 CE:
The court discussed the relevance of Notification No. 45/99 CE, which relates to the provisional assessment and the subsequent refund process. The court emphasized that the refund process under provisional assessments must comply with the provisions of Rule 7[6], which includes the unjust enrichment test. The court highlighted that the authorities must examine whether the incidence of duty was passed on to the ultimate buyer/customer when processing refund claims under provisional assessments.

3. Governance of Refund of Duty Under Proviso [d] & [e] of Section 11B [2] of the Central Excise Act, 1944:
The court analyzed the provisions of Section 11B[2] and Rule 9B[5], noting that the refund of duty must adhere to the procedure established under Section 11B. The court referred to the Supreme Court's judgment in Allied Photographics India Ltd., which clarified that Rule 9B is a complete code by itself and the refund process under provisional assessments must comply with the conditions therein. The court concluded that Rule 7[6] and the proviso to Rule 9B[5] require adherence to Section 11B's procedure for refunds.

4. Applicability of the Presumption Under Section 12B of the Central Excise Act, 1944:
The court examined whether the presumption under Section 12B, which assumes that the incidence of duty has been passed on to the buyer, applies to provisional assessments. The court noted that the authorities must establish whether the incidence of duty was passed on to the buyer, as required by Rule 7[6]. The court found that the factual findings of the authorities confirmed that the burden of duty was borne by the assessee, and this finding was not challenged by the Revenue.

Conclusion:
The court dismissed the Revenue's appeal, upholding the Tribunal's decision. It held that the doctrine of unjust enrichment applies to provisional assessments and the refund process must comply with Rule 7[6] and Section 11B. The court found no illegality or perversity in the orders impugned and answered the substantial questions of law in favor of the assessee and against the Revenue. The court emphasized that the authorities' factual findings confirming that the burden of duty was borne by the assessee were not challenged, and the Revenue could not selectively challenge the assessment years.

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