2008 (1) TMI 144 - AT - Central Excise

Refund - appellant had succeeded in their claim of exemption before the Tribunal and revenue has not filed any appeal against the said order - it is undisputed that the amount has been paid as a deposit to avail right of appeal that also subsequent to the clearance made by appellant - incidence of duty could not be transferred to the buyer after the date of clearance - Sec.11B not made applicable to such deposits since these deposits are in the form of pre-deposit

Summary

Issues:
Rejection of refund claim under Sec.11B of the Central Excise Act, 1944.

Analysis:
The case involved the rejection of a refund claim amounting to Rs.2,66,579 under Sec.11B of the Central Excise Act, 1944. The appellant had a dispute with the revenue regarding the benefit of a Notification, which was later resolved in favor of the appellant. During the dispute, the appellant paid the amount under protest on the revenue's direction. The Commissioner (Appeals) upheld the adjudicating authority's order sanctioning the refund claim but transferred the amount to the consumer welfare fund, citing the doctrine of unjust enrichment. The adjudicating authority relied on the Supreme Court's decision in M/s Sahakari Khank Udyog Ltd. (2005) regarding the burden of proof on the appellant to show that duty incidence was not passed on to customers. The appellant argued that the issue was covered by judgments of the High Courts of Bombay and Punjab and Haryana, emphasizing that the duty was paid under protest and was not passed on to customers.

The appellant contended that the provisions of Sec.11B were not applicable to deposits made under protest for availing the right to appeal. The High Court of Bombay in Suvidhe Ltd. case held that the doctrine of unjust enrichment does not apply to such deposits. Similarly, the High Court of Punjab and Haryana in Modi Oil & General Mills case emphasized that the question of whether duty incidence was passed on is a question of fact. The appellant's position was supported by the fact that the duty was paid under protest and that the revenue did not appeal the Tribunal's order in favor of the appellant. The appellant argued that the judgments of the High Courts should apply in this case where the duty amount was deposited under protest and not passed on to customers.

In contrast, the Senior Departmental Representative (SDR) argued that any refund claim must pass the test of unjust enrichment as per Sec.11B. The SDR referenced the Supreme Court's decision in M/s Sahakari Khand Udyog Ltd. (2005) to support the position that the duty amount was indirectly recovered from customers. However, the Tribunal found that the facts in the present case indicated that the duty amount was paid as a deposit subsequent to clearance and was not recovered from customers. Therefore, the Tribunal allowed the appeal, setting aside the order rejecting the refund claim and providing consequential relief if necessary.