1990 (9) TMI 78 - HC - Central Excise

Summary

Issues:
1. Liability of excise duty on the manufacture of aluminium alloy strips under Tariff Item 27(b) of the First Schedule to the Central Excises & Salt Act.
2. Entitlement to refund of duty erroneously recovered by the excise authority.

Analysis:

Issue 1: Liability of excise duty on the manufacture of aluminium alloy strips
The petitioner, an existing company engaged in manufacturing bimetal bearings, challenged the liability to pay excise duty on the manufacture of aluminium alloy strips under Tariff Item 27(b). The company contended that even though the strips were goods specified in the First Schedule, they were not marketable, thus not liable for duty. The Supreme Court precedent emphasized marketability as a crucial factor for dutiability under the excise law. The court referred to previous judgments supporting the importance of marketability in determining excise duty liability. The appellate authority's decision, which disregarded marketability, was deemed flawed. Consequently, the court held that the manufacture of aluminium alloy strips was not subject to duty under Tariff Item 27(b).

Issue 2: Entitlement to refund of duty erroneously recovered
The company had filed the classification list under protest, and duty was collected based on the erroneous assumption of duty liability on alloy strips. Following the court's decision on the duty liability issue, the company sought a refund of the duty erroneously recovered. The Department argued against refund, citing unjust enrichment concerns. However, the court emphasized the Department's burden to prove unjust enrichment and noted the absence of such evidence in this case. Refund was deemed appropriate upon setting aside the erroneous orders of the excise authorities. The court directed the Assistant Collector to determine the refund amount and facilitate its payment to the company, with interest if delayed beyond a specified date.

In conclusion, the court ruled in favor of the petitioner, holding that the manufacture of aluminium alloy strips was not liable for excise duty under Tariff Item 27(b) and directed the refund of duty erroneously recovered by the excise authority. The judgment highlighted the significance of marketability in determining excise duty liability and the burden on the Department to establish unjust enrichment before denying a refund.