1990 (9) TMI 85 - HC - Central Excise

Dutiability and Marketability Burden of proof Refund Unjust enrichment Interest of refund amount

Summary

Issues:
Classification of aluminium alloy strips for excise duty liability under Tariff Item 27(b) of the First Schedule to the Central Excises & Salt Act; Entitlement of the company to refund of excise duty erroneously recovered.

Analysis:
1. The petition concerns the liability of excise duty on the manufacture of aluminium alloy strips used in the production of bimetal bearings. The company contended that since the strips are not marketed, they should not be subject to excise duty under Tariff Item 27(b) of the First Schedule. The Supreme Court precedent emphasizes that marketability is crucial for an article to be dutiable under the excise law, as seen in Union Carbide India Ltd. v. Union of India and Bhor Industries v. Collector of Central Excise.

2. The company filed a classification list under protest, which was approved by the Assistant Collector. However, subsequent amendments and appeals led to a decision by the Appellate Authority that the aluminium alloy strips are liable for excise duty under Tariff Item 27(b). The company challenged this decision under Article 226 of the Constitution of India, arguing that the strips' non-marketability exempts them from duty.

3. The court agreed with the company's argument, noting that the Department failed to prove marketability, a key factor for excise duty liability. The Appellate Authority's decision was deemed flawed as it disregarded the marketability aspect, contrary to Supreme Court rulings. Therefore, the court held that the manufacture of aluminium alloy strips is not liable for excise duty under Tariff Item 27(b).

4. Regarding the refund of duty erroneously recovered, the court ruled in favor of the company. The Department's argument of unjust enrichment was dismissed as it failed to demonstrate how the duty was passed on to consumers. The court cited a previous judgment requiring the Department to establish unjust enrichment, which was not done in this case. Consequently, the company was entitled to a refund of the duty.

5. The court made the rule absolute in favor of the company, directing the Assistant Collector to determine the refund amount and make the payment by a specified date. Failure to comply would result in interest accruing on the refund amount. Additionally, the bank guarantees provided by the company were discharged, and no costs were awarded in the matter.