2023 (4) TMI 1068 - AT - Central Excise

Adjustment of Excess Excise duty paid - whether adjustment of duty excess paid during the period of provisional assessment is permitted at the time of finalisation of assessment in terms of rule 7 of the Central Excise Rules when the appellants had neither take the refund of said excess nor had ever availed Cenvat Credit of duty liability discharged? HELD THAT - The Larger Bench of this Tribunal in the case of HINDUSTAN ZINC LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR 2015 (11) TMI 953 - CESTAT NEW DELHI (LB) has decided this issue - It was held that If on finalisation of assessment, assessee required to pay shortfall duty during a particular period and denied excess payment made during another period of same financial year, entire purpose of keeping assessment provisional would become a futile exercise. In that case, it becomes a case of short paid/assessed duty for that period and ending with recovery of same. Further, adjustment of excess paid duty against short payment not to be denied on taking of Cenvat credit by sister unit inasmuch as it is assessee s total duty liability after adjustment of short paid duty with excess paid duty which would be available as credit to other unit. The Tribunal, Mumbai Bench in the case of M/S MERCEDES-BENZ INDIA PVT. LTD. VERSUS CCE, PUNE-II 2016 (10) TMI 79 - CESTAT MUMBAI also held that Adjustment of excess duty paid is allowable at the time of finalization of provisional assessment even when goods supplied to sister unit, who availed Cenvat Credit. The Tribunal, Mumbai Bench in another case of CENTURY RAYON VERSUS COMMISSIONER OF CENTRAL EXCISE, THANE-I 2014 (12) TMI 157 - CESTAT MUMBAI has held Adjustment of excess duty paid against short duty paid is allowable at the time of finalization of provisional assessment if the assessee is able to establish that such excess payment has not been passed on but borne by the assessee. In the present case, Unit II is not even the sister concern. Appellant admittedly has not taken Cenvat Credit. These admissions when are read with above discussed settled legal position, it stands clear that the adjustment of excess duty paid is liable at the time of finalisation of the provisional assessment. No Cenvat Credit ever been taken, admittedly, by the appellant. The question of any unjust enrichment of the appellant does not at all arise. In view of these observations, it is held that the Adjudicating Authorities below have wrongly denied the adjustment of excess duty of the amount of Rs. 2,17,328/- paid by the appellant to the amount of duty confirmed. Appeal allowed.

Summary

Issues:
1. Denial of refund for excess excise duty paid by the appellant.
2. Discrepancy in duty payments for different months during the financial year 2016-17.
3. Applicability of rule 7 of the Central Excise Rules for adjustment of excess duty paid.

Analysis:

Issue 1: Denial of refund for excess excise duty paid by the appellant
The appellant, engaged in manufacturing foot ware components, opted for provisional assessment of duty for clearances in 2016-17. The Department found discrepancies in duty payments, with excess payment in some months and short payment in others. The Jurisdictional Range Superintendent confirmed the excess payment, stating it was passed on to consumers. The appellant's request for adjustment or refund was denied during final assessment. The appellant argued against the denial, stating they had no sister concern and had never availed Cenvat Credit. The Department contended that excise duty was included in the cost of goods transferred. The Tribunal analyzed the facts and legal precedents, including the Hindustan Zinc Ltd. case, and ruled in favor of the appellant. The Tribunal held that adjustment of excess duty paid was permissible at finalization, especially when no Cenvat Credit was taken, and unjust enrichment was not an issue. The order denying the adjustment was modified, and the appeal was allowed.

Issue 2: Discrepancy in duty payments for different months during the financial year 2016-17
The appellant paid excess duty of Rs. 2,17,328 during the financial year 2016-17 based on provisional assessment. The duty liability was discharged without taking Cenvat Credit, and Unit-1 consumed all manufactured products. The Tribunal reviewed the month-wise duty liability and confirmed the excess payment. The Tribunal referred to legal precedents like the Toyota Kirloskar and Mercedes Benz cases, emphasizing the allowance of adjustment of excess duty paid at finalization. The Tribunal concluded that the appellant was entitled to adjust the excess duty paid against the confirmed duty liability, as Unit II was not a sister concern and no Cenvat Credit was availed.

Issue 3: Applicability of rule 7 of the Central Excise Rules for adjustment of excess duty paid
The Tribunal examined the provisions of Rule 7 of the Central Excise Rules, emphasizing that the amount payable or refundable is subject to final assessment outcomes. The Tribunal cited precedents like the Century Rayon case to support the allowance of adjustment of excess duty paid against short payment during provisional assessment finalization. Considering the appellant's admission of not taking Cenvat Credit and the absence of unjust enrichment, the Tribunal held that the denial of adjustment by the Adjudicating Authorities was incorrect. The Tribunal modified the order, allowing the adjustment of the excess duty paid by the appellant.

In conclusion, the Tribunal's judgment in this case addressed the denial of refund for excess excise duty paid, discrepancies in duty payments, and the applicability of Rule 7 for adjustment of excess duty. The ruling favored the appellant, allowing the adjustment of excess duty paid during provisional assessment finalization.