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2023 (11) TMI 887 - AT - Central ExciseRefund of duty - doctrine of unjust enrichment - duty was paid under compounded levy scheme - Refund was sanctioned but credited to the Consumer Welfare Fund under erstwhile Section 12B of the Central Excise Act, 1944 - HELD THAT - It is astonishing to note that the department is missing a simple thing to notice that the company was paying excise duty liability on compounding basis i.e. its liability was fixed on the basis of no. of machines. Accordingly, the company was responsible to pay excise duty even if it had not produced a single pouch of scented tobacco jarda or branded chewing jarda as the case may be and if this was so it is beyond comprehension that how the company could take excise duty as component of cost for fixing price as mentioned in the order at several places. Since the company was paying excise duty on compounding basis and none of its part was treated as manufacturing expense therefore, it was deducted directly from Revenue from Operations as per guidelines given under Companies Act 2013. It may be noted that no Chartered Account can change the format of Balance Sheet or Profit and Loss Account as given under Schedule III of Companies Act 2013, and since the format specifically mandates that excise duty paid should be specifically deducted from Revenue from operations, then every Chartered Accountants is bound to follow the same format - the company had to pay excise duty irrespective of sale/production under compounding scheme, therefore, it has correctly debited entire amount to profit and loss account. The refund amount constitutes the entitlement of the company on account of excess excised duty paid and mere change in nomenclature i.e. called pre-deposit or deposited under protest etc. does not change the essence of transaction. Under no circumstance compoundable excise duty can be shown anywhere else but as a reduction from Revenue from Operation. recovery of excise duty is not possible. It is found that there is no set mechanism or opportunity available to the manufacturers working under compounded levy scheme in terms of Section 3A and the Assessee necessarily have to pay the prescribed duty in advance, irrespective of the number of days the machines are operative and irrespective of the quantity of the goods manufactured - the principle of the unjust enrichment, which is ordinarily applicable only on the goods manufactured and removed under the scheme of levy and more appropriately under Section 3 of the Act, the said principle cannot by any logically and economical be justifiable as legally tenable principle be extended to the manufactures working under compounded levy scheme under Section 3A. The impugned order cannot be sustained and is accordingly set aside. The doctrine of unjust enrichment is not applicable to the facts and circumstances of the present case and accordingly it is directed that the refund of Rs.6,95,52,000/- appropriated in favour of the Consumer Welfare Fund be credited to the account of the Appellant. Accordingly the appeal filed by the Appellant is allowed.
Issues Involved:
1. Sanctioned refund credited to the Consumer Welfare Fund. 2. Payment of CENVAT duty on a compounding basis. 3. Classification and applicable rates. 4. Applicability of unjust enrichment. Issue-wise Comprehensive Details: 1. Sanctioned refund credited to the Consumer Welfare Fund: The appeal arises from an order where the sanctioned refund was credited to the Consumer Welfare Fund under erstwhile Section 12B of the Central Excise Act, 1944. The Appellant, a manufacturer of Branded Chewing Tobacco, claimed a refund of Rs. 6,95,52,000/- which was initially denied on the grounds of unjust enrichment. 2. Payment of CENVAT duty on a compounding basis: The Appellant was discharging excise duty under the erstwhile compounded levy scheme as per Section 3A of the Central Excise Act, 1944. This scheme required the Appellant to file a declaration of production parameters, based on which the Annual Capacity of production was determined by the Jurisdictional Assistant Commissioner. The duty was to be paid in advance, irrespective of actual production or clearance. 3. Classification and applicable rates: The dispute involved the classification of the product as Branded Chewing Tobacco versus Jarda Scented Tobacco, which affected the applicable rates of duty. The Tribunal's final order, which settled the classification issue, was accepted by the revenue, leading to the Appellant's refund claim. 4. Applicability of unjust enrichment: The Appellant argued that the duty paid in advance under the compounding scheme was not recoverable from buyers, as it was a fixed duty unrelated to actual production. The Tribunal noted that the excise duty liability was fixed based on the number of machines, and the company was liable to pay this duty even without production. The Tribunal concluded that the principle of unjust enrichment did not apply because the duty was not passed on to the customers. Conclusion: The Tribunal found that the refund amount was not shown as a current asset in the balance sheet for FY 2015-16 because the refund claim was made only after the final order was passed in 2022. The Tribunal held that the doctrine of unjust enrichment was not applicable in this case and directed that the refund amount appropriated to the Consumer Welfare Fund be credited to the Appellant's account. The appeal was allowed, and the impugned order was set aside. Pronounced in open court on 22.11.2023.
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