2024 (3) TMI 9 - HC - Central Excise

Refund of excise duty paid under protest against demand created on alleged manufacture and clearance of Zarda Scented Tobacco - applicability of principles of Unjust Enrichment if the Central Excise Duty has been paid under Compounded Levy Scheme, made applicable in terms of Section 3-A of the Central Excise Act, 1944 - rebuttal of presumption created under Section 12-B of the Central Excise Act, 1944 - HELD THAT - In the present proceedings for refund, the revenue had failed to establish that any part of the excess duty paid by the assessee under protest had been passed - on. First, there is absence of finding of manufacture of goods (Zarda Scented Tobacco) on which duty demand may have been levied, paid and passed on. Second, there was no evidence to allege that the assessee charged higher value/M.R.P. on the goods cleared by it (Branded Chewing Tobacco) as may have accounted for the allegation of passing - on the disputed duty liability. Once the entire goods cleared by the assessee were only Branded Chewing Tobacco cleared at the M.R.P. rate, the presumption of passing - on the disputed duty liability (on the Zarda Scented Tobacco) never arose. In absence of any material in support of the allegation made by the revenue authorities, the Tribunal rightly allowed the assessee's appeal, on facts. Petition dismissed.

Issues Involved:
The issues involved in the judgment are:
1. Application of "Unjust Enrichment" in cases where Central Excise Duty is paid under Compounded Levy Scheme.
2. Consideration of findings of the Hon'ble Supreme Court regarding components of 'price' in relation to the application of "Unjust Enrichment" under the Compounded Levy Scheme.
3. Rebuttal of the presumption created under Section 12-B of the Central Excise Act, 1944 in cases where duty element is not shown in the invoice.

Issue 1: Application of "Unjust Enrichment" under Compounded Levy Scheme
The Tribunal allowed the assessee's appeal for a refund of excise duty paid under protest for alleged manufacture and clearance of 'Zarda Scented Tobacco'. The Tribunal held that the provisions of "Unjust Enrichment" cannot be applied when Central Excise Duty is paid under the Compounded Levy Scheme. The Tribunal observed that the duty liability was fixed based on the number of machines, and the duty was to be paid irrespective of the quantity manufactured/sold. The Tribunal emphasized that under the compounding method, duty is deducted directly from Revenue from Operations as per the guidelines of the Companies Act 2013.

Issue 2: Consideration of Hon'ble Supreme Court Findings on 'Price' Components
The Tribunal also addressed the findings of the Hon'ble Supreme Court regarding the components of 'price' in the context of applying "Unjust Enrichment" under the Compounded Levy Scheme. It noted that the company paid excise duty on a compounding basis and did not change the prices of its products despite changes in excise duty rates. The Tribunal highlighted that the company's duty payment was not challenged, and the department was depriving the company of a legitimate refund based on the method of recording transactions in the Audited Financial Statements. The Tribunal concluded that the company's refund claim was admissible as it correctly debited the excess excise duty paid to the profit and loss account.

Issue 3: Rebuttal of Presumption under Section 12-B of the Central Excise Act
The Tribunal dismissed the revenue's objection of unjust arrangement by disbelieving that any part of the excess duty paid had been passed on. It found that there was no evidence of manufacture of 'Zarda Scented Tobacco' on which duty demand was levied and passed on. The Tribunal emphasized that since the entire goods cleared were 'Branded Chewing Tobacco' at the M.R.P. rate, the presumption of passing on the disputed duty liability did not arise. The Tribunal allowed the assessee's appeal based on the lack of evidence supporting the revenue authorities' allegations.

In conclusion, the High Court dismissed the present petition, upholding the Tribunal's decision to allow the assessee's appeal for a refund of excise duty paid under the Compounded Levy Scheme. The judgment emphasized the specific circumstances under which the provisions of "Unjust Enrichment" apply and highlighted the importance of evidence and findings in determining duty liability and refund claims.

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