2003 (9) TMI 84 - SC - Central Excise

Whether the Tribunal had misconstrued paragraph 108(iv) of the decision of this Court in Mafatlal Industries ( 1996 (12) TMI 50 - SUPREME COURT OF INDIA ) and that paragraph did not in any way preclude an application for refund being made in respect of duties paid under protest? Whether in any event this Court in Sinkhai Synthetics Chemicals (P) Ltd. v. Collector of Central Excise, Aurangabad 2002 (4) TMI 65 - SUPREME COURT OF INDIA has held that Sections 11A and 11B did not apply to duty paid under protest? Held that - The Tribunal's appreciation of the relevant paragraph in Mafatlal Industries (supra) was correct. The cause of action of the appellant would arise only after the final dispute regarding the classification list had been settled by this Court. That was done as recently as on 28-8-2003. The application for refund by the appellant was therefore premature. We have noted the proviso to sub-section (1) of Section 11(B) which says that the period of limitation of one year prescribed under sub-section (1) will not apply in case duties are paid under protest. The question then is from which date will the period of limitation start to run? It appears on the basis of the paragraph of Mafatlal Industries decision which has been relied upon by the Tribunal it would have to be from the final decision in the assessee's own case. As the second submission is concerned, the submission does not appear to have been raised before the Tribunal at all by the appellant/assessee. Indeed the Tribunal did not address itself to the question of unjust enrichment having rejected the appeal of the appellant on a point of demurrer namely, the maintainability of the application for refund. Now that the dispute regarding the classification list has ultimately been resolved, it would be open to the appellant to raise the issue of unjust enrichment before the Tribunal. It is open to the Tribunal to decide the issue on remand as to whether the Departmental authorities were right in holding that the appellant was not in fact entitled to claim for refund and whether the decision in Sinkhai Synthetics Chemicals (P) Ltd. would be applicable to the appellant's case.

Summary

Issues:
1. Classification of products under Central Excise Act.
2. Refund of duty paid under protest.
3. Entitlement to refund based on passing on the burden of higher duty to customers.
4. Application of Sections 11A and 11B to duty paid under protest.

Issue 1 - Classification of products under Central Excise Act:
The appellant initially classified its product under sub-heading 2404.60 of the Central Excise Act but later faced a verbal direction from the Inspector to pay duty at a higher rate under sub-heading 2404.50. The appellant paid duty under protest and later sought a refund based on a Tribunal decision in a similar case. The Tribunal rejected the appeal on the grounds of maintainability, citing a previous decision that an assessee must obtain a final order in its own proceedings before applying for a refund. The Supreme Court ultimately decided in favor of the appellant, confirming that the duty was leviable under sub-heading 2404.60, not 2404.50, as previously paid under protest.

Issue 2 - Refund of duty paid under protest:
The appellant raised two primary issues before the Court. Firstly, challenging the Tribunal's interpretation of a previous decision and asserting that an application for refund could be made for duties paid under protest. Secondly, citing a separate case to argue that Sections 11A and 11B did not apply to duty paid under protest. The Court agreed with the Tribunal that the application for refund was premature until the final dispute regarding the classification list was settled. However, the Court did not address the issue of unjust enrichment raised by the appellant, leaving it open for consideration by the Tribunal upon remand.

Issue 3 - Entitlement to refund based on passing on the burden of higher duty to customers:
In a separate appeal, the Departmental authorities rejected the appellant's application for refund, stating that no evidence had been provided to show that the burden of the higher duty had not been passed on to customers. The Tribunal upheld this decision, noting that the appellant had not challenged this finding or provided evidence to discharge the burden of proof under relevant sections of the Central Excise Act. The Court dismissed the appeal based on this ground but allowed the appellant to present arguments before the Tribunal to contest the recorded findings and evidence presented.

Issue 4 - Application of Sections 11A and 11B to duty paid under protest:
The Court addressed the appellant's argument regarding the applicability of Sections 11A and 11B to duty paid under protest. While the Tribunal did not consider the issue of unjust enrichment, the Court suggested that the appellant could raise this issue before the Tribunal upon remand. The Court refrained from directing the initiation of fresh proceedings, leaving it to the Tribunal to determine the appellant's entitlement to a refund and the applicability of relevant legal provisions.