2005 (12) TMI 109 - HC - Central Excise

Refund claim - excise duty paid on goods cleared on provisional assessment - Whether the CESTAT was justified in holding that the refund claim of the assessee could not be rejected by applying the principle of unjust enrichment, on the ground, that the principle of unjust enrichment is not applicable to the refunds arising on the finalization of the provisional assessment under Rule 9B(5) of the Central Excise Rules, 1944 on June 8, 1999 ? - HELD THAT - Admittedly the assessee has filed the refund application on November 1, 1999. Since amendment to Rule 9B(5) had come into force with effect from June 25, 1999, the said refund application made on November 1, 1999 had to be disposed of as per the amended Rule 9B(5) by applying the principles of unjust enrichment contained in Section 11B of the Excise Act. The contention that the refund claimed in the application dated November 1, 1999 pertains to the refund accrued to the assessee prior to June 25, 1999 and, therefore, the amended Rule 9B(5) has no application cannot be accepted for the simple reason that in view of the amendment to Section 11B with effect from August 1, 1998, all refunds arising on finalisation of the provisional assessments made under the Excises Rules are governed by the procedure prescribed u/s 11B of the Excise Act and the amendment to Rule 9B(5) on June 25,1999 merely clarifies the legal position existing from August 1, 1998. Thus, refund accrued to the assessee after August 1, 1998 and moreover claim for refund was admittedly made after the amendment to Rule 9B(5) and , therefore, the principles of unjust enrichment is squarely applicable to the facts of the present case. Accordingly, we hold that, the Assessing Officer was justified in invoking the principles of unjust enrichment to the refund arising on finalisation of the provisional assessment on June 8, 1999 and that the refund claimed by the assessee by application dated November 1, 1999 was governed by the provisions of Section 11B of the Excise Act. In the present case, admittedly the assessee has recovered from its customers the duty paid on goods cleared on provisional assessment. Therefore, the Assessing Officer was justified in rejecting the refund claim of the assessee. Moreover, having consistently argued before the authorities below that irrespective of the assessee collecting excise duty from the customers, the revenue cannot deny refund arising on finalisation of the provisional assessment, it is not open to the assessee, at this belated stage in this appeal to make out an altogether different case that the duty collected has been refunded to the customers. Thus, we hold that the assessing officer was justified in holding that the refund arising on finalisation of the provisional assessment on June 8, 1999 was governed by the principles of unjust enrichment contained in Section 11B of the Excise Act as amended by Act 21 of 1998 and the Tribunal erred in holding to the contrary. In the result, the appeal succeeds. The reframed question of law, is answered in the negative i.e. in favour of the Revenue and against the assessee. In the facts and circumstances of the case, there will be no order as to costs.

Issues Involved:
1. Applicability of the principles of unjust enrichment to refunds arising from the finalization of provisional assessments.
2. Interpretation of Rule 9B(5) and its amendment.
3. The effect of Section 11B of the Central Excise Act, 1944 on refund claims.
4. Retrospective vs. prospective application of legal amendments.

Issue-wise Detailed Analysis:

1. Applicability of the Principles of Unjust Enrichment:
The core question was whether the refund arising on the finalization of provisional assessment could be denied by applying the principles of unjust enrichment under Section 11B of the Central Excise Act, 1944. The court analyzed the statutory amendments and precedents, particularly focusing on the amendment to Rule 9B(5) and the insertion of clause (eb) to Section 11B. It was concluded that refunds arising from the finalization of provisional assessments after August 1, 1998, must comply with the procedure under Section 11B, which includes the principles of unjust enrichment. Therefore, the refund claim must establish that the burden of duty was not passed on to third parties.

2. Interpretation of Rule 9B(5) and its Amendment:
Initially, Rule 9B(5) allowed for refunds without applying the principles of unjust enrichment. However, the rule was amended on June 25, 1999, to include a proviso that refunds would be subject to Section 11B procedures. The court held that the amendment was clarificatory, reinforcing the requirement to follow Section 11B for refunds post-August 1, 1998. The court rejected the argument that the amendment to Rule 9B(5) should apply only from June 25, 1999, emphasizing that the legislative intent was to align Rule 9B with Section 11B.

3. The Effect of Section 11B of the Central Excise Act, 1944:
Section 11B was amended to include clause (eb), specifying that refunds from provisional assessments must be claimed within the stipulated time and must not have been passed on to third parties. The court noted that this amendment aimed to ensure that all refunds, including those from provisional assessments, adhere to the principles of unjust enrichment. The court emphasized that the legislative amendment to Section 11B was intended to bring uniformity and prevent undue enrichment by ensuring that refunds are granted only when the claimant has not passed on the duty burden.

4. Retrospective vs. Prospective Application of Legal Amendments:
The court examined whether the amendments to Rule 9B(5) and Section 11B should apply retrospectively or prospectively. It was concluded that the amendments to Section 11B from August 1, 1998, were applicable to all refunds arising from provisional assessments finalized after this date. The court clarified that the amendment to Rule 9B(5) on June 25, 1999, was merely a reiteration of the existing statutory provisions and did not alter the applicability of Section 11B from August 1, 1998. Hence, the refund claim filed on November 1, 1999, was subject to the amended Section 11B and the principles of unjust enrichment.

Conclusion:
The court held that the refund arising from the finalization of the provisional assessment on June 8, 1999, was governed by the principles of unjust enrichment under Section 11B of the Excise Act, as amended by Act 21 of 1998. The court found that the assessee had passed on the duty burden to its customers and thus, the refund claim was rightly rejected by the assessing officer. The appellate authorities' reliance on pre-amendment judicial precedents was deemed erroneous. Consequently, the appeal was allowed in favor of the Revenue, and the reframed question of law was answered in the negative, confirming the applicability of the principles of unjust enrichment to the refund claim.

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