2001 (9) TMI 141 - AT - Central Excise

Summary

Issues:
1. Duty liability on the wholesale value of man-made fabrics.
2. Inclusion of trader's profit in the assessable value.
3. Application of unjust enrichment in refund claims.

Analysis:

Issue 1: Duty liability on the wholesale value of man-made fabrics
The appellants contended that their duty liability should be restricted to the amount payable on the value added by them, not on the wholesale value of man-made fabrics. The Hon'ble Supreme Court, in an interim order, directed them to furnish a bank guarantee for the duty on the difference between the price charged from customers and the value of processing work done by the appellants. The subsequent disposal of writ petitions clarified the obligations, leading to a refund claim for excess duty paid.

Issue 2: Inclusion of trader's profit in the assessable value
A refund claim was filed covering the period from April 1984 to November 1987, representing duty worked out on the trader's profit. The Assistant Commissioner initially rejected the claim, citing Notification 305/77, which includes trader's profit in the assessable value. However, the Commissioner (Appeals) overturned this decision, holding that trader's profit should not be included. The Tribunal upheld this decision, emphasizing that trader's profit cannot be part of the assessable value.

Issue 3: Application of unjust enrichment in refund claims
The appellants claimed that the refund sought was from the excess amount realized through the bank guarantee, not from any excess duty paid by them. The authorities rejected the claim citing unjust enrichment. However, the Tribunal, guided by the Supreme Court's decision in Oswal Agro Mills Ltd. v. CCE, clarified that a bank guarantee as security does not constitute payment of duty, thus unjust enrichment does not apply. This principle was reiterated in subsequent cases like Grasim Industries Ltd. v. CCE and CCE, Rajkot v. Juptier Cement Industries Ltd. Based on these precedents, the Tribunal allowed the appeal, setting aside the order and granting the refund to the appellants.