2004 (7) TMI 112 - AT - Central Excise

Issues Involved:
1. Whether the refund of Central Excise duty claimed by the appellant is hit by the principle of unjust enrichment.
2. Applicability of the principle of unjust enrichment to refunds arising from the finalization of provisional assessments.
3. The impact of amendments to Rule 9B(5) of the Central Excise Rules, 1944 on the refund claims.

Issue-wise Detailed Analysis:

1. Principle of Unjust Enrichment:
The primary issue is whether the refund of Central Excise duty claimed by the appellant is affected by the principle of unjust enrichment. The appellant argued that the assessments were provisional under Rule 9B, and the principle of unjust enrichment should not apply. The appellant relied on the Tribunal's previous decisions and the Supreme Court's ruling in the case of Mafatlal Industries Ltd. v. UOI, which stated that the principle of unjust enrichment does not apply to refunds arising from provisional assessments finalized before the amendment of Rule 9B(5).

2. Applicability to Refunds from Finalized Assessments:
The appellant contested that the refund claims for the financial years 1988-89 to 1990-91 should not be subjected to the principle of unjust enrichment, as the assessments were finalized on 5-5-97, before the amendment of Rule 9B(5). The Tribunal agreed, referencing the Supreme Court's decision in Mafatlal Industries and the Tribunal's earlier ruling in Hindustan Lever Ltd. v. CCE, which confirmed that the principle of unjust enrichment does not apply to such refunds. Thus, the refund for deductions on account of taxes borne by the company and interest costs on receivables for these years is allowed.

3. Impact of Rule 9B(5) Amendment:
For the financial years 1995-96 and 1996-97, the assessments were finalized on 29-3-2000, after the amendment of Rule 9B(5). The amendment introduced a proviso stating that refunds arising from provisional assessments must comply with the procedure established under Section 11B, which includes the principle of unjust enrichment. The Tribunal held that the refund claims for these years are subject to the amended rule, and the appellant must prove that the incidence of duty was not passed on to another person.

Freight Charges on Finished Goods:
The appellant's claim for refund on account of freight charges on finished goods was initially disallowed by the Assistant Commissioner but was later allowed on appeal. The Tribunal noted that this refund arose not from the finalization of the assessment but from the appeal decision. According to the Supreme Court's ruling in Mafatlal Industries, refunds arising as a consequence of an appeal against the final order under Rule 9B(5) are governed by Section 11B, and thus the principle of unjust enrichment applies.

Conclusion and Remand:
The Tribunal concluded that:
- The principle of unjust enrichment does not apply to refunds for the financial years 1988-89 to 1990-91 for taxes borne by the company and interest costs on receivables.
- The principle of unjust enrichment applies to refunds arising from the finalization of assessments for the financial years 1995-96 and 1996-97.
- The refund claim for freight charges on finished goods is subject to the principle of unjust enrichment, as it arose from an appeal decision.

The matter was remanded to the jurisdictional Adjudicating Authority to sanction the refund claims in accordance with these directions and to decide the issue of unjust enrichment for the remaining claims, allowing the appellant to provide evidence that the incidence of duty was borne by them. The appeal was disposed of in these terms.

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