2024 (10) TMI 978 - HC - Central Excise

Admissibility of interest on Sundry Debtors as a deduction in finalization of Provisional assessments under Rule 9B of the Central Excise Rules, 1944 for the period prior to 1996 - violation of principles of unjust enrichment - HELD THAT - In the instant case, it is not in dispute between the parties that the relevant period is between 01.04.1989 to 31.03.1998. The Provisional Assessment Order was passed on 12.03.1999. The said order became subject matter of challenge in appeal and then before the CESTAT. Upon remand by CESTAT by its order, dated 04.11.1999, the Order-In-Original (Assessment Order) could be passed only on 31.03.2004. In this backdrop, it is to be seen whether proviso to Rule 9B (5) of the Rules, 1944 can be pressed into service and refund can be declined by applying the concept of unjust enrichment . In view of the settled position of law, it is clear that the entitlement to refund and finalization of the provisional assessment under Rule 9B of the Central Excise Rules, 1944 is independent from the provisions of refund under Section 11B of the Central Excise Act, 1944 - The procedure regarding unjust enrichment of finalization of provisional assessment will be applicable to the provisional assessment made after 1999 and not before that date as the proviso to Rule 9B in the form of sub-rule (5) did not have a retrospective effect. The doctrine of unjust enrichment therefore would not be attracted to the refunds pertaining to the finalization of the provisional assessment for the period prior to 1999 and sub-rule (5) to Rule 9B of the Central Excise Rules, 1944 will not operate retrospectively. When delay in deciding the Assessment Order is not attributable to the assessee, the time consumed in passing the Assessment Order will not defeat the claim for refund on the ground of unjust enrichment flowing from proviso to sub rule (5) of Rule 9B of the Rules 1944. The impugned order of Tribunal is in consonance with law and no case is made out for interference. In view of settled legal position, no substantial question subsists and therefore, the appeal is dismissed.

Summary

Issues:
- Interpretation of Section 35(G) of the Central Excise Act, 1944
- Application of the principle of unjust enrichment to refunds arising from finalization of provisional assessments
- Effect of the proviso to Rule 9B(5) of the Central Excise Rules, 1944 on refund claims

Analysis:
1. The judgment pertains to an appeal under Section 35(G) of the Central Excise Act, 1944, concerning the application of the principle of unjust enrichment to refunds arising from finalization of provisional assessments. The central question revolved around whether the proviso to Rule 9B(5) of the Central Excise Rules, 1944 could be applied retrospectively to deny a refund based on the concept of unjust enrichment.

2. The facts of the case involved a provisional assessment period from 01.04.1989 to 31.03.1998, with the final assessment order issued on 31.03.2004 after a remand by CESTAT. The appellant contested the Tribunal's decision, arguing that the Constitution Bench judgment in Mafatlal Industries Limited v. Union of India should prevail, and the proviso should not have retrospective effect.

3. The appellant contended that the Tribunal erred in not considering the date of finalizing the provisional assessment as the crucial point, which occurred after the introduction of the proviso to Rule 9B(5). The Bombay High Court's decision in CCE v. CEAT Limited was cited to support the argument that unjust enrichment could not be applied retrospectively.

4. The Division Bench of the Bombay High Court, in the CEAT Limited case, clarified that the principle of unjust enrichment could only be invoked from 25.06.1999 onwards and did not have retrospective effect. The judgment emphasized that unjust enrichment did not apply to refunds from finalization of provisional assessments before 25.06.1999, even if the assessments were completed after that date.

5. Referring to the Supreme Court's decision in CCE, Chennai v. TVS Suzuki Limited, the judgment highlighted that delays in finalizing assessment orders not caused by the assessee would not defeat refund claims based on unjust enrichment. The Tribunal's decision was deemed to be in accordance with the law, and no substantial question meriting interference was found, leading to the dismissal of the appeal.

6. The judgment concluded that the proviso to Rule 9B(5) did not have retrospective effect, and the principle of unjust enrichment could not be applied to refunds arising from finalization of provisional assessments before 25.06.1999. The settled legal position led to the dismissal of the appeal, with no costs awarded, and closure of any pending miscellaneous petitions related to the case.