2024 (12) TMI 940 - AT - Central Excise

Refund claim of the amount deposited 'under protest' during the pendency of the adjudication proceedings and investigation - rejection on the ground of unjust enrichment in terms of section 11B of the Central Excise Act, 1994 - HELD THAT - The issue whether the appellant is eligible to claim the refund and whether the same is hit by the bar of unjust enrichment in terms of section 11B is no longer res integra, having been decided in series of decisions. Reference made to the latest decision passed by this Tribunal in M/S CHAMBAL FERTILIZERS AND CHEMICALS LIMITED VERSUS COMMISSIONER, CENTRAL GOODS AND SERVICE TAX, UDAIPUR (RAJ.) 2023 (2) TMI 10 - CESTAT NEW DELHI where the Bench had dealt with similar contentions as raised by the appellant herein referring to the earlier decisions of the Madras High Court in THE COMMISSIONER OF CENTRAL EXCISE, COIMBATORE VERSUS M/S. PRICOL LTD., THE CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL 2015 (3) TMI 735 - MADRAS HIGH COURT which was subsequently followed by the Allahabad High Court in THE COMMISSIONER OF CENTRAL EXCISE, COIMBATORE VERSUS M/S. PRICOL LTD., THE CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL 2015 (3) TMI 735 - MADRAS HIGH COURT . In all these decisions, the main principle laid down is that any amount deposited during the pendency of adjudication or investigation is in the nature of deposit and therefore, cannot be considered to be towards payment of duty and consequently the principles of unjust enrichment would not apply in the event of claiming refund of such deposit. Deposit of the duty amount 'under protest' by the appellant during the period April 2016 to June 2017 - no show cause notice itself was issued by the department - HELD THAT - The deposit made by the appellant cannot be characterised as 'duty' in terms of section 11B of the Act. The amount deposited by the appellant during this period was only by way of abundant caution as the very basis of initiating any proceedings is by issuing the show cause notice itself, however, the stage in the present case is when the show cause notice has not been issued. It is concluded that the amount deposited during the period April 2016 to June 2017 was a mere deposit which cannot be subjected to the bar of unjust enrichment and the appellant is entitled to claim the refund thereof. The issue of refund of the amount deposited 'under protest' during adjudication/investigation has been consistently held to be a simple deposit which is not hit by the bar of unjust enrichment was affirmed by the Karnataka High Court in COMMISSIONER, BANGALORE VERSUS MOTOROLA INDIA PRIVATE LTD. 2007 (11) TMI 64 - HIGH COURT KARNATAKA where the appeal filed by the revenue was dismissed and the view taken by the Tribunal was affirmed observing that there was no unjust enrichment. Subsequently, the Madras High Court in THE COMMISSIONER OF CENTRAL EXCISE, COIMBATORE VERSUS M/S. PRICOL LTD., THE CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL 2015 (3) TMI 735 - MADRAS HIGH COURT and the Allahabad High Court in EBIZ. COM PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX AND ORS. 2016 (9) TMI 1405 - ALLAHABAD HIGH COURT upheld the view. We may also refer to the decision of the High Court of Delhi in the case of TEAM HR SERVICES PRIVATE LTD. VERSUS UNION OF INDIA ANR. 2020 (6) TMI 342 - DELHI HIGH COURT where the Court observed that the undisputed position is that the deposit 'under protest' was made against the anticipated liability and which liability though fructified by the respondent was set aside by the CESTAT and which order attained finality. The reliance placed by the learned Special Counsel on JCT LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH-II 2003 (11) TMI 145 - CESTAT, NEW DELHI is completely misplaced as the doctrine of unjust enrichment was considered in the general sense and the price of the goods was inclusive of duty, which meant that the assessee had already recovered the duty from the customers. The impugned order passed by the Commissioner (Appeals) is unsustainable and is hereby set aside and the order of the adjudicating authority dated 04.09.2019 is restored with consequential relief - Appeal allowed.

Issues Involved:

1. Refund claim of the amount deposited 'under protest' and applicability of the doctrine of unjust enrichment under Section 11B of the Central Excise Act, 1994.
2. Consideration of accounting treatment and Chartered Accountant's Certificate in determining unjust enrichment.
3. Characterization of deposits made during adjudication/investigation as 'duty' or 'deposit'.
4. Impact of statutory price fixation by the Rajasthan Electricity Regulatory Commission (RERC) on the claim of unjust enrichment.

Issue-wise Detailed Analysis:

1. Refund Claim and Unjust Enrichment:

The appellant challenged the rejection of their refund claim on the grounds of unjust enrichment. The Tribunal referred to precedents establishing that amounts deposited during adjudication or investigation are considered deposits, not payments of duty, and thus are not subject to unjust enrichment. The Tribunal cited decisions from various High Courts, including the Madras and Allahabad High Courts, affirming that the doctrine of unjust enrichment does not apply to such deposits. The Tribunal concluded that the refund claim is not barred by unjust enrichment, aligning with the principle that deposits made during pending proceedings are not payments of duty.

2. Accounting Treatment and Chartered Accountant's Certificate:

The appellant argued that the manner of accounting (showing the amount as an expenditure) does not prove unjust enrichment. The Tribunal noted that accounting standards, such as AS-29, classify claims under legal pursuit as contingent assets, which do not impact the admissibility of refunds. The Tribunal emphasized that mere accounting treatment does not demonstrate that the duty burden was passed to customers. The Tribunal gave credence to the Chartered Accountant's Certificate, which stated that the excise duty was charged at RERC-approved prices, indicating no additional recovery from customers. The Tribunal held that the Certificate, unless disproven by the Revenue, is reliable evidence against unjust enrichment.

3. Characterization of Deposits:

The Tribunal addressed the nature of deposits made 'under protest' during adjudication/investigation, emphasizing that such deposits do not constitute duty payments under Section 11B. The Tribunal reiterated that deposits made without any show cause notice, as in the period from April 2016 to June 2017, were merely cautionary and could not be treated as duty. Consequently, the Tribunal ruled that these deposits are not subject to the bar of unjust enrichment, allowing the appellant to claim refunds.

4. Statutory Price Fixation by RERC:

The appellant contended that the statutory price fixation by RERC negates the applicability of unjust enrichment, as they had no discretion to alter the price. The Tribunal supported this view, stating that when prices are fixed by a statutory authority, the issue of unjust enrichment does not arise. The Tribunal referenced the Supreme Court's decision in State of Rajasthan vs. Hindustan Copper Ltd, affirming that statutory price fixation precludes the adjustment of prices for duty inclusion, thereby supporting the appellant's claim for a refund.

Conclusion:

The Tribunal set aside the impugned order by the Commissioner (Appeals) and restored the adjudicating authority's order, allowing the refund claim with consequential relief. The Tribunal's decision was based on the established legal principles that deposits during adjudication are not duty payments and are not subject to unjust enrichment, supported by the statutory price fixation by RERC and the Chartered Accountant's Certificate. The appeal was allowed, and the miscellaneous application for stay was deemed infructuous.

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