1998 (8) TMI 304 - AT - Central Excise

Summary

Issues Involved:
1. Classification of plastic components for audio-cassettes.
2. Admissibility of Modvat credit and refund claims.
3. Applicability of unjust enrichment.
4. Limitation period for claiming refunds under Section 11B.
5. Adjustment of duty without a proper demand under Section 11A.
6. Entitlement to interest on delayed refunds under Section 11BB.

Issue-Wise Detailed Analysis:

1. Classification of Plastic Components for Audio-Cassettes:
The appellants contested the classification of plastic components like hub stoppers and rollers under sub-heading 8523.12 of the Central Excise Tariff Act, 1985. Initially, these components were classified under sub-heading 8523.12, and duty was paid under protest. Later, it was determined that these components were not classifiable under this heading. The Tribunal, referencing cases such as *Indian Plywood Manufacturing Co. v. Collector of Central Excise* and *Ceat Tyres v. Collector of Central Excise*, concluded that the amounts paid by the manufacturers on these components could not be retained by the Department once it was established that the classification was incorrect.

2. Admissibility of Modvat Credit and Refund Claims:
The Assistant Commissioner rejected the refund claims on the grounds that the manufacturers had taken Modvat credit on the inputs, and hence, the appellants, as purchasers, were not entitled to any refund. The appellants argued that since the duty collected was without authority of law, no duty was payable, and it was not permissible to adjust the amount already paid as duty under a different heading. The Tribunal agreed with the appellants, stating that the amounts paid by the manufacturers could not be adjusted as duty payable under a different tariff heading without a proper demand under Section 11A.

3. Applicability of Unjust Enrichment:
The Department argued that the bar of unjust enrichment would apply to the appellants, citing the *Indo-Swiss Synthetics Gems Co. v. C.C.E.* case. However, the Assistant Commissioner had held that unjust enrichment did not apply to the appellants. The Tribunal supported this view, referencing the *East Anglia Plastic (India) Ltd. v. CCE* case, where it was held that unjust enrichment does not apply when the goods are used in the manufacture of other products and there is no evidence that the duty incidence was passed on to other persons.

4. Limitation Period for Claiming Refunds under Section 11B:
The Department contended that the refund claims were subject to the limitation period under Section 11B. The appellants argued that the limitation period did not apply since the duty was paid under protest. The Tribunal agreed with the appellants, noting that the six-month limitation period under Section 11B does not apply when the initial payment of duty was made under protest.

5. Adjustment of Duty without a Proper Demand under Section 11A:
The Tribunal examined whether the amounts could be adjusted as duty payable under a different tariff heading without issuing a proper demand under Section 11A. Citing the *Bharat Commerce and Industries v. Union of India* case, the Tribunal concluded that it was not permissible to adjust the duty without a proper demand in terms of Rule 10, and any recovery had to be made from the manufacturer, not the customer.

6. Entitlement to Interest on Delayed Refunds under Section 11BB:
The appellants claimed interest on delayed refunds under Section 11BB. The Tribunal held that interest under Section 11BB applies only to duty ordered to be refunded under Section 11B(2). Since no order was passed by the Assistant Commissioner under Section 11B(2), the question of awarding interest did not arise.

Conclusion:
The Tribunal allowed all 15 appeals, setting aside the impugned orders. The appellants were entitled to the refund claims as per the findings, but no interest on delayed refunds was awarded.