2012 (7) TMI 231 - AT - Central Excise

Whether refund claim is liable to be rejected on ground of unjust enrichment u/s 11B - Held that - As the respondent has not disputed the computation of assessable value of cigarettes after the decision of the Delhi High Court that duty at only concessional rate was deductible from the cum-duty price for determination of assessable value as the respondent has not challenged deduction of amount of Rs. 20,33,381.53 from the total refund of Rs.35,57,094.53. Therefore, the decisions relied upon by the respondents do not support their claim which is rejected on the ground of unjust enrichment. The invoice price charged to the buyers from 30.11.82 to 07.12.82 includes the duty amount calculated at the rate of 440% Adv. plus Rs. 32/- specific amount of duty paid and the duty paid in the ARI is calculated and paid under Notification No. 30/79 dated 01.03.79 plus 50% of the disputed amount shown in ARI and less than the duty amount charged in the invoices, thus it is clear that although duty has been charged at tariff rate from the buyers in the invoice, the total amount of duty paid to the Central Excise department as is evident from the ARI assessment is less than the amount recovered as duty from the buyers, the respondent has not been able to prove that the amount sought to be refunded by the assessee was not recovered from buyers - against assessee.

Summary

Issues Involved:
1. Entitlement to refund claim.
2. Applicability of unjust enrichment doctrine.
3. Computation of assessable value and duty deduction.

Detailed Analysis:

1. Entitlement to Refund Claim:
The respondent, engaged in the manufacture of cigarettes, initially filed a refund claim of Rs. 54,40,642.71, which was paid against a show cause notice due to the rescinding of Notification No. 30/79-CE by Notification No. 284/82-CE. The respondent argued that the new notification should take effect from the date it was made known to the public, not from its issuance date. The Assistant Collector rejected the refund claim, stating that the notification takes effect from its publication date in the official Gazette. The Mumbai High Court later ruled that the recovery from 8.12.1982 onwards was valid, and the excess recovery from 30.11.1982 to 7.12.1982 should be refunded with interest. The Supreme Court directed the Assistant Collector to decide the refund entitlement in light of Section 11B of the Central Excise Act.

2. Applicability of Unjust Enrichment Doctrine:
The Assistant Commissioner rejected the refund claim on the grounds of unjust enrichment, stating that the respondent had passed the duty incidence to the buyers. The Commissioner (Appeals) remanded the case for re-adjudication, instructing to consider the refund entitlement as per the Supreme Court's order. The respondent argued that the difference in duty computed based on full tariff rate and concessional rate had already been adjusted, and denying the balance amount on unjust enrichment grounds was unlawful. The respondent relied on the Patna High Court's decision in Bata Shoe Company, which was affirmed by the Supreme Court, stating that the computation of assessable value does not represent the actual duty collected from buyers.

3. Computation of Assessable Value and Duty Deduction:
The department contended that the assessable value should be computed by deducting the duty at the tariff rate from the cum-duty price, and the duty amount collected from buyers was at the tariff rate. The respondent had paid duty at the concessional rate but computed the assessable value by deducting duty at the tariff rate. The department argued that the respondent recovered the duty amount at the tariff rate from buyers, which was evident from the invoices. The Tribunal found that the respondent's computation of assessable value by deducting duty at the tariff rate from the cum-duty price indicated that the duty burden was passed on to the buyers, thus supporting the department's claim of unjust enrichment.

Conclusion:
The Tribunal concluded that the refund claim was rightly rejected on the grounds of unjust enrichment, as the respondent failed to prove that the duty amount sought for refund was not recovered from buyers. The order passed by the Commissioner (Appeals) was set aside, and the Revenue's appeal was allowed. The Tribunal emphasized that the computation of assessable value and the actual duty collected from buyers are crucial in determining the applicability of the unjust enrichment doctrine. The decision was pronounced in court on 22/06/2012.