2012 (12) TMI 436 - AT - Central Excise

Refund claim pre-deposit Held that - Sum of Rs. 40 lakhs was deposited by the respondent pursuant to the direction given by the Commissioner (Appeals) under proviso to Section 35F of Central Excise Act, 1944 - This deposit was in the nature of securing the demand confirmed against the respondents vide order-in-original - Once the order-in-original and order of the Commissioner (Appeals) has been set aside by the Tribunal, the department has no option but to return the amount of pre-deposit and has no right or legal authority to create any obstruction in refunding the amount In favor of assessee

Summary

Issues:
Department's appeal against refund sanctioned to the assessee without considering unjust enrichment.

Analysis:
The appeal was filed by the department against the order of the Commissioner (Appeals) confirming the refund of Rs. 40 lakhs to the assessee. The respondents, engaged in the manufacture of malted food products subject to excise duty, were transferring goods in bulk to depots for packaging and marketing. The goods were cleared provisionally under Rule 9B due to unknown actual costs at the time of removal.

Following a Tribunal judgment and a subsequent circular, the department asked the respondent to calculate and pay the differential duty on freight and insurance charges for a specific period. The respondent complied, depositing Rs. 3,62,94,447 with the department. Subsequently, a show cause notice was issued for recovery of interest on late payment, leading to a demand confirmed against the respondent.

The Commissioner (Appeals) directed the assessee to deposit Rs. 40 lakhs as a pre-condition for hearing their appeal, which was done. The appeal was dismissed, but the Tribunal later set aside the demand for interest. Upon this decision, the respondent applied for a refund of the pre-deposited amount, which was allowed by the Deputy Commissioner and upheld by the appellate authority.

The department appealed against the refund solely on the grounds of unjust enrichment, claiming that the original and appellate authorities did not consider this aspect. However, the Tribunal found the department's plea unfounded. It noted that the goods were cleared at a lesser valuation initially, and the subsequent payment of differential excise duty on freight and insurance charges was not passed on to retail customers, with no evidence suggesting otherwise.

The Tribunal emphasized that the pre-deposit was made to secure the demand confirmed in the now-set-aside orders, and as such, the department was obligated to refund the amount without creating any obstacles. Consequently, the appeal was dismissed for lacking merit, affirming the refund of Rs. 40 lakhs to the respondent.