2013 (11) TMI 988 - AT - Central Excise

Passing of Incidence of duty to the customer Eligibility for refund Unjust enrichment - Excess duty paid on bulk supply of explosives on prices determined provisionally Duty decided in lower side Held that - The price was finalized at a lower side and the appellant initially cleared at a higher price with higher duty claimed refund - The higher duty collected from M/s Coal India Ltd., which was not supposed to be collected were computed and intimated in a document called credit note which is actually in the format of a Tax invoice and Coal India since paid higher duty, adjusted the amount against their future payments - Thus, they got back the money/amount paid in excess earlier - the excess duty amount initially paid by IOC has not been passed on to the buyer Coal India - Coal India has not also taken any Cenvat Credit on the duty paid on explosives and those were consumed by them - the document said to be credit notes is actually a tax invoice showing the amount excess collected to enable Coal India to adjust it with the future payments. Following CCEx., Nagpur Vs. Solar Capital Ltd. 2006 (2) TMI 522 - CESTAT, MUMBAI and Special Blasts Ltd. Vs. CCEx., Raipur 2005 (3) TMI 496 - CESTAT, NEW DELHI - bar of unjust enrichment is not attracted It is not similar to the Credit Notes referred in the Board s Circular - it is a settlement of price either higher or lower side, in the course of finalization of provisional assessment, and not a price reduction subsequent to sale as envisaged in the Board s Circular - Decided against Revenue.

Summary

Issues:
- Refund claim on excess duty paid for bulk supply of explosives
- Transfer of refunded duty to Consumer Welfare Fund
- Principle of unjust enrichment
- Use of credit notes for future liability adjustment

Refund Claim on Excess Duty Paid for Bulk Supply of Explosives:
The case involves the Revenue filing appeals against Orders-in-Appeal passed by the Commissioner (Appeals) regarding refund claims on excess duty paid by the Appellants for bulk supply of explosives to a government undertaking. The Appellants cleared explosives to the customer on a provisional price, paid appropriate central excise duty, and later claimed a refund of the differential duty due to finalization of the price at a lower rate. The adjudicating authority sanctioned the refund but directed the transfer of the amount to the Consumer Welfare Fund, citing the failure of the Appellants to prove that the duty incidence was not passed on to the customer. The Commissioner (Appeals) allowed the appeal, leading to the Revenue's appeal.

Transfer of Refunded Duty to Consumer Welfare Fund:
The Revenue argued that even though the excess duty amount was returned to the customer through credit notes, the principle of unjust enrichment applied as the duty incidence initially passed on could not be neutralized by post-clearance credit notes. Referring to a CBEC circular, the Revenue contended that issuance of credit notes post-clearance did not absolve the assessee from unjust enrichment. In contrast, the Respondent's advocate argued that the credit notes were issued for future liability adjustment and settlement of accounts with the customer, not merely for passing on the duty incidence.

Principle of Unjust Enrichment:
The central issue revolved around whether the Appellants could demonstrate that the duty incidence was not passed on to their customer, making them eligible for the refund. The Commissioner (Appeals) analyzed the purpose and object of the credit notes issued by the Appellants, concluding that they were for settlement, payment, and future liability adjustment, not for passing on duty incidence. Citing various tribunal decisions, the Commissioner (Appeals) found that the bar of unjust enrichment did not apply in this case, as the excess duty amount was not passed on to the buyer.

Use of Credit Notes for Future Liability Adjustment:
The Commissioner (Appeals) highlighted that the credit notes issued by the Appellants were in the format of tax invoices, enabling the customer to adjust the excess amount with future payments. Drawing a distinction from the Board's circular on credit notes, the Commissioner (Appeals) emphasized that the credit notes in this case were part of a price settlement process, not a post-sale price reduction scenario. The Tribunal upheld the Commissioner (Appeals)'s reasoning, dismissing the Revenue's appeals and affirming the orders in favor of the Appellants.