2014 (2) TMI 12 - AT - Central Excise

Rejection of refund claim u/s 11B - Price variation - Unjust enrichment - Held that - refund can be granted to the assessee in a situation where the assessments were not made provisional but the price of excisable goods was reduced downward after clearance of the goods as per price variation clause which was in existence in the contract under which goods were being cleared and the buyers adjusted the amount. There are sales prices to be paid on the goods subsequently sold - Tribunal further observed that where the buyer had taken the Cenvat credit on the initial excise duty paid, the matter has not been examined but inasmuch as adjudicating authority has granted part refund, it has to be presumed that this aspect has been looked into - appellants have taken a categorical stand that on account of negative price variation, they have issued the credit notes to their customers by crediting the account of the buyers in their books of accounts. This amount includes incidence of duty also - duty incidence does not stand passed on to the buyers, and as such are not hit by the provisions of unjust enrichment - Following decision of CCE, Ghaziabad vs. Mahavir Cylinders 2013 (6) TMI 509 - CESTAT, NEW DELHI - Decided in favour of assessee.

Summary

Issues:
Refund claim rejection on merits, limitation, and unjust enrichment.

Refund Claim Rejection on Merits:
The appellants, manufacturers of electric transformers, filed a refund claim under section 11 B of the Central Excise Act, which was rejected by lower authorities citing non-resort to provisional assessment under Rule 7 of Central Excise Rules, 2002. The lower authorities held that duty paid at clearance must be considered correct duty, barring any refund due to subsequent price reduction. However, referencing various decisions, including CCE vs. Mahavir Cylinders, it was established that a downward price reduction post-clearance can entitle the assessee to a refund, even without provisional assessment. The Tribunal's precedent supported the refund claim based on price variation clauses in contracts, leading to a favorable decision for the appellants on merits.

Limitation:
Lower authorities deemed most of the refund claim as time-barred, except for a specific invoice not contested by the appellants. Since the uncontested claim fell within the limitation period, the refund was considered valid within the prescribed time frame. This aspect was crucial in determining the eligibility of the refund claim and ensuring compliance with statutory limitations.

Unjust Enrichment:
The issue of unjust enrichment was extensively discussed, referencing cases like Universal Cylinders Ltd. and A K Spintex Ltd. to analyze the buyer's role in the refund process. The Tribunal's decision in Mahavir Cylinders emphasized that if buyers had taken Cenvat credit on initial excise duty paid, it implied a thorough examination of the price element. Cases like Kurool Cylinders Pvt. Ltd. and Swastika Concab (I) Pvt. Ltd. further supported the appellants' stance that they did not pass on the duty incidence to buyers, thereby avoiding unjust enrichment. Despite the Commissioner (Appeals) not following the Swastika Concab decision due to pending appeals, the appellants' issuance of credit notes for negative price variation demonstrated the non-passing of duty incidence, aligning with established legal principles on unjust enrichment. Consequently, the judgment favored the appellants, setting aside the impugned order and granting them relief.

This comprehensive analysis of the judgment highlights the critical legal aspects of the refund claim rejection on merits, limitation considerations, and the intricate examination of unjust enrichment principles in the context of the Central Excise Act.