2014 (7) TMI 151 - AT - Central Excise

Denial of refund claim - differential duty was paid on finalization of provisional assessee - later the issue was decided in favor of assessee - Unjust enrichment - Held that - In order to get over the situation arising under Mafatlal Industries Ltd., (2011 (8) TMI 880 - CESTAT, MUMBAI) vide notification No. 45/99-C.E. (N.T.), dated 25-6-1999, an amendment was made in sub-rule (5) of Rule 9B by adding a proviso thereto. The effect of the proviso is that even after finalisation of the provisional assessment under Rule 9B(5), if it is found that an assessee is entitled to refund, such refund shall not be made to him except in accordance with the procedure established under sub-section (2) of Section 11B of the Act. Proviso introduced in sub-rule (5) of Rule 9B cannot be said to be retrospective in operation. - However, revenue, contends that on the date on which the proviso was brought into force, i.e. 25-6-1999, the refund claim was still pending with the departmental authorities and, therefore, it had to be adjudicated in accordance with the law as it became enforceable from 25-6-1999. - this contention cannot be accepted. - Merely because the departmental authorities took a long time to process the application for refund, the right of the appellant does not get defeated by the subsequent amendment made in sub-rule (5) of Rule 9B. The matter should be re-examined by the lower authority in respect of the applicability of Doctrine of Unjust Enrichment. - Accordingly, impugned order insofar as the rejection of the refund, as it is hit by Doctrine of Unjust Enrichment, is set aside. - Decided in favour of assessee.

Summary

Issues:
- Provisional assessment of duty under Rule 9B of Central Excise Rules, 1944/Rule 7(1) of Central Excise Rules, 2002
- Liability to pay differential duty
- Eligibility for refund
- Doctrine of unjust enrichment applicability
- Applicability of Supreme Court judgments

Analysis:

1. The case involves the appellants engaged in manufacturing activities classified under Chapter 84 of the Central Excise Tariff Act, 1985, opting for provisional assessment of duty under Rule 9B of the Central Excise Rules. The Assistant Commissioner finalized the provisional assessment, determining a liability for the appellants to pay differential duty, which was later disputed by the Commissioner (Appeals) granting eligibility for a refund. However, the refund was rejected citing the doctrine of unjust enrichment.

2. The appellant's counsel argued that principles of unjust enrichment should not apply to clearances made before June 1999, referring to relevant Supreme Court judgments. On the contrary, the Authorized Representative contended that the doctrine of unjust enrichment applies to all refund claims, citing various judicial precedents including decisions by the Hon'ble Supreme Court and the Tribunal. The crucial date for invoking the provisions of unjust enrichment was highlighted as the finalization of assessment in September 2005.

3. The adjudicating authority observed that the transaction dated back to 1995 and was finalized under Rule 9B of the Central Excise Rules, with a proviso inserted in June 1999 regarding refund procedures. The case law of T.V.S. Suzuki Ltd. was referenced, emphasizing that the doctrine of unjust enrichment did not apply before the relevant amendment.

4. Referring to the Supreme Court's decision in the case of Sahakari Khand Udyog Mandal Ltd., the Tribunal set aside the rejection of the refund based on unjust enrichment. The Tribunal directed a re-examination by the lower authority to determine the applicability of the doctrine of unjust enrichment to the refund claims in accordance with the law and the Supreme Court's decision in T.V.S. Suzuki Ltd.

5. The Tribunal's decision focused on the retrospective application of the proviso introduced in Rule 9B, emphasizing that the appellant's right to refund should not be defeated by subsequent amendments. The matter was remanded for a fresh examination of unjust enrichment applicability, aligning with the principles established by the Supreme Court judgments.

This comprehensive analysis of the judgment highlights the key issues, arguments presented by both sides, relevant legal precedents, and the Tribunal's decision regarding the doctrine of unjust enrichment in the context of provisional duty assessment and refund eligibility.