2014 (7) TMI 650 - AT - Central Excise

Denial of Refund claim of excess payment of duty - unjust enrichment - Consequent of the Final Order dt 12.08.2010 of Settlement Commission, the assessee filed an application seeking refund of ₹ 6, 36,739/- being the excess paid amount - The Commissioner (Appeals) has observed that in the cost of goods sold the amount of refund claim has also been included and therefore the amount has been included as expenditure - Held that - the conclusion reached by the Commissioner without examining the records and in view of the fact that the Chartered Accountant did not specifically certify about the burden having been passed on or not, it is in fairness of things that assessee may be given another opportunity to get their records examined by a Chartered Accountant and get a revised certificate and produce it before the original authority who shall examine the same and consider the refund claim afresh and decide in accordance with law. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Settlement of case by Settlement Commission under Central Excise Act, 1944.
2. Refund application by assessee and subsequent appeal by the department.
3. Unjust enrichment and passing on the burden of duty to customers.

Settlement of case by Settlement Commission under Central Excise Act, 1944:
The case involved M/s Linkwell Telesystems Pvt. Ltd. engaging in the manufacture of telecommunication equipment. The Directorate General of Central Excise Intelligence (DGCEI) found discrepancies in CENVAT credit utilization by the company. Two show cause notices were issued, leading to a demand of Rs. 1,00,69,646. The company paid Rs. 1,01,45,447 in 2008 and admitted to an amount of Rs. 95,08,708, seeking settlement. The Settlement Commission settled the case under various terms, including settling the additional excise duty and interest amounts already paid, granting immunity from fine, penalty, and prosecution under Section 32K(1) of the Central Excise Act, 1944.

Refund application by assessee and subsequent appeal by the department:
Following the settlement, the assessee sought a refund of Rs. 6,36,739 as an excess paid amount. The Jurisdictional Assistant Commissioner sanctioned the refund under Section 11B of the Central Excise Act, 1944. However, the department appealed, arguing that the aspect of unjust enrichment was not examined by the original adjudicating authority. The Commissioner (Appeals) ruled in favor of the department, stating that the burden of duty had been passed on to customers, and the refunded amount should be credited to the Consumer Welfare Fund. The assessee appealed this decision.

Unjust enrichment and passing on the burden of duty to customers:
The main issue revolved around unjust enrichment and whether the burden of duty had been passed on to customers by the assessee. The Chartered Accountant's certificate presented did not definitively state that the duty burden was not transferred to customers. The Commissioner (Appeals) noted that the refund claim amount was included in the cost of goods sold, indicating a pass-through to customers. However, the judgment highlighted that this observation lacked a thorough examination of records or accounts. It was suggested that a detailed review, considering production and costing records based on standard accounting principles, was necessary. The judgment emphasized the need for a revised certificate from a Chartered Accountant to ascertain the passing on of duty burden. Consequently, both appeals were set aside, and the matter was remanded for a fresh decision, with a three-month deadline for producing the revised certificate. Failure to comply would lead to rejection of the claim on unjust enrichment grounds.