2014 (8) TMI 698 - AT - Central Excise

Denial of refund claim - Unjust enrichment - Duty paid twice - Notification No. 62/2002-CX dated 31.12.2002 - Held that - Appellants have paid duty on Ethanol and did not take credit thereof. It is also not in dispute that the appellants cleared EBMS on payment of duty at the rate fixed by the Govt. of India. The fact that the duty has been paid twice on Ethanol is also not in dispute. The dispute in this case is on issuance of letter by the department on 21.11.2002 wherein their activity on blending was held that the same does not amount to manufacture. If, at that time, the appellants were told that their activity amounts to manufacture, the dispute could not have arisen as on today. In this context of that it cannot be said that the appellants are required to pay duty twice. As the appellants have claimed refund of excess duty paid on Ethanol portion at the time of clearance of EBMS or they are entitled for CENVAT credit at the time of procurement of Ethanol, the consequences will be the same as they are entitled to get the refund of excess duty borne by them. As the facts of double payment of duty on Ethanol is not in dispute at any stage and the dispute has been arisen on the wrong understanding of the Revenue while granting them permission for blending the Ethanol with MS. Therefore, following the principles of natural justice we hold that the appellants are entitled for refund claim for duty paid on Ethanol - unjust enrichment is not applicable to the facts of this case - appellants are entitled for refund claim - Decided in favour of assessee.

Summary

Issues:
- Refund claim of duty paid twice on Ethanol
- Entitlement for CENVAT credit on Ethanol at the time of procurement

Analysis:
The appellants appealed against the rejection of their refund claim for duty paid twice on Ethanol. They are engaged in manufacturing and distribution of petroleum products, where Ethanol is mixed with motor spirit to create Ethanol Blended Motor Spirit (EBMS). The lower authorities held that the blending of Ethanol with motor spirit amounts to manufacture, making the appellants ineligible for a refund. The appellants argued that they did not avail CENVAT credit on Ethanol at the time of procurement and paid duty twice on Ethanol content in EBMS. They sought a refund or CENVAT credit for the duty paid. The issue of unjust enrichment was raised, with the appellants citing a previous case to support their claim. The Revenue opposed the refund claim, stating that the activity amounted to manufacture and the product became duty-free as per Notification 62/2002. They argued that the appellants did not challenge the order rejecting the refund claim on valid grounds.

The Tribunal considered both sides' submissions and found that the appellants paid duty on Ethanol without taking credit and cleared EBMS by paying duty fixed by the government. It was undisputed that duty was paid twice on Ethanol. The dispute arose from a letter by the department stating that the blending activity did not amount to manufacture. The Tribunal held that the appellants were entitled to a refund as they paid duty twice on Ethanol, based on the wrong understanding of the Revenue. The Tribunal also addressed the issue of unjust enrichment, citing precedents where it was deemed inapplicable due to statutory price controls. Consequently, the Tribunal allowed the appeals, setting aside the impugned orders and granting consequential relief to the appellants.