2014 (12) TMI 157 - AT - Central Excise

Provisional assessment - Adjustment of excess payments against short payments - Valuation of goods - Sanction of refund during provisional assessment - Held that - From the records, it is seen that the assessments for the quarters October to December, 2008 and January to March, 2009 were finalised and the refunds sanctioned. The assessments for these quarters were not appealed against by the Revenue before the lower appellate authority and, therefore, they had become final. If the assessment had become final, the time limit that would apply would be from the date of finalisation of the assessment and if the show cause notices have been issued after a period of one year from the date of finalisation of assessment, they would be clearly time-barred. Therefore, in respect of these two quarters, the contention of the appellant that the show cause notice is time-barred has merit. There is an error committed by the adjudicating authority by taking the transaction value at which the greatest aggregate quantity of goods were sold, we observe that as per Rule 2(b), normal transaction value means the transaction value at which the greatest aggregate quantity of goods are sold and, therefore, this is the price which has to be adopted for determination of transaction value at the time of removal of the goods from the factory. Therefore, this finding of the lower appellate authority is clearly wrong. If the appellants are able to show that they have not passed on the duty burden and have borne the duty burden by themselves, then there is no bar under Rule 7 of the Central Excise Rules relating to provisional assessment for adjustment of excess payments against short-payments. However, this is a pure question of fact which needs verification. If the assessee is able to produce documentary evidences in support of their claim that where-ver they have made excess payments they have not passed on the duty incidence but have borne out themselves, then such excess payments can be adjusted against short-payments of duty and the bar of unjust enrichment will not apply. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
- Finalization of provisional assessments for various quarters
- Disallowance of deductions leading to duty demand
- Recovery of refunds granted during provisional assessments
- Adjustment of excess duty payments against short-duty payments
- Application of principles of unjust enrichment

Analysis:

Finalization of Provisional Assessments:
The appellant, a manufacturer of viscose filament yarn, finalized provisional assessments for different quarters, offering discounts on depot sale prices. Refunds were granted for some quarters, but deductions were disallowed for others. The appellant challenged the disallowance, arguing that the method of finalizing assessments based on the sale price of the greatest aggregate quantity of goods sold from the depot was in line with Central Excise Valuation Rules, 2000. The appellant also contended that the Revenue raised new grounds during the Tribunal hearing, which were not part of the original challenge. The Tribunal noted that assessments for certain quarters had become final as they were not appealed by the Revenue, making the show cause notice time-barred for those quarters. However, for other quarters, further examination was required.

Disallowed Deductions and Duty Demand:
The lower appellate authority disallowed deductions, leading to a duty demand of Rs. 36,98,700. The appellant argued that rate differences were price adjustments passed on to consumers, supported by a Chartered Accountant certificate. The appellant also revised certificates to clarify discounts instead of expenses. The Tribunal observed that the lower authority's findings on rate differences and deductions were erroneous, as the adjustments were legitimate and supported by evidence. The Tribunal directed a fresh consideration of the claims and counter-claims made by both parties.

Recovery of Refunds and Adjustment of Payments:
Show cause notices were issued to recover refunds granted and demand alleged inadmissible deductions. The Revenue contended that adjusting excess duty payments against short payments was incorrect, citing principles of unjust enrichment. The Tribunal noted conflicting decisions on this matter and directed the adjudicating authority to re-examine the issue. The appellant was given the opportunity to provide evidence supporting their claim that they bore the duty burden.

Application of Principles of Unjust Enrichment:
The Revenue argued that the goods cleared without discounts showed the duty burden was passed on to buyers, affecting the applicability of unjust enrichment principles. The Tribunal emphasized the need for factual verification and directed a fresh consideration of the matter by the adjudicating authority.

In conclusion, the Tribunal allowed the appeals by way of remand, directing a re-examination of the issues raised and evidence presented by both parties.