2015 (1) TMI 369 - Commissioner - Central Excise

Denial of refund claim - Bar of limitation - Unjust enrichment - exemption under Notification No. 5/1999, S. No. 5 - Classification of goods - Classification held in favour of assessee by Commissioner and upheld by Supreme Court 2011 (7) TMI 1088 - Supreme Court of India - whether the appellants are entitled for refund of duty or not - Held that - adjudicating authority had observed that the refund claim had been filed by the appellants consequent to Hon ble CEGAT s judgment dated 26-9-2002. The adjudicating authority further observed that Hon ble CEGAT s order supra was never stayed by any appellate authority and that Hon ble CEGAT, in their order supra had held that The appeals of the appellants stand allowed accordingly with consequential relief, permissible under the law ; that therefore, the appellants should have filed the refund claim within one year of Hon ble CEGAT s order. Further, I find that for not applying refund after CEGAT s order supra, the appellants had contended before the adjudicating authority that they did not do so because the matter was pending before Hon ble Supreme Court. Further, I find that for holding the refund claim of the appellants as time-barred, the adjudicating authority had relied upon clause (ec) supra. But I find that the clause (ec) supra of Explanation to Section 11B of the Act was introduced w.e.f. 11-5-2007, whereas the refund claim in the present appeal pertains to the period from March, 2001 to October, 2002. I find that during the period prior to 11-5-2007, there was no relevant date prescribed in the Explanation to Section 11B supra in so far as consequential refunds are concerned. Further, I find that clause (ec) supra had not been given retrospective effect and thus, the same can be made applicable only in respect of the duties which had been paid after the said amendment and for which the refund claims are being filed thereafter. Therefore, I hold that the clause (ec) supra of Explanation to Section 11B of the Act, cannot be applied to the duties paid for the periods prior to the said amendment. Clause (ec) is also not applicable to the present case as the duty was paid under protest by the appellants. This is evident from the letter dated 7-3-2001 filed by the appellants with the Deputy Commissioner, Central Excise & Service Tax Division Sangrur, intimating thereunder that they would pay the duty on Lehar Kurkure Namkeen and Cheetos Tomato wheels namkeen under protest. Therefore, the relevant date of one year for filing refund, become nugatory in the present case, as evident from the plain reading of the provisions of Section 11B of the Act, supra which states that that the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest. Balance sheets filed by the appellants for the relevant period that they have shown the refundable amount as recoverable from the excise authorities, under the schedule relating to loans and advances in their balance sheets for the period from 2001-02 onwards till 2012-13. Further I find that the appellants have also submitted a copy of Chartered Accountant s certificated dated 18-2-2013 validating the entries in their balance sheets. I find that the balance sheets are conclusive evidence clearly showing the recoverable refundable amount from Excise department. Further, I observe that to rebut such conclusive evidence as that of balance sheets, which are in fact a statutory obligation for a limited company under Companies Act, one need to have sound and reasonable evidence to counter the same. Further, I also observe that the appellants have submitted a chart which showed the MRP at which the products in question have been sold during that period i.e. prior to 2001-02 during the disputed period, namely, 2001-02 and 2002-03 and much after the disputed period, namely, 2003-04. Adjudicating authority had observed that that since the products in question were subject to MRP based assessment under Section 4A of the Act, and definition of retail sale price in the Explanation to Section 4A was inclusive of the duties and taxes, the duty paid by the appellant during the relevant period had formed part of the retail sale price and, therefore, the appellant had passed on the duty burden to the consumers. I find that if this reasoning of the adjudicating authority is accepted then all MRP based products would not be eligible to claim refund of duty, if any. Further, I find that when the duty was paid under protest and shown to be recoverable from the department and further more there was no fluctuation in the MRP of the products, it clearly implies that the appellants had not passed on the duty element to the buyers. Thus, I hold that the appellants had succeeded in proving that the products in question manufactured and sold by them, did not include duty paid under protest. Refund is not hit by the doctrine of unjust enrichment, neither hit by time limitation - Decided in favour of assessee.

Summary

Issues Involved:
1. Time-barred refund claim.
2. Doctrine of unjust enrichment.

Detailed Analysis:

1. Time-barred Refund Claim:
The appellants filed a refund claim of Rs. 13,96,53,003/- on 25-7-2012, following the Supreme Court's dismissal of the Revenue's appeal on 26-7-2011. The adjudicating authority rejected the claim, stating it was time-barred, referencing the CESTAT's judgment dated 26-9-2002. According to Section 11B of the Central Excise Act, 1944, the claim must be filed within one year from the relevant date unless the duty was paid under protest. The adjudicating authority relied on clause (ec) of Explanation B to Section 11B, introduced on 11-5-2007, which specifies the relevant date as the date of the judgment, decree, order, or direction. However, this clause was not applicable to the period from March 2001 to October 2002 as it was introduced later and not given retrospective effect. Moreover, the duty was paid under protest, as evidenced by the letter dated 7-3-2001, making the one-year limitation inapplicable. The adjudicating authority's reliance on clause (ec) was incorrect as the limitation of one year does not apply to duties paid under protest. Therefore, the refund claim was not time-barred.

2. Doctrine of Unjust Enrichment:
The adjudicating authority also rejected the refund claim on the grounds of unjust enrichment, arguing that the duty paid formed part of the retail sale price (MRP) and was passed on to the consumers. The appellants contended that their refund was not hit by unjust enrichment, providing three main arguments supported by documents:
- They showed the refundable amount as recoverable from the excise authorities in their balance sheets from 2001-02 to 2012-13, supported by various judgments.
- They communicated their intention not to recover the duty from customers and paid the duty under protest, as stated in their 2001 letter.
- They submitted a Chartered Accountant's certificate validating the entries in their balance sheets.
- The MRP of the products remained unchanged during the disputed period, indicating that the duty payment did not affect the product price.

The balance sheets and Chartered Accountant's certificate were conclusive evidence that the refundable amount was recoverable from the excise authorities. The chart showing no fluctuation in MRP prices further supported that the duty was not passed on to the consumers. Accepting the adjudicating authority's reasoning would imply that all MRP-based products would be ineligible for duty refunds, which is not the case. Thus, the refund was not hit by the doctrine of unjust enrichment.

Conclusion:
The refund filed by the appellants was neither time-barred nor hit by the doctrine of unjust enrichment. The appeal was allowed with consequential relief, and the impugned order was set aside.