2015 (9) TMI 929 - HC - Central Excise

Refund of amount paid as pre-deposit as a per-condition to admit appeal - unjust enrichment - Levy of duty on free market sugar - Exemption under Notification No. 130/83-C.E. and 131/83-C.E., dated 27-4-1983 - Held that - Pre-deposit amount remitted by the respondent, as a condition precedent for filing the further appeal before CEGAT need not be refunded, necessary submission in that behalf ought to have been made before CEGAT itself. When the application is filed under Section 11B of the Act, the Assistant Collector appears to have thought that he is not bound by the order passed by the CEGAT at all and virtually treated the adjudication that has taken thus far, as irrelevant. It is curious to note that the amount involved in this case is one, of pre-deposit and not the one recovered or collected from a manufacturer as excise duty. Another factor is that CEGAT has referred to a trade notification, which added strength and kept the entire issue beyond pale of doubt. Benefit that has accrued to the respondent on the basis of long drawn adjudication was denied to him - Though the Collector of Customs & Central Excise (Appeals), Hyderabad, upheld such an act, the CEGAT, Bangalore, has taken the correct view and we do not find any substance in the questions that are framed in this CERC. - Decided against Revenue.

Summary

Issues:
- Claim for refund of pre-deposit amount under Section 11B of the Central Excises and Salt Act, 1944.
- Burden of excise duty passed on to consumers.
- Dispute over benefit under Notification No. 130/83 & 131/83.
- Actions of the Assistant Collector and higher authorities in handling the refund claim.

Claim for Refund of Pre-Deposit Amount:
The respondent, a sugar manufacturer, claimed exemption under Notification No. 130/83-C.E. and 131/83-C.E. for free market sugar in 1991. After a series of appeals, the CEGAT allowed the benefit under the notification. Subsequently, the respondent sought a refund of the pre-deposit amount of Rs. 3,69,600 under Section 11B of the Act. The Assistant Collector denied the refund, stating that the duty burden was passed on to consumers, directing the amount to be deposited in the consumer welfare fund. The higher authorities upheld this decision, leading to the respondent's appeal. The CEGAT in Bangalore allowed the appeal, emphasizing that the burden passing to consumers was not raised earlier and that the respondent was entitled to the benefit. The High Court rejected the department's plea to set aside the CEGAT order, criticizing the Assistant Collector's handling of the matter and upholding the CEGAT's decision.

Burden of Excise Duty Passed on to Consumers:
The Assistant Collector's refusal to refund the pre-deposit amount was based on the assertion that the duty burden was passed on to consumers. However, the High Court noted that this argument was not raised before the CEGAT earlier. The Court highlighted that the issue pertained to the pre-deposit amount and not the duty collected from consumers. The CEGAT's reference to a trade notification further supported the respondent's entitlement to the benefit under the notification. The Court disapproved of the Assistant Collector's approach and upheld the CEGAT's decision, emphasizing that the benefit derived from the adjudication process should not be denied to the respondent.

Dispute Over Benefit Under Notification No. 130/83 & 131/83:
The dispute arose from the respondent's claim for exemption under Notification No. 130/83 & 131/83 for free market sugar, leading to a series of appeals and counter-arguments regarding the entitlement to the benefit. The CEGAT ultimately allowed the benefit, leading to the refund claim under Section 11B. The High Court scrutinized the entire adjudication process and concluded that the respondent was rightfully entitled to the benefit, rejecting the department's contentions against the refund.

Actions of the Assistant Collector and Higher Authorities:
The High Court criticized the Assistant Collector's handling of the refund claim, noting that the prolonged litigation and additional liability incurred by the department were a result of the unreasonable approach taken. The Court emphasized that the Assistant Collector should have respected the CEGAT's decision and not disregarded the adjudication process. The higher authorities' support of the Assistant Collector's decision was overturned by the CEGAT's correct interpretation, leading the High Court to reject the department's plea and uphold the respondent's entitlement to the refund.