2017 (2) TMI 306 - AT - Central Excise

Refund claim - unjust enrichment - Held that - in the appeal before the Commissioner (Appeals) against order-in-original, the Revenue has not challenged the admissibility of deduction as is apparent from the grounds of application where it is specifically stated that the deductions are not in dispute. In these circumstances, it is not open to Revenue to challenge the admissibility of deductions before the Tribunal. The provisions of unjust enrichment cannot be applied to the assessment when the period prior to 25/06/1999. The first order of finalisation of assessment was directed to be withdrawn by the Hon ble High Court as the same was issued without a show-cause notice. In these circumstances, the order-in-original seeking refund claim become of first order of finalisation of provisional assessment - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Challenge of encashment of bank guarantee by appellant.
2. Finalization of assessment by denying deductions claimed by appellant.
3. Challenge of order of encashment of bank guarantee by Revenue.
4. Appeal before the Commissioner (Appeals) on the ground of unjust enrichment.
5. Admissibility of deduction challenged by Ld. AR.
6. Application of unjust enrichment to the assessment.
7. Interpretation of provisions regarding unjust enrichment pre and post 25/06/1999.
8. Application of doctrine of unjust enrichment to refunds arising from finalization of provisional assessments.
9. Decision of Tribunal in the case of Panasonic Battery India Co. Ltd.
10. Applicability of unjust enrichment to assessments finalized after 25/06/1999 for the period prior to that date.
11. Observations of Hon’ble Apex Court in the case of Mafatlal Industries.
12. Withdrawal of first order of finalization of assessment by Hon’ble High Court.
13. Applicability of Section 11B for refund claims arising from appeal proceedings.

Analysis:
1. The appellant's assessment was initially done on a provisional basis, leading to the submission of a bank guarantee. Upon finalization of the assessment, the claimed deductions were denied, and the bank guarantee was encashed. The appellant challenged this before the Hon’ble High Court, which directed the Revenue to issue a show-cause notice before finalizing the assessment. Subsequently, the assessment was finalized allowing all deductions claimed by the appellant, and the appellant was permitted to take credit of the refund in their Cenvat account. The issue of unjust enrichment was also examined during the refund process, leading to a challenge by Revenue before the Commissioner (Appeals) solely on the ground of unjust enrichment.

2. The Ld. Counsel for the appellants argued that for the period prior to 25/06/1999, the provisions of unjust enrichment should not apply to the finalization of the provisional assessment. They presented a Chartered Accountant Certificate to support their claim of no unjust enrichment. The argument emphasized that this case was distinct from the precedent set by the Hon’ble Apex Court in the case of Mafatlal Industries. It was highlighted that the withdrawal of the earlier order of finalization of provisional assessment by the Hon’ble High Court made this the first order of finalization of the original assessment.

3. The Ld. AR sought to challenge the admissibility of deductions but was countered by the Tribunal’s observation that the Revenue had not disputed the deductions during the appeal before the Commissioner (Appeals). The Tribunal referred to the decision in the case of Sahakari Khand Udyog Mandal Ltd. and the Tribunal’s stance in the case of Panasonic Battery India Co. Ltd., emphasizing the independence of entitlement to refund and finalization of provisional assessments.

4. The Tribunal, after considering the arguments and precedents, concluded that the provisions of unjust enrichment could not be applied to the assessment for the period before 25/06/1999. The Tribunal differentiated between the application of unjust enrichment pre and post the specified date, aligning with the Tribunal’s previous decision in the case of Panasonic Battery India Co. Ltd. The Tribunal also clarified the applicability of Section 11B for refund claims arising from appeal proceedings, based on the observations of the Hon’ble Apex Court in the case of Mafatlal Industries. The withdrawal of the initial order of finalization of assessment by the Hon’ble High Court was crucial in determining the outcome of the appeal in favor of the appellants.