2018 (4) TMI 108 - HC - Central Excise

Unjust enrichment - refund of duty - finalization of provisional assessment - Section 11B of Central Excise Act 1944 - case of Revenue is that since the duty element was passed on to their customers the appellant/Assessee has no hold to claim the excess duty - Held that - the decision in the case of Commissioner of Central Excise Chennai Versus M/s. Dollar Company Pvt. Ltd. 2015 (2) TMI 346 - MADRAS HIGH COURT applies to the present case where it was held that the relevant date will be the date of adjustment of the duty after final assessment made thereof. The restrictions in Section 11A and Section 11B would not apply to refund claims consequent upon finalisation of provisional assessment orders. Appeal dismissed - decided against Revenue.

Issues Involved:
1. Applicability of the doctrine of unjust enrichment to refund claims arising from the finalization of provisional assessments for periods prior to 25.06.1999.
2. Entitlement of the respondent to challenge the correctness of the order-in-original rejecting the refund claim.

Detailed Analysis:

Issue 1: Applicability of the Doctrine of Unjust Enrichment

The primary issue revolves around whether the doctrine of unjust enrichment applies to the refund claims arising from the finalization of provisional assessments for periods before 25.06.1999. The appellant contended that the doctrine should apply, citing the amendment to Section 11B of the Central Excise Act, 1944, effective from 01.08.1998, which mandates that any refund consequent to finalization after this date would be covered by Section 11B provisions.

The tribunal, however, held that the doctrine of unjust enrichment did not apply to claims for periods prior to 25.06.1999. This decision was challenged by the appellant, who argued that the finalization of the provisional assessment for the year 1998-99 was done on 30.10.2000, post the amendment, thus making the doctrine applicable.

The appellant supported their argument by referring to the judgment of the High Court, Mumbai in the case of M/s. Standard Drum & Barrel Mfg. Co., which analyzed the applicability of the doctrine to refunds arising from finalizations post-amendment.

The High Court, Mumbai held that the amendment to Section 11B effective from 01.08.1998 required that refunds on finalization of provisional assessments must follow the procedure under Section 11B, including proving that the duty burden was not passed on to third parties. The court clarified that the amendment to Rule 9B on 25.06.1999 was merely clarificatory and did not alter the statutory provisions effective from 01.08.1998.

Issue 2: Entitlement to Challenge the Order-in-Original

The second issue concerns whether the respondent could challenge the correctness of the order-in-original, which rejected their refund claim based on the earlier provisional assessment order. The appellant argued that since the respondent did not challenge the provisional assessment order, it became final and binding, thus precluding any challenge to the subsequent order rejecting the refund claim.

The tribunal allowed the appeal filed by the respondent, holding that the doctrine of unjust enrichment was not applicable to any claim for refund of duty consequential to the finalization of provisional assessment for any period prior to 25.06.1999.

Court's Decision:

The court, after hearing the arguments and reviewing the materials, did not accept the appellant’s contentions. The court relied on its own precedent in Commissioner of Central Excise, Chennai-I, Vs. Dollar Company Private Limited, which followed the Supreme Court's decision in Commissioner of Central Excise, Chennai Vs. TVS Suzuki Limited. The Supreme Court had held that the amendment to Rule 9B(5) was not retrospective and did not apply to refunds arising from provisional assessments finalized before the amendment.

The court concluded that the refund claim in question was governed by the law as it stood before the amendment to Rule 9B(5) and thus was not subject to the doctrine of unjust enrichment. Consequently, the substantial questions of law were answered against the revenue, and the appeal was dismissed with no costs.

Conclusion:

The court dismissed the appeal, holding that the doctrine of unjust enrichment did not apply to refund claims arising from the finalization of provisional assessments for periods prior to 25.06.1999, following its precedent and the Supreme Court's interpretation. The respondent was entitled to the refund as the claim was made within the stipulated time and was not subject to the amended provisions.

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