2018 (8) TMI 357 - HC - Central Excise

Adjustment/refund of the excess provisional duty - unjust enrichment - whether such a refund/adjustment deserves to be made under erstwhile u/r 9B(5) of the Central Excise Rules, 1944 or the Respondent-assessee has to claim such refund by adopting the procedure u/s 11B of the Act establishing before the Revenue Department that the incidence of duty has not been passed on to the customers, to avoid unjust enrichment to the Respondent-assessee by making such refund/adjustment? Held that - We are not impressed with the arguments raised by the learned counsel for the appellant-Revenue before us that in view of the Proviso of Rule 9B(5) of the Rules w.e.f. 25.07.1999 merely because the order u/r 9B(5) came to be passed after the date in the year 2006, the Respondent-assessee was required to take recourse of Section 11B of the Act. On the contrary, the adjustment/refund or short payment of provisional duty was required to be determined by the Assessing Authority under Rule 9B(5) of the Rules as it then existed during the contemporary period of taxable event of manufacture and removal of goods took place. The Rule governing the obligations or liability of the Respondent-assessee relevant on the date of removal of goods and payment of provisional duty will apply, rather than the Rule as amended subsequently after which, the belated order came to be passed by the Assessing Authority in the year 2006. No substantial question of law arises in the present appeals filed by the appellant-Revenue - appeal dismissed - decided against appellant-Revenue.

Issues Involved:
1. Adjustment/refund of excess provisional duty paid.
2. Applicability of Rule 9B(5) of the Central Excise Rules, 1944.
3. Requirement to follow Section 11B of the Central Excise Act, 1944.
4. Concept of unjust enrichment.
5. Legal precedents and their application.

Detailed Analysis:

1. Adjustment/Refund of Excess Provisional Duty Paid:
The core issue revolves around whether the Respondent-assessee is entitled to an adjustment/refund of excess provisional duty paid during the relevant period (1998-99 to 1999-2000). The provisional assessments were conducted under Rule 9B of the Central Excise Rules, 1944, which allowed the clearance of goods based on provisional duty payments. The final determination of duty was to be adjusted or refunded as per Rule 9B(5).

2. Applicability of Rule 9B(5) of the Central Excise Rules, 1944:
The rule in question, Rule 9B(5), stipulated that upon final assessment, any excess provisional duty paid should be refunded or adjusted. A proviso inserted on 25.07.1999 mandated that such refunds should follow the procedure under Section 11B of the Act, which includes proving that the incidence of duty had not been passed on to the customers to avoid unjust enrichment.

3. Requirement to Follow Section 11B of the Central Excise Act, 1944:
The appellant-Revenue argued that the Respondent-assessee must follow Section 11B to claim refunds, ensuring no unjust enrichment. However, the Respondent-assessee contended, supported by legal precedents, that Rule 9B(5) and Section 11B operate in different spheres. The Supreme Court in Commissioner of C.Ex., Mumbai-II vs. Allied Photographics India Ltd. clarified that refunds arising from adjustments under Rule 9B(5) are not governed by Section 11B unless an independent refund claim is made.

4. Concept of Unjust Enrichment:
The Revenue's concern was that granting a refund without following Section 11B could lead to unjust enrichment for the Respondent-assessee. The Respondent-assessee, being a Government of India Undertaking, supplied goods to another Government Department (DOT/BSNL), making the argument of unjust enrichment less tenable. The court noted the unnecessary litigation between government entities, emphasizing the need for better decision-making to avoid such disputes.

5. Legal Precedents and Their Application:
The court referred to the Supreme Court's decision in Allied Photographics, which distinguished the applicability of Rule 9B(5) and Section 11B. The Tribunal and Commissioner (Appeals) had correctly applied this precedent, allowing the adjustment/refund without requiring compliance with Section 11B. The court criticized the Revenue for not adhering to this established legal position, leading to unnecessary litigation.

Conclusion:
The court dismissed the Revenue's appeals, affirming that the Respondent-assessee was entitled to the adjustment/refund of excess provisional duty paid without following Section 11B, as per the Supreme Court's interpretation in Allied Photographics. The court expressed concern over the needless litigation between government entities and emphasized the importance of better training for tax authorities to prevent such disputes. No substantial question of law was found to arise from the appeals, leading to their dismissal without costs.

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