2019 (7) TMI 327 - AT - Central Excise

Refund of excess duty paid - Valuation - sales made to their dealers (customers) who in turn sell the final product - finalisation of provisional assessment under Rule 7 of CER, 2002 - doctrine of unjust enrichment - HELD THAT - In the present case, the appellants were clearing the goods to their dealers from the factory gate and were paying the duty on the prevalent prices and later on the appellant issued the credit notes to the dealers which resulted into payment of excess duty by the appellant while clearing the goods from the factory gate. Further, the appellants were permitted to clear the goods on provisional assessment under Rule 7 of the Central Excise Rules for the disputed period. Subsequently, the Assistant Commissioner finalized the provisional assessment by passing two separate Order-in-Originals and in the said order of finalization, the original authority has categorically held that the appellants are entitled to the refund for the excess duty paid by them. After such sales to the ultimate consumer by the dealer at lesser value due to market fluctuations of prices, additional discount was given to the dealers to bridge the gap between the factory sale price and final sale price in the market, that the appellant had provided additional discount by issuing of credit notes to them and submitted them for the purpose of finalization of provisional assessment, which was verified by the jurisdictional Range Officer and it was found to be in order. These orders finalizing the provisional assessment were never challenged before the higher authorities and have attained finality. The appellants have also produced Chartered Accountant certificate which was also considered by the original authority while finalizing the provisional assessment but during the refund proceedings, both the authorities did not consider the Chartered Accountant certificate certifying that incidence of duty has not been passed on to the ultimate consumer. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claims rejection based on misinterpretation of Addision & Co. Ltd. judgment, failure to issue SCN before rejecting refund claims, consideration of Chartered Accountant certificate, unjust enrichment, misinterpretation of judgment by Commissioner (Appeals).

Analysis:
The case involved the rejection of refund claims by the Commissioner (Appeals) based on the misinterpretation of the Addision & Co. Ltd. judgment. The appellants, engaged in manufacturing Asbestos Cement products, paid duty on sales made to dealers at prevalent prices. The dispute arose regarding the refund of excess duty paid due to credit notes issued to dealers, resulting in a reduction in assessable value. The Revenue conducted provisional assessment under Rule 7 of CER, 2002, and finalized it in favor of the appellants, holding them eligible for a refund as per the Addision & Co. Ltd. decision. The Department did not challenge these finalization orders, which attained finality. The appellants filed refund claims post-finalization, but the original authority rejected them without issuing an SCN, citing Addision & Co. Ltd. judgment incorrectly.

The appellants argued that the Department cannot take a contrary stand after final orders have attained finality, citing various Supreme Court decisions. They emphasized the importance of issuing an SCN in quasi-judicial proceedings, as per legal precedents. The appellants also highlighted the Chartered Accountant certificate produced, supporting their claim that the duty incidence was not passed on to consumers. The issue of unjust enrichment was refuted based on the evidence considered during finalization of provisional assessment.

The Tribunal found that the rejection of refund claims based on misinterpretation of the Addision & Co. Ltd. judgment was unsustainable. It noted that the finalization orders, holding the appellants eligible for a refund, were not challenged and had attained finality. The Tribunal criticized the original authority for rejecting the claims without issuing an SCN and failing to consider the Chartered Accountant certificate. The Tribunal also referenced its own decisions and Mumbai Tribunal's ruling in the appellant's case, supporting the appellants' entitlement to a refund. Ultimately, the Tribunal allowed the appeal, setting aside the impugned order and granting relief to the appellants.