2019 (12) TMI 803 - HC - Central Excise

Recovery of erroneously granted refund - unjust enrichment - finalization of provisional assessment - HELD THAT - From the reading of provisions of Section 11A(1) of the Act, which provides for recovery of any duty of excise which has not been levied or paid or has been short levied or short paid or erroneously refunded. The recovery of such amount of excise duty can be made under Section 11A(1) irrespective of whether such non-levy or non payment or short levy or short payment or erroneously refund was on the basis of any approval, acceptance or assessment relating to rate of duty or on valuation of excisable goods under any other provisions of this Act or Rules made thereunder. As in the present case, provisional assessment was finalised on 24.07.2015, the assessing authority recorded a finding that CA certificate dated 15.06.2015 certifies that no part of duty is recovered from the dealers/ distributors involved in the discount passed on to the dealers/ distributors, which indicates that assessee had not passed on the incidence of duty paid in proportion to the discount given to dealers/ distributors and, therefore, issue of unjust enrichment is a remote possibility and further, the order observed that duty to the tune of ₹ 17,89,42,303/- was passed on to the customers and duty deposited to the tune of ₹ 1,03,75,633/- was in excess - Further, an application being made by petitioner was adjudicated by Assistant Commissioner on 05.11.2015 wherein it was held that it was not a case of unjust enrichment and petitioner was entitled for refund. This order was also not challenged by revenue and the same attained finality. Initiation of proceedings under Section 11A for recovery of excise duty - change of opinion - adjudication had been made by department making final provisional assessment and, thereafter, no appeal being filed challenging the said adjudication which having attained finality - HELD THAT - As it is not in dispute that after provisional assessment order, the adjudicating authority passed an order for refund under Section 11B of the Act. Both the orders which were appealable and revisable under Section 35 and 35E were never taken to the higher forum by revenue and they attained finality. Section 11B assumes great significance, as any order of refund of excise duty and interest is made only after the adjudication as envisaged under scheme of Section 11B. In the present case, petitioner-company had made an application for refund which was adjudicated on 05.11.2015 and it was directed to refund excise duty to tune of ₹ 1,02,75,633/- which was in excess. This order was never challenged by revenue in appeal and it attained finality - once the order of adjudication has been validly passed under Section 11B and a refund has been made on 05.11.2015. Invocation of Section 11A of CEA - HELD THAT - Section 35E and 11A operate in different fields and are invoked for different purposes, we are merely concerned in this case with the interplay between Sections 11A and 35E. We are also concerned with what happened in the form of an adjudication under Section 11B. What happens in a case wherein adjudication takes place under Section 11B and authorities do not take recourse available to them, whether after having allowed adjudication under Section 11B to attain finality, was there any remedy available to department at all under Section 11A to proceed - Thus, the department, once the adjudication has taken place under Section 11B, cannot proceed to recover on the basis of erroneous refund under Section 11A so as to enable the refund order to be revoked, as the remedy lied under Section 35E for applying to the Appellate Tribunal for determination and not invoking Section 11A. The issuance of show-cause notice dated 17.08.2017 and, thereafter, order dated 30.11.2017 passed by respondent authority for repayment of refund pursuant to orders under Section 11B are unsustainable - Petition allowed.

Issues Involved:
1. Legality of the show-cause notice dated 17.08.2017 and order dated 30.11.2017.
2. Applicability of the principle of unjust enrichment.
3. Jurisdiction and power of review under Section 35E of the Central Excise Act.
4. Limitation period for issuing show-cause notice.
5. Validity of reopening concluded proceedings based on subsequent Supreme Court judgments.
6. Maintainability of writ petition under Article 226 of the Constitution.

Detailed Analysis:

1. Legality of the Show-Cause Notice and Order:
The petitioner challenged the show-cause notice dated 17.08.2017 and the subsequent order dated 30.11.2017, arguing that these actions were illegal as they sought to reopen finalized proceedings. The court noted that the provisional assessment and refund orders dated 24.07.2015 and 05.11.2015, respectively, had attained finality as no appeals were filed by the department. Therefore, initiating proceedings under Section 11A for recovery of excise duty was deemed improper.

2. Applicability of the Principle of Unjust Enrichment:
The court referenced the case of CCE, Madras vs. Addison and Company, which held that the principle of unjust enrichment applies when the manufacturer fails to prove that the duty burden was not passed on to the ultimate buyer. However, in this case, the petitioner had provided a CA certificate confirming that the incidence of duty was not passed on. The court found that the principle of unjust enrichment did not apply as the petitioner had borne the duty burden.

3. Jurisdiction and Power of Review under Section 35E:
The court emphasized that Section 35E provides the Commissioner with the power to direct an appeal against any order. Since the orders dated 24.07.2015 and 05.11.2015 were not appealed, they attained finality. The court held that the department could not bypass this process by initiating collateral proceedings under Section 11A.

4. Limitation Period for Issuing Show-Cause Notice:
The petitioner argued that the show-cause notice issued after more than two years from the finalization of the assessment order was barred by limitation. The court agreed, stating that the notice was beyond the permissible period and thus invalid.

5. Validity of Reopening Concluded Proceedings Based on Subsequent Supreme Court Judgments:
The court cited several cases, including CIT vs. Simplex Concrete Piles, which held that subsequent judgments cannot be used to reopen or disturb concluded assessments. The court found that the department's reliance on the Addison and Company judgment to reopen the case was not applicable, as the facts differed significantly.

6. Maintainability of Writ Petition under Article 226:
The court addressed the maintainability of the writ petition, noting that questions of limitation and jurisdiction are valid grounds for invoking Article 226. The court referenced the case of State of Punjab vs. Bhatinda District Cooperative Milk Producers Union, which supported the maintainability of the writ petition in such circumstances.

Conclusion:
The court concluded that the issuance of the show-cause notice and the subsequent order were unsustainable. The department's failure to appeal the original orders meant they could not later invoke Section 11A to recover the refunded amount. The writ petition was allowed, and the impugned show-cause notice and order were quashed.

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