2020 (3) TMI 737 - AT - Central Excise

Refund claim - HSD was supplied to M/s TIL - rejection on the ground that the documents which were supplied along with the refund application did not substantiate the claim of the appellant that they duty of refund sought had been paid - N/N. 108/1995 - HELD THAT - The claim of refund in the application was not of duty paid by M/s RPL. Further, a plain reading of the exemption notification shows that the goods which are supplied to the specified agencies are exempted from the payment of basic excise duty subject to some conditions mentioned in the exemption notification. There is nothing in the notification to say that a trader who bought goods on payment of duty from another manufacturer and in turn supplies to one of the eligible parties will also be eligible for refund under the exemption notification. There is no explicit exemption to the goods which have been bought by the appellant and in turn supplied to an eligible party. The case laws relied upon by the appellant pertain to the cases where the eligible recipient of the goods had claimed refund of the duty paid. There cannot be a dispute in such cases because the beneficiary who should not have paid the duty is eligible for refund if he had actually paid it. At any rate, the application was not seeking refund of duty paid by M/s RPL but of duty paid by their refinery. Such HSD having not been supplied to M/s TIL, the question of refund does not arise. Appeal dismissed.

Summary

Issues:
Refund claim rejection based on accounting error and lack of substantiating documents.

Analysis:
The appeal was filed against the rejection of a refund claim by the Appellant, a Government of India undertaking involved in refining crude oil and marketing petroleum products. The Appellant stored products in a bonded tank, mixing those produced at their refinery with products purchased from other manufacturers. Despite maintaining separate accounts in their ERP system for manufactured and bought products, physical separation was lacking. The Appellant sought a refund of basic duty paid on High Speed Diesel (HSD) supplied to a customer eligible for partial duty exemption. The original authority rejected the refund claim due to insufficient evidence of duty payment on the supplied HSD, as per ER-1 returns and invoices. The first appellate authority upheld the rejection, leading to this appeal.

The Appellant argued an accounting error led to confusion, claiming they mistakenly debited the supplied HSD from bought products in their ERP system instead of the refinery-produced quantity. They contended this error should not negate their exemption eligibility, emphasizing the buyer's exemption eligibility and non-payment of basic excise duty. The Appellant further argued that regardless of the supplier, if the user meets exemption conditions, basic excise duty exemption applies, citing relevant case laws.

The departmental representative reiterated the rejection based on lack of evidence supporting the refund claim. They emphasized that ER-1 returns did not show HSD supply to the eligible customer, questioning the Appellant's entitlement to exemption and refund. The representative argued that the exemption notification did not extend to traders supplying goods to eligible parties, relying on a Supreme Court case for strict construction of exemption notifications.

The Tribunal considered both arguments and upheld the rejection of the refund claim. The Tribunal noted the impossibility of physical separation in the single tank storing HSD, with only notional separation in the ERP system. As the supplied HSD was not reflected in ER-1 returns and not manufactured by the Appellant, the refund claim was rightly rejected. The Tribunal agreed with the departmental representative that the exemption notification did not cover goods bought from other manufacturers and supplied to eligible parties. The Tribunal also supported the representative's argument that challenging the assessment of duty by the original manufacturer was necessary before refund sanctioning, following a Supreme Court precedent.

In conclusion, the Tribunal upheld the impugned order, rejecting the appeal based on the lack of substantiating evidence for the refund claim and the strict interpretation of exemption provisions.