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2023 (12) TMI 899 - AT - Central ExciseAdjustment of excess duty to that of duty short-paid during the period of provisional assessment - Applicability of principles of unjust enrichment to the amount excess paid before adjusting the same with the amount short-paid while finalising provisional assessment under Rule 7 of the Central Excise Rules, 2002. HELD THAT - Undisputedly, the appellant has resorted to provisional assessment under Rule 7 of the Central Excise Rules, 2002 at the time of clearance of the goods from the factory to the depots, since certain conditional discounts passed on to the customers on sale from depots subsequently, the exact quantum of which is known only after its clearance from factory and sale from depots. When the exact amount of discount is ascertained, the admissible discounts are calculated on month-to-month basis and the assessable value at the time of clearance from the factory is redetermined and the duty payable is accordingly arrived at. Consequently, the difference between the duty paid and the duty payable is calculated and the assessment is finalized. The result of the said exercise may end up with recovery of differential duty short paid or refund of excess paid. The Revenue s contention is that after determination of the exact duty payable on finalization of assessment, excess duty paid cannot be adjusted against duty short paid, without testing its incidence of excess duty whether passed on to any other person in compliance with the statutory presumption under section 12B of CEA, 1944. It is their argument that netting of duty by passing the statutory presumption is not laid down under Rule 7 of Central Excise Rules,2002. Accordingly, duty liability is calculated against the duty provisionally paid at the time of clearance of the goods from the factory and the amount payable - The Revenue s objection is that the duty excess paid cannot be adjusted against the duty short-paid during a particular month/period of assessment to arrive at the net result of refund or liability. It is the Revenue s contention that there is no specific provisions under Rule 7 of the Central Excise Rules, 2002 directing such adjustment/netting off duty. It has been brought to our notice that the said judgment of the Hon ble Karnataka High Court in Sudhir Papers Ltd. vs. Commissioner of Central Excise, Bangalore-I 2011 (3) TMI 1443 - KARNATAKA HIGH COURT has been accepted by the Revenue as communicated through their letter dated 17.11.2023. Needless to mention, the principle laid down by the jurisdictional High Court is binding on the Tribunal in view of the judgment of the Larger Bench of the Tribunal in the case of COLLECTOR OF CENTRAL EXCISE, CHANDIGARH VERSUS KASHMIR CONDUCTORS 1997 (7) TMI 186 - CEGAT, COURT NO. II, NEW DELHI . The impugned order is set aside and the appeals are allowed.
Issues Involved:
1. Applicability of the principles of unjust enrichment to the amount excess paid before adjusting the same with the amount short-paid while finalizing provisional assessment under Rule 7 of the Central Excise Rules, 2002. Summary: Issue 1: Applicability of Unjust Enrichment Principles The short question involved in these present appeals for determination is whether the principles of unjust enrichment be applicable to the amount excess paid before adjusting the same with the amount short-paid while finalizing provisional assessment under Rule 7 of the Central Excise Rules, 2002. Undisputedly, the appellant has resorted to provisional assessment under Rule 7 of the Central Excise Rules, 2002 at the time of clearance of the goods from the factory to the depots, since certain conditional discounts passed on to the customers on sale from depots subsequently, the exact quantum of which is known only after its clearance from the factory and sale from depots. When the exact amount of discount is ascertained, the admissible discounts are calculated on a month-to-month basis and the assessable value at the time of clearance from the factory is redetermined and the duty payable is accordingly arrived at. Consequently, the difference between the duty paid and the duty payable is calculated and the assessment is finalized. The result of the said exercise may end up with the recovery of differential duty short paid or refund of excess paid. The Revenue's contention is that after determination of the exact duty payable on finalization of assessment, excess duty paid cannot be adjusted against duty short paid, without testing its incidence of excess duty whether passed on to any other person in compliance with the statutory presumption under section 12B of CEA, 1944. It is their argument that netting of duty by passing the statutory presumption is not laid down under Rule 7 of Central Excise Rules, 2002. Accordingly, duty liability is calculated against the duty provisionally paid at the time of clearance of the goods from the factory and the amount payable. During the said exercise for a particular month, the result could be excess payment of duty in certain cases and short payment in other cases. The assessing authority after adjusting the duty excess paid against the short-paid, arrives at the net result i.e., either excess payment or short-paid during the month is recoverable or refundable. Consequently, the recovery/refund is accordingly directed. The Revenue's objection is that the duty excess paid cannot be adjusted against the duty short-paid during a particular month/period of assessment to arrive at the net result of refund or liability. It is the Revenue's contention that there are no specific provisions under Rule 7 of the Central Excise Rules, 2002 directing such adjustment/netting off duty. Revenue has referred to the judgment of the Hon'ble Madras High Court in the case of TVS Electronics Ltd. case (supra) which followed the judgment in Addison & Co. Ltd. passed by the Hon'ble Supreme Court in directing that the refund amount arising due to provisional assessment be subjected to unjust enrichment. The appellant's contention on the other hand is that the very purpose of provisional assessment is for adjustment of excess duty-paid to short-paid during a particular period and determining the net effect of the duty, that is, either by way of payment or seeking refund of the amount paid. In support, they referred to the judgment of the jurisdictional High Court in the case of Vikrant Tyres Ltd's case and in Toyota Kirloskar Auto Parts Pvt. Ltd's case (supra). The Revenue's argument may seem attractive in view of the judgment of Hon'ble Madras High Court in TVS Electronics's case (supra), but we find that the jurisdictional Hon'ble Karnataka High Court in the appellant's own case taking note of the judgment of the Hon'ble Supreme Court in Addison & Co. Ltd. case and in the context of finalization of provisional assessment for different periods of the same assessee held as follows: "In Addison & Co. Ltd., supra, the Hon'ble Apex Court has held that the assessee had admitted the incidence of duty was originally passed on to the buyer. No material was placed on record to show that the buyer to whom the incidence of duty was passed on by the assessee did not pass it on to any other person. It has been thus held that the sine qua non for a claim for refund as contemplated in Section 11B of the Act is that the claimant has to establish that the amount of duty of excess in relation to which such refund is claimed was paid by him and that the incidence of such duty has not been passed on by him to any other person. In the aforesaid judgment, the Hon'ble Apex Court has observed that the refund of excess duty paid can be allowed only in cases where the burden of duty has not been passed on to any other person including the ultimate customer as well and moreover, Hon'ble Apex Court was considering the case of normal refund and not adjustment at the time of finalization of provisional assessment. Hence, it is distinguishable. Thus, the authorities were conscious of Rule 7(6) and the factual findings of the authorities held in favor of the assessee is not challenged by the Revenue. Nextly, it is also significant to note the methodology and manner of challenge made by the Revenue. Indisputedly, for the assessment years from 2002-03 to 2008-09 refund claim of the manufacturer assessee was allowed and the same has reached finality. The Revenue has cherry-picked the assessment years in question to challenge, giving a finality to the other assessment years. In this context, it would be preferable to refer to the judgment of the Hon'ble Apex Court in the case of Commissioner of Central Excise, Allahabad vs. Surcoat Paints (P) Ltd. [2008) E.L.T. 4 (SC) wherein, the Hon'ble Apex Court has held that the Revenue having accepted the decision given by the Tribunal in another case of the same nature, is precluded from challenging the similar order passed in respect of another unit. If so, in the very same assessee's case if the refund orders are accepted for particular years, the same cannot be challenged relating to other years. Revenue cannot pick and choose the assessment years for challenging the orders having a similar effect. Moreover, as observed by the First Appellate Authority, the issue of unjust enrichment has been raised for the first time on the sanction of refund order consequent on finalization of provisional assessment. The authorities have admitted that the credit notes were issued by the assessee to their dealer representing various discounts which have been actually passed on, in accordance with marketing circulars/policies. It is also observed that on verification of sample depot invoices at the time of completion of provisional assessment, that the assessee has not issued any cenvatable invoice from the depot which are prescribed documents for availment of cenvat credit under Cenvat Credit Rules, 2004. Thus, it cannot be held that the assessee has not subjected to the test of unjust enrichment."¯ It has been brought to our notice that the said judgment of the Hon'ble Karnataka High Court has been accepted by the Revenue as communicated through their letter dated 17.11.2023. Needless to mention, the principle laid down by the jurisdictional High Court is binding on the Tribunal in view of the judgment of the Larger Bench of the Tribunal in the case of Collector of Central Excise, Chandigarh vs. Kashmir Conductors: 1997 (96) E.L.T. 257 (Tri.-LB). Following the said judgments, the impugned order is set aside and the appeals are allowed with consequential relief, if any, as per law. (Order pronounced in Open Court on 19. 12. 2023.)
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