2000 (12) TMI 124 - AT - Central Excise

Summary

Issues:
Challenge to Order-in-appeal for refund claim based on classification of white cement under specific duty rate; Allegation of unjust enrichment under Sections 12A and 12B of Central Excise Act, 1944; Applicability of Section 11B to refund claim; Nature of bank guarantee as security or payment of duty; Interpretation of judgments in cases of Oswal Agro Mills Ltd. and Jupiter Cement Industries Ltd.; Encashment of bank guarantee as duty payment or security.

Analysis:
The appeal challenged the Order-in-appeal dated 16-12-1999 concerning a refund claim by M/s. Grasim Industries Ltd. The claim was based on the final classification of white cement by the Hon'ble Supreme Court under a specific duty rate. The Department alleged unjust enrichment under Sections 12A and 12B of the Central Excise Act, 1944, due to encashment of a bank guarantee for Rs. 88 lakhs. The appellants argued that the bank guarantee was security, not duty payment, citing the Apex Court's judgment in the case of Oswal Agro Mills Ltd. and a Tribunal decision in the case of Jupiter Cement Industries Ltd.

The key contention was whether the encashment of the bank guarantee constituted payment of Central Excise duty or merely security. The Tribunal analyzed the judgment in the case of Union of India v. Jain Spinners Ltd., where the Supreme Court clarified the distinction between duty payment and security. The Tribunal noted that the bank guarantee in this case was not equivalent to duty payment, as per the observations in the Oswal Agro Mills Ltd. case and the Tribunal's decision in Jupiter Cement Industries Ltd.

The Tribunal held that the bank guarantee in the instant case did not amount to payment of duty, thus the refund claim did not fall under the purview of Section 11B of the Central Excise Act, 1944. Citing the judgments and rulings, including the Apex Court's decision in Oswal Agro Mills Ltd., the Tribunal allowed the appeal, concluding that the encashed bank guarantee was security for the Revenue and not duty payment, hence rejecting the allegation of unjust enrichment and ordering the refund to the appellants.