2024 (6) TMI 781 - AT - Central Excise

Refund claim u/s 11B of the Central Excise Act, 1944 - entire quantity of SKO was cleared from those refineries at nil rate of duty in terms of N/N. 4/2006-C.E. dated 01.03.2006, for ultimate sale through Public Distribution System (PDS) - failure to pass the bar of unjust enrichment - time limitation. Whether the appellant has passed the bar of unjust enrichment or not? - HELD THAT - The appellant paid 7% duty at the time of clearance, which means that the goods in question have suffered total rate of duty of 21% whereas duty is payable at the rate of 14%. Therefore, the excess duty paid by the appellant is required to be refunded, as instead of charging duty from the customers at the rate of 14%, the appellant charged duty at the rate of 7% at the time of clearance. Thus, in these circumstances, the appellant has passed the bar of unjust enrichment - the appellant has passed the bar of unjust enrichment. Whether the refund claim(s) filed by the appellant are barred by limitation or not? - HELD THAT - The facts of the present case are similar to that in the case of M/S. BANSAL BISCUITS PRIVATE LIMITED VERSUS COMMR. OF CENTRAL EXCISE SERVICE TAX, PATNA 2023 (11) TMI 615 - CESTAT KOLKATA wherein the duty was paid by utilizing CENVAT Credit account, which was not payable by the assessee and in those set of facts, this Tribunal held that the duty paid, which was not payable, is to be refunded and no time-limit as prescribed under Section 11B of the Central Excise Act would be applicable. Therefore, in this case also, in respect of both the refund claims filed by the appellant, the provisions of Section 11B of the Act are not attracted. Accordingly, the appellant succeeds on limitation. The impugned order set aside - appeal allowed.

Summary

Issues:
1. Unjust enrichment
2. Limitation for refund claims

Detailed Analysis:

Unjust Enrichment:
The case involved a manufacturer of petroleum products who filed refund claims under Section 11B of the Central Excise Act, 1944 for Superior Kerosene Oil (SKO) cleared at a 'nil' rate of duty for Public Distribution System (PDS) sales. The appellant later sold some SKO to non-PDS customers, paying duty at 7% ad valorem, realizing it was a mistake as duty should have been paid by the manufacturers. The manufacturers paid the appropriate duty later. The issue was whether the appellant passed the bar of unjust enrichment. The Tribunal found that the appellant paid 7% duty at clearance, resulting in a total duty of 21% instead of the correct 14%. As the excess duty was refundable and not collected from customers, the appellant passed the unjust enrichment test.

Limitation for Refund Claims:
The refund claims were challenged on two grounds: unjust enrichment and limitation. The Ld. Commissioner (Appeals) held one claim time-barred and the other passed the unjust enrichment test. The appellant argued that no time limit applied as they were not liable to pay duty at all. The Revenue contended that the appellant failed the unjust enrichment test and the time limit under Section 11B applied. The Tribunal referred to a previous case and held that if an amount was paid under a mistaken notion and not required, the limitation under Section 11B did not apply. As the duty paid was not payable by the appellant, the time limit did not bar the refund claims. The Tribunal also noted that the Revenue did not address the unjust enrichment issue at lower stages, and as no appeal was filed, the objection could not be sustained. Therefore, the appellant succeeded on the limitation issue.

Conclusion:
The Tribunal set aside the impugned orders, allowing the appeals with consequential relief. The appellant's refund claims were upheld as they passed the unjust enrichment test and were not time-barred. The appeals were disposed of in favor of the appellant.