2024 (7) TMI 546 - AT - Central Excise

Refund of duty paid at enhanced rate - refund on account of claim of liquidated damages by the Railways. Refund claim - refund on account of increase in the rate of duty of the goods manufactured by them to the Railways - HELD THAT - It is observed that the agreement entered into by the appellant with the Railways has a denial clause for enhancement of rate of duty. Therefore, the Railways have not paid the differential duty on account of the enhancement. The appellant is therefore liable to pay duty at the enhanced rate and if the Railways refuse to pay the enhanced duty, then the duty at the enhanced rate has to be borne by the appellant. In this case, the appellant has rightly paid the duty at the enhanced rate and claimed it as refund from the Department since the Railways have not paid the enhanced rate of duty to them - the Ld. Appellate Authority has rightly rejected the refund claim of the appellant on this count since the appellant has rightly paid duty at the enhanced rate - the rejection of the refund claim by the Ld. Appellate Authority in the impugned order on this count is proper and sustainable. Refund on account of claim of liquidated damages by the Railways - Railways have imposed a penalty of Rs.1,36,23,253/- on the appellant on account of delay in supply of sleepers - HELD THAT - The Department is no way connected with the delay in supply of the goods by the manufacturer and if there is any penalty imposed on account of such delay, it is to be borne by the appellant themselves. The appellant cannot consider that the penalty would effectively reduce the assessable value and that they are liable to pay only lesser duty to the extent of Rs.10,93,900/- on account of the deduction of liquidated damages from them by the Railways. Thus, the Ld. Appellate Authority has rightly rejected the refund of Rs.10,93,900/- claimed by the appellant on this count. Thus, the refunds of Rs.35,12,486/- and Rs.10,93,900/- claimed by the appellant have been rightly rejected by the Ld. Appellate Authority in the impugned order - there are no infirmity in the impugned order - appeal dismissed.

Summary

Issues involved:
1. Refund claim of Rs.54,96,223 by M/s. Natraj Engineers Private Limited for P.C.S. Sleeper under Chapter Heading No. 6807.00.
2. Rejection of refund of Rs.35,12,486 due to non-payment of enhancement of duty rate by Railways.
3. Rejection of refund of Rs.10,93,900 due to imposition of liquidated damages by Railways.

Issue 1 - Refund Claim of Rs.54,96,223:
The appellant, M/s. Natraj Engineers Private Limited, filed a refund claim of Rs.54,96,223 for manufacturing P.C.S. Sleeper under Chapter Heading No. 6807.00 for Indian Railways. The refund claim consisted of three parts. The first part, amounting to Rs.35,12,486, was rejected as the Railways did not pay the enhanced duty rate, which the appellant had already paid. The second part, Rs.10,93,900, was also rejected as it was based on the claim of liquidated damages imposed by the Railways due to a delay in supply. The third part, Rs.8,89,837, was allowed and not disputed in the appeal. The appellant contended that the Railways were required to pay the enhanced duty rate and that the liquidated damages reduced the transaction value, making them eligible for refunds. However, the Appellate Authority upheld the rejection of both refund claims, stating that the appellant rightly paid duty at the enhanced rate and that the Department was not responsible for the delay in supply, hence rejecting the refund based on liquidated damages.

Issue 2 - Rejection of Refund of Rs.35,12,486:
The refund claim of Rs.35,12,486 was based on the appellant's argument that the Railways should pay the enhanced duty rate, which they did not, leading to the refund claim. However, the agreement between the appellant and Railways had a denial clause for enhancement of duty rate, making the Railways not liable to pay the differential duty. The Appellate Authority rightly rejected this refund claim, stating that the appellant had correctly paid duty at the enhanced rate and upheld the rejection as proper and sustainable.

Issue 3 - Rejection of Refund of Rs.10,93,900:
The refund claim of Rs.10,93,900 arose from the imposition of liquidated damages by the Railways due to a delay in supply of sleepers. The appellant argued that the penalty effectively reduced the assessable value, making them eligible for a refund. However, the Appellate Authority rejected this claim, emphasizing that the Department was not responsible for the delay, and any penalty imposed was to be borne by the appellant. Therefore, the rejection of the refund claim was upheld as the appellant could not consider the penalty as reducing the assessable value.

In conclusion, the Appellate Tribunal upheld the rejection of the refund claims of Rs.35,12,486 and Rs.10,93,900 by the Appellate Authority, finding no infirmity in the impugned order and consequently rejecting the appeal filed by the appellant. The judgment was pronounced on 10.07.2024.