2024 (7) TMI 1071 - AT - Central Excise

Refund of excess duty paid on account of issue of credit notes to dealers and stockists after the clearance of the goods - rejection on the ground that incidence of duty has been passed on and the appellants have not given any evidence to the effect that the incidence has not been passed on to the ultimate customers - principles of unjust enrichment under Section 11B read with provisions of Section 12B of Central Excise Act - HELD THAT - This issue as to whether in the given set of facts, it was not possible to identify the persons who ultimately borne out the amount of excise duty collected in excess and therefore such excess amount will remain in the fund which will be utilised for the benefit of the customers as provided under Section 12D of the Central Excise Act, 1944 needs to be examined. The appellants have not been able to establish that they had not passed on the excess excise duty to their ultimate customer. Merely because they were selling on MRP basis, it would not absolve them from the fact that they had not passed on the original duty charged by the appellant to the ultimate customer and therefore even if they are entitled for refund on merit, they would still not be entitled for refund on the grounds of unjust enrichment under Section 11B. It is found that the judgment by Larger Bench of Hon ble Supreme Court in the case of Commissioner of Central Excise, Madras Vs Addison and Co. Ltd., the Addison and Company case law 2016 (8) TMI 1071 - SUPREME COURT is squarely applicable to the facts of the case in as much as while the appellant is entitled for refund on merits but clearly they are not entitled for refund on the grounds of unjust enrichment as they have not been able to clear the bar of unjust enrichment. In so far as applicability of Section 12B is concerned, Commissioner (Appeals) has relied on various judgments including Grasim Industries Vs CCE, Bhopal 2003 (2) TMI 89 - CEGAT, NEW DELHI , Sangam Processors (Bhilwara) Ltd., Vs Collector of Central Excise, Jaipur 1993 (2) TMI 211 - CEGAT, NEW DELHI , Grasim Industries Ltd., Vs CCE, Bhopal 2011 (8) TMI 689 - SUPREME COURT . He has placed reliance on Sangam Processors Ltd., 1994 (1) TMI 275 - SC ORDER judgment passed by Three Member Bench of Hon ble Supreme Court to come to the conclusion that in the given fact of the case principle of doctrine of unjust enrichment would be applicable. It is found that though the appellants have also relied on various case laws, all these case laws have been dealt with adequately by the Commissioner (Appeals) who has given reasons for relying on certain judgments for coming to the conclusion that in the facts of the case, the principle of unjust enrichment would be applicable. Since the appellants have failed to prove that they had not passed on the excess excise duty to their ultimate customer, they would be hit by the provision of Section 12B. Therefore, while the refund is eligible on merits, the same cannot be disbursed to the appellant and is required to be dealt with in accordance with the provisions under Section 12D. Therefore, part of the observations of the Commissioner (Appeals) as regards non-entitlement of the refund on merit is not sustainable. However, his order is sustainable as regards applicability of unjust enrichment in the facts of the case. Appeal disposed off.

Summary

Issues Involved:

1. Eligibility for refund on merits.
2. Applicability of unjust enrichment doctrine.

Issue-wise Detailed Analysis:

1. Eligibility for Refund on Merits:

The appellant, engaged in the manufacture of cement, filed several refund claims for different periods due to excess duty paid. The appellant issued credit notes to dealers and stockists post-clearance, asserting that they had not passed on the burden of duty incidence to their customers, supported by a Chartered Accountant's certificate. The Department issued a show cause notice, questioning the refund claim on the grounds of unjust enrichment under Section 11B read with Section 12B of the Central Excise Act, and also because the appellant had not opted for provisional assessment or intimated the quantum of discount at the time of clearance.

The Adjudicating Authority rejected the refund claim, observing that the appellant failed to prove that the duty incidence was not passed on to the ultimate customers. The Commissioner (Appeals) upheld this decision, stating that the refund claims were not admissible both on merits and on the grounds of unjust enrichment.

The appellant contended that provisional assessment was not a mandatory requirement for refund and cited various judgments, including their own case, to support their claim. The Tribunal, in previous orders, had held that non-intimation regarding discounts and not opting for provisional assessment were procedural in nature and did not disentitle the assessee from claiming a refund.

2. Applicability of Unjust Enrichment Doctrine:

The Revenue argued that the appellant had not discharged the burden of proof that the incidence of duty was not passed on to the ultimate customer. The Tribunal considered various judgments, including the Larger Bench decision of the Supreme Court in the case of Addison & Co. Ltd., which held that even if a refund is eligible on merits, it must clear the bar of unjust enrichment.

The Tribunal noted that the appellant initially collected the full excise duty from their dealers, distributors, and stockists, who in turn sold the product downstream to ultimate customers. The appellant failed to prove that the original duty paid at the time of clearance was not passed on to the ultimate customers. The Tribunal emphasized that the burden of proof lies on the claimant to establish that the incidence of duty was not passed on to any other person, as per Section 11B of the Central Excise Act.

The Tribunal concluded that while the appellant was entitled to a refund on merits, they were not entitled to the refund due to the bar of unjust enrichment. The refund amount should be credited to the Consumer Welfare Fund as per Section 12D of the Central Excise Act.

Conclusion:

The Tribunal disposed of the appeals by affirming that the appellant was eligible for a refund on merits but was not entitled to the refund due to the doctrine of unjust enrichment. The refund claims were to be dealt with in accordance with the provisions under Section 12D of the Central Excise Act. The order was pronounced in open court on 19.07.2024.