Commissioner Of Central Excise vs Ceat Ltd

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI

COURT No. II

APPEAL No.E/310/07

(Arising out of Order-in-Original No.47/KKS/2005-2006 dated 31/03/2006 passed by Commissioner of Central Excise, Mumbai)

For approval and signature:

Honble Mr. Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical)

1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy :Seen of the Order?

4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================

Commissioner of Central Excise, Mumbai Appellant

Vs. CEAT Ltd., Respondent

Appearance:

Shri.Ashutosh Nath, Asst. Comm. (AR) for appellant Shri.Rajesh Ostwal, Advocate, for respondent

CORAM:

Honble Mr.Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical)

Date of Hearing : 24/09/2015 Date of Decision : 24/09/2015

ORDER NO

Per: Anil Choudhary

1. Revenue is in appeal against Order-in-Original No.47/KKS/2005-2006 dated 31/03/2006 passed by Commissioner of Central Excise, Mumbai.

2. Brief facts of the case are that, for the financial year 1998-99 the respondent assessee, a manufacturer of tyres, had cleared the goods under provisional assessment, which was finalized vide order-in-original No.01/01-02 dated 04/06/2001, and duty excess paid was determined at Rs.91,59,977/-. Revenue being aggrieved by the order, they filed an appeal before the Commissioner (Appeals) on the ground that the assessee have incorrectly claimed deductions on the assessable value. The said appeal of the Revenue was allowed by the Commissioner (Appeals) vide order No.RJB/M-III/353/2003 dated 04/08/2003. Being aggrieved by the order, the assessee preferred an appeal before this Tribunal and this Tribunal vide final order dated 28/04/2004 allowed the appeal filed by the assessee and set aside the order-in-appeal dated 04/08/2003. The said order of the Tribunal has become final as the same was not challenged. Pursuant to the finalisation of assessment order dated 04/06/2001, an excess amount was paid by the assessee amounting to Rs.91,59,977/-. The assessee had claimed the refund of the same and vide order-in-original dated 31/03/2003 the refund was sanctioned and paid to the assessee vide cheque dated 04/04/2003. On the question of unjust enrichment, the learned Assistant Commissioner under para 8 of the order granting refund have observed as follows:

The assessee submitted that in respect of refund claim for the period 1998-99 the provisions of unjust enrichment as specified under Section 11B (2) do not apply to their case. They further submitted that they have sold the goods in the replacement market which is inclusive of excise duty after claiming the deduction on account of secondary cost of transportation, duty and taxes absorbed, interest on receivables and various discounts allowed to the buyers on provisional basis as per the provisions of Rule 9B of Central Excise Rules,1944. After the finalisation of the balance sheet, the assessee has been able to quantify the exact amount of permissible deductions on the above heads of accounts. Thus as per the calculation sheet enclosed along with the refund claim, it is clear that the assessee has claimed less abatement towards the said permissible deductions. They had relied upon the para 95 of the Supreme Court judgement in the case of Mafatlal Industries Vs. UOI  1997 (89) ELT247.

8.2 The assessee has submitted that the various trade discounts allowed by the company to its buyers in the replacement market have been passed on to the buyers even before the finalisation of the assessment and the credit notes for the same have been credited to the accounts of the dealers before finalisation of the assessment and therefore the bar of unjust enrichment do not apply to their case. The report of the Range Officer in this regard is already discussed in earlier paras. The Range Officer in her report had stated that the assessee has issued the credit notes and thereby there is no unjust enrichment. The Range Officer has also verified the statements for the year 98-99 showing the refund of excess duty paid from the Range records and the assessees record and found as correct. The instant case is a case of provisional assessment and after finalisation it has been noticed by the Range Officer and the assessee that the Central Excise duty was paid in excess and is refundable. The CA certificate has also certified the above fact. The assessee has also relied upon the judgement dated 19/10/2000 in the case of CCE Jamshedpur Vs. Usha Beltron Ltd., reported in 2001 (95) ECR 281  Tri.

I am in agreement with the assessees submission regarding unjust enrichment which they say is not applicable in their case. Moreover, Rule 9B(5) is crystal clear in this regard which states (5) Where the duty leviable on the goods is assessed finally in accordance with the provisions of these Rules, the duty provisionally assessed shall be adjusted against the duty finally assessed falls short of or is in excess of the duty finally assessed the (assessee) shall pay the deficiency or be entitled to a refund, as the case may be.

And along with the provisions of the Rule, various case laws as submitted by the assessee clarify the matter and I therefore, conclude that the doctrine of unjust enrichment is not applicable in the instant case.

9. In view of the discussions above, facts and circumstances of the case, order-in-original No.1/01-02 dated 04/06/2000 of the then Deputy Commissioner regarding the finalisation of the provisional assessment for the year 98-99 quantification done on the basis of the CA certificate, verification of the Range Officers report judicial pronouncements discussed above, I hold that the assessee is entitled for the quantified refund claim filed by them due to finalisation of the provisional assessments for the year 98-99.(Emphasize supplied).

3. In the meantime, the Revenue issued a show-cause notice dated 04/07/2003, which was issued under 11A (1) of the Central Excise Act, 1944 on the ground. Further scrutiny of the case records, it appears that CEAT Ltd., was not entitled to the refund and the same could have been credited to Consumer Welfare Fund as laid down under the provisions of Section 11B (2) as the applicant, M/s.CEAT Ltd., had not produced any evidence to prove that they had not passed on the incidence of the duty to their customers during the relevant period. Further stating therein that it appears that the deduction on account of interest on receivables is allowable only in cases where the sale is on credit and the payment is realized beyond the normal credit period. The interest charged from the date of delivery of the goods till the date of realization of the price is permissible deduction, provided it is claimed on actual basis and subsequent to the sale of goods and should also be on account of delayed payment. The said show-cause notice was adjudicated vide impugned order. The Commissioner has recorded the findings that the issue as regards the deduction on account of interest on receivables, the same stands settled by the order of this Tribunal dated 28/04/2004.

So far, the issue of unjust enrichment is concerned, the provision under Rule 9B (5) of Central Excise Rules, 1944 was made applicable with effect from 26/06/1999. It was further observed that the amendment is substantive in nature to the existing law, the same is applicable prospectively. Accordingly, it was held that for the period in question, i.e. 1998-99 the said amendment dated 25/06/1999 will not be applicable. Further, the learned Commissioner also referred the ruling in the case of Mafatlal Industries Ltd.  1997 (89) ELT 247 (SC) taking note of the Honble Supreme Court decision that any refund consequent upon adjustment under sub-rule (5) of Rule 9B will not be governed by Section 11A or Section 11B as the case may be. It was further noticed that ruling of Mafatlal Industries Ltd. case was followed by TVS Suzuki Ltd. case  2001 (135) ELT 140 (Tri-Chennai). The Revenue had filed civil appeal before the Honble Supreme Court in TVS Suzuki Ltd. case and had also issued Circular No.518/14/2000-CX dated 03/03/2000.It was further relied upon the decision of the Madras High Court in the case of CCE, Trichirapalli Vs Hajee A.M.

Abdul Rahiman  2001 (133) ELT 23 (Mad) wherein it was held that Section 11B of the Central Excise Act, will not apply to the claim of refund in respect of provisional assessment concerned, for a period anterior to 25/06/99, by order dated 23/07/2001. Further it was noticed that the Honble Supreme Court decision in the case of Sinkhai Synthetics & Chemicals Pvt. Ltd., Vs. CCE Aurangabad  2002 (143) ELT 17 (SC) wherein it was held that refund arising out of provisional assessment are not to be governed by Section 11B of the Act. Accordingly, the learned Commissioner settled the case in favour of the assessee and dropped the proceedings.

4. Aggrieved by the order, the Revenue is in appeal before this Tribunal on the ground that the assessee has to clear the bar of unjust enrichment even in the case of refund arising out of provisional assessment.

5. Learned AR appearing for the Revenue have further drawn our attention and relied upon the Honble High Court decision in the case of Godrej Industries Ltd., Vs. CCE  2015 (316) ELT 192 (Bom) wherein it was held that the relevant date for the purpose of limitation under Section 11A is the date of finalisation of provisional assessment. In this case as the provisional assessment was on 04/06/2001, and the amendment came into effect under Rule 9B prior to that date, on the provisional assessment unjust enrichment is applicable. Further his contention is that the adjudicating authority granting refund vide order dated 31/03/2003 have not considered the issue of unjust enrichment in proper perspective.

5.1 The learned DR further relied upon the decision of Honble Madras High Court in the case of Dollar Company Pvt. Ltd.  2015-TIOL-344-HC-MAD-CX wherein the question before the Honble High Court was whether on the facts and the circumstances of the case, the Tribunal is right in dismissing the Revenues appeal placing reliance on the decision of the Apex Court in the case of Mafatlal Industries Ltd. passed during 1997, in respect of provisional assessment when a new clause (eb) to Explanation B in Section 11B of the Act was enact with effect from 01/08/2009 by virtue of which the refund on finalisation of the provisional assessment after 01/08/98 is governed by Section 11B of the Act and whether the Tribunal was right in dismissing the Revenues appeal on the ground that the amendment was made under Rule 9B (5) of the Rules, with effect from 25/06/99 particularly when legislative amendment was introduced under Section 11B of the Act from 01/08/1998 onwards by insertion of clause (eb) to explanation B in Section 11B of the Act. The facts in that case was the assessee manufacturer of medicine had cleared under Chapter 30 of the tariff Act and paid duty of 8%. The Revenue classified the product under 3304 and as such was chargeable at 30% and the assessee has paid the differential duty under protest and thereafter they filed appeal before the Commissioner (Appeals), who held in favour of the assessee and the refund was applied within one month of the order of the Commissioner (Appeals). But the Revenue had preferred an appeal before this Tribunal and was being unsuccessful before the Honble Supreme Court, on the question of classification. The Honble High Court held that there is no doubt that clause (eb) explanation B of Secation 11B is squarely applicable and the assessee also does not dispute the same, i.e. in respect of unjust enrichment. The relevant date of the applicability, the Honble High Court following ruling of Mafatlal Industries Ltd., and the TVS Suzuki Ltd. and the Apex Court held that the refund claim was made on 21/09/1998 sub-rule 5 of Rule 9B came into force subsequently therefore, mischief of unjust enrichment will not apply.

6. The learned Counsel for the respondent assessee supports the impugned order and further states that the whole proceedings are otherwise initiated vide the show-cause notice, which itself is without jurisdiction, because the show-cause notice was issued only under Section 11A and was not with reference to Section 35E (2) of the Act. It is mentioned here that under Section 35E (2) Act, it is the jurisdiction of the Commissioner of Central Excise to Review any order passed by the sub-ordinate authority, if it is found prejudicial to interest of the Revenue. It is evident that there is no direction or the order of the Commissioner of Central Excise to issue such notice. The learned Counsel further states that in order-in-original granting refund dated 31/03/2003 the issue of unjust enrichment was considered in detail on merits, wherein a categorical finding that the assessee have issued credit notes for discounting and the same was the duty found accounted in the books of accounts and after considering report of the range officers on the facts, and CA certificate were considered. The learned Commissioner has recorded the finding that the assessee meets the bar of unjust enrichment. The learned Counsel states that as the provision under Rule 9B (5) have come under statue with effect from 25/06/1999 and the period of the assessment ended on 31/03/1999, prior to that date. Hence, the unjust enrichment is legally not applicable.

6. Having considered the rival contentions, we find that the adjudicating authority has recorded categorical findings in favour of the assessee both in law and on facts. Further, we find that satisfaction to bar of unjust enrichment was recorded in detail in the order dated 31/03/2003. Further, we find that the show-cause notice given is vague and no mistake have been pointed out in the order-in-original dated 31/03/2003 granting refund. Thus, we hold that the show-cause notice is vague as it does not contain the gist of accusation which the assessee was required to meet or answer. Further, it is bad in law as the same is not issued under the powers vested with the Commissioner under Section 35E (2) of the Act. Thus, we dismiss the appeal of the Revenue and uphold the impugned order.

(Dictated in Court)

(Raju) Member (Technical) (Anil Choudhary) Member (Judicial)

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