Telangana High Court
Commissioner Of Customs And Central ... vs M/S. Iciilimited, Balanagar, Hyd on 23 July, 2024
THE HON'BLESRI JUSTICE SUJOY PAUL
AND
THE HON'BLE SRI JUSTICE NAMAVARAPU RAJESHWAR RAO
CENTRAL EXCISE APPEAL NO. 95 OF 2007
JUDGMENT:
(per Hon'ble Justice Sujoy Paul) Heard Mr. A.Rama Krishna Reddy, learned Standing Counsel for Central Board of Excise and Customs, appearing for the appellant and Mr.Narendra Dave and Mr.Sumanth Chanda, learned counsel representing Mr.Lakshmi Kumaran Sridharan, learned counsel appearing for the respondent.
2. On the joint request, appeal is finally heard.
3. This appeal is filed under Section 35 (G) of the Central Excise Act, 1944 (for short, 'the Act, 1944') and it was admitted on the following substantial question of law:
"Whether the Hon'ble Tribunal, Bangalore is justified in passing its Final Order No. 513 to 516/2007, dt.01.05.07, ignoring the relevant date under Section 11(5) (B) (eb) of Central Excise Act' 1944, i.e, 'in case where the duty of excise is paid provisionally under this Act or rules made thereunder, the date of adjustment of duty after the final assessments thereof' while holding that the provisions of unjust enrichment would not be applicable to the cases where the period of provisional assessment is prior to the amendment made to Rue 9B(5) of Central Excise Rules, 1944 by insertion of proviso w.e.f 25.06.99, to Rule 9B(5) vide Notification No.45/99-CE.(NT) dt 25.06.99 even in cases where the refund arises as a consequence of the decision in appeal of the final orders passed under sub-rule 9B of 2 SP,J&RRN,J cea_95_2007 Central Excise Rules' 1944 that too after 25.6.99 i.e. the date of introduction of proviso in sub-rule 5 of the rule 9B of Central Excise rules, 1944 by which the provisions of unjust enrichment of Section.11B of Central Excise Act'1944 were made applicable to refunds arising out of finalization of provisional assessments?
4. The brief admitted facts necessary for adjudication of this appeal are that the period in question is between 01.04.1989 to 31.03.1998. The Order-In-Original finalizing provisional assessment was passed on 12.03.1999. The said order was challenged in Appeal No.65/1999 (H-I) CE-Deduction, which was decided on 01.06.1999. Aggrieved, assessee preferred an appeal to CEGAT, which remanded the matter to the Assessing Officer with a direction to finalize the assessment by allowing deduction of (i) Secondary Freight and (ii) Interest on Sundry Debtors. In furtherance of the order of CEGAT, the Order-In-Original (de-novo) was finally passed on 31.03.2004 allowing deduction of (i) Secondary Freight and (ii) Granting interest on Sundry Debtors from 01.01.1996 to 31.03.1998. The assessee unsuccessfully challenged in Appeal No.7 of 2005 (H-IV) CE, which was decided on 28.01.2005. This appellate order became subject matter of challenge before the CESTAT, which passed the 3 SP,J&RRN,J cea_95_2007 impugned order on 01.05.2007. This order of CESTAT is subject matter of challenge before this Court.
5. Sri A.Rama Krishna Reddy, learned Standing Counsel for the appellant fairly submits that the first issue was regarding admissibility of interest on Sundry Debtors as a deduction in finalization of Provisional assessments under Rule 9B of the Central Excise Rules, 1944 (for short, 'the Rules, 1944') for the period prior to 1996. The Department accepted the order of CESTAT on this issue. Learned counsel further submits that the appellant is aggrieved by the order impugned, because the Tribunal was impressed and came to hold that since the period involved in this appeal is prior to 25.06.1999, the provisions of 'unjust enrichment' would not be applicable. The original authority can re-compute the refund amount due to the party by taking into account the interest on receivable even prior to 1996.
6. Criticizing the basis on the strength of which the Tribunal proceeded, learned counsel for the appellant submits that the crucial date is the date when the provisional assessment was finalized by issuing assessment order on 31.03.2004. This happened because of the remand order 4 SP,J&RRN,J cea_95_2007 passed by the CESTAT, dated 04.11.1999. The order of CESTAT, dated 04.11.1999 and the Order-In-Original (de novo), dated 31.03.2004 were passed after 25.06.1999, by that time proviso to Rule 9 B (5) of the Rules, 1944 became part of Statute book. In that event, judgment of the Constitution Bench of the Supreme Court in Mafatlal Industries Limited v. Union of India 1 will hold the field. Since the order of the Tribunal runs contrary to the Constitution Bench judgment of the Supreme Court, the order may be set aside.
7. Per contra, learned counsel for the assessee submits that the Tribunal has not committed any error of law for the simple reason that similar question is considered in great detail by a Division Bench of Bombay High Court in CCE v. CEAT Limited 2. It is submitted that after taking note of the Constitution Bench Judgment in Mafatlal (supra) and other Supreme Court Judgments on the point, the Bombay High Court clearly held that newly inserted proviso to Rule 9 B (5) of the Rules, 1944 can be made applicable w.e.f 25.06.1999 and it does not have any retrospective 1 1997 (89) ELT 247 (SC) 2 2018 (361) ELT 420 (Bom) 5 SP,J&RRN,J cea_95_2007 effect. Therefore, the principle of 'unjust enrichment' cannot be made applicable to the funds arising out of finalization of the provisional assessments pertaining to the period prior to 25.06.1999, despite the fact that the assessments were finalized after 25.06.1999. It is informed that this judgment of Bombay High Court is not interfered with by the Supreme Court.
8. The next submission is based on the Judgment of the Supreme Court in CCE, Chennai v. TVS Suzuki Limited 3, wherein it was held that if period was prior to 25.06.1999 and delay caused by the Department to finalize it, the refund cannot be declined.
9. The parties confined their arguments to the extent indicated above.
10. We have heard the parties at length and perused the record.
11. As noticed above, in the instant case, it is not in dispute between the parties that the relevant period is between 01.04.1989 to 31.03.1998. The Provisional 3 2003 (156) ELT 161 (SC) 6 SP,J&RRN,J cea_95_2007 Assessment Order was passed on 12.03.1999. The said order became subject matter of challenge in appeal and then before the CESTAT. Upon remand by CESTAT by its order, dated 04.11.1999, the Order-In-Original (Assessment Order) could be passed only on 31.03.2004. In this backdrop, it is to be seen whether proviso to Rule 9B (5) of the Rules, 1944 can be pressed into service and refund can be declined by applying the concept of 'unjust enrichment'.
12. In our opinion, the point involved is no more res integra. On this question the Division Bench of Bombay High Court has drawn curtains in the case of CEAT Limited (supra). The Division Bench after taking into account the Judgment of the Supreme Court in the case of Mafatlal (supra) and Commissioner of C.EX.Banglore-II v. ITC Limited 4 opined as under:
"5. From the aforesaid material on record, it is clear that the Appellate Authority, the Tribunal and the department proceeds on the assumption that this is a case of claim for refund by the Assessee under Section 11b of the Excise Act, 1944 and therefore, the burden of unjust enrichment applies. However, the material on record, which is not in dispute, discloses that the duty was paid in pursuance of a provisional assessment whereas in the final order of assessment, the Assessing Authority directed the Assessee to pay the differential duty. The said order was challenged before the Appellate Authority. The Appellate Authority set aside the 4 2011 (268) E.L.T 308 (Kar) 7 SP,J&RRN,J cea_95_2007 said order and directed for re-determination of the duty payable by the Assessee. After said re-determination of the duty payable, the Assessing Authority found that the duty paid by the Assessee is in excess of what is liable to be paid under the Act. The amount was quantified. The Assessee was called upon to furnish the documents to substantiate his case. The Assessee produced the documents. Refund was sanctioned.
Now, the question is whether this amount which is already refunded to the Assessee is liable to be reclaimed and credited to the Welfare Fund account. The Apex Court at Para 104 of the judgment in the case of Mafatlal Industries Ltd. v. Union of India, has clearly laid down under what circumstances a claim for refund arises under the Act, i.e. when the levy is unconstitutional or when the levy is illegal or when on the basis of the calculation made if it is found that an excess amount has been paid. It is only in those circumstances, Section 11A is attracted. The subsequent judgment of the Ape Court in the case of Commissioner of Central Excise, Mumbai-ll v. Allied Photographies India Ltd. reported in 2004 (166) E.L.T. 3 (S.C.) at paragraph 14 held that "Para. 104 of the judgment in the case Mafatlal Industries Ltd. (supra) states that if refund arises upon finalisation of provisional assessment, Section 11B will not apply." Similarly, the judgment of the Apex Court in the case of Commissioner of Central Excise. Chennai v. T.V.S. Suzuki Ltd. reported in 2003 (156) E.L.T. 161 (S.C.) held that the refund claims consequent upon finalization of the provisional assessment does not attract the bar of unjust enrichment. Even subsequent to 1989 to the amendment to Section 113(2), the case of unjust enrichment is not attracted.
6. In the instant case, the relevant period is from 1-10- 1975 to 28-2-1983 before the amendment to Section 11(2) of the Act. This is not a case arising out of Section 11B of the Act The refund is paid in pursuance of the finalization of the provisional assessment order and in fact, the Assessing Authority was right in holding that the doctrine of unjust enrichment does not apply in the facts of the case relying on the judgment of the Constitution Bench as well as subsequent decisions."
16. In view of the settled position of law, it is clear that the entitlement to refund and finalization of the provisional assessment under Rule 9B of the Central Excise Rules, 1944 is independent from the provisions of refund under Section 11B of the Central Excise Act, 1944. Even if the amendment made by the notification 45/99 with effect from 25-6-1999, is noted, only the procedure 8 SP,J&RRN,J cea_95_2007 established under sub-section (2) of Section 11B of the Central Excise Act has been made applicable to the refund arising out of the finalization of the provisional assessment under Rule 9B of the Central Excise Rules, 1944. The procedure regarding unjust enrichment of finalization of provisional assessment will be applicable to the provisional assessment made after 1999 and not before that date as the proviso to Rule 9B in the form of sub-rule (5) did not have a retrospective effect. The doctrine of unjust enrichment therefore would not be attracted to the refunds pertaining to the finalization of the provisional assessment for the period prior to 1999 and sub-rule (5) to Rule 9B of the Central Excise Rules, 1944 will not operate retrospectively. The proviso to Rule 9B(5) would be made applicable only with effect from 25-6-1999 and therefore the principle of unjust enrichment cannot be made applicable to the refunds arising out of finalization of the provisional assessments pertaining to the period prior to 25-6-1999 even if the assessments are finalized after 25-6- 1999."
13. A plain reading of the Judgment of Bombay High Court leaves no room for any doubt that it was ruled that the principle of 'unjust enrichment' can be pressed into service only w.e.f 25.06.1999 and it cannot have any retrospective effect. It was poignantly held that the principle of 'unjust enrichment' cannot be pressed into service about refunds arising out of finalization of the provisional assessment pertaining to the period prior to 25.06.1999 even if the assessments are finalized after 25.06.1999.
14. The present case has great similarity with the aforesaid matter where the provisional assessment was 9 SP,J&RRN,J cea_95_2007 relating to period prior to 25.06.1999 and assessments are finalized after 25.06.1999.
15. Apart from this, the Apex Court in TVS Suzuki(supra) opined as under:
"3. In order to get over the situation arising under Mafatlal Industries Ltd., (supra) vide notification No. 45/99- C.E. (N.T.), dated 25.06.1999, an amendment was made in sub-rule (5) of Rule 9B by adding a proviso thereto. The effect of the proviso is that even after finalisation of the provisional assessment under Rule 9(5), if it is found that an assessee is entitled to refund, such refund shall not be made to him except in accordance with the procedure established under subsection (2) of Section 11B of the Act.
5. Shri Verma fairly concedes that the proviso introduced in sub-rule (5) of Rule 9B cannot be said to be retrospective in operation. He, however, contends that on the date on which the proviso was brought into force, i.e. 25.06.1999, the refund claim was still pending with the departmental authorities and, therefore, it had to be adjudicated in accordance with the law as it became enforceable from 25.06.1999. In our view, this contention cannot be accepted. Merely because the departmental authorities took a long time to process the application for refund, the right of the appellant does not get defeated by the subsequent amendment made in sub-rule (5) of Rule 9B. The Commissioner of Central Excise and the CEGAT were, therefore, justified in holding that the claim for refund made by the appellant had to be decided according to the law laid down by this Court in Mafatlal Industries Ltd. (supra) and would not be governed by the proviso to sub-rule (5) of the Rule 9B."
16. Our understanding of the ratio decidendi of this Judgment is that when delay in deciding the Assessment Order is not attributable to the assessee, the time consumed 10 SP,J&RRN,J cea_95_2007 in passing the Assessment Order will not defeat the claim for refund on the ground of 'unjust enrichment' flowing from proviso to sub rule (5) of Rule 9B of the Rules 1944.
17. In view of foregoing analysis, in our opinion, the impugned order of Tribunal is in consonance with law and no case is made out for interference. In view of settled legal position, no substantial question subsists and therefore, the appeal is dismissed. There shall be no order as to costs.
Miscellaneous petitions, if any, pending in this appeal shall stand closed.
_________________________ SUJOY PAUL, J _____________________________________ NAMAVARAPU RAJESHWAR RAO, J Date: 23.07.2024 YVL/BDR