By TIOL News Service

AHMEDABAD, SEPT 17, 2013 : THE issue involved pertains to finalization of the assessments for the period from 1986 to 1998 pursuant to the order passed by the Gujarat High Court.

Two questions arose in the said appeal before the CESTAT.

(i) Whether the adjustment of the excess amount against the short paid amount has been correctly made?

(ii) Whether the surplus (excess) amount, after adjustment, is subjected to refund based on the amended provisions of the erstwhile Rule 9B of the Central Excise Rules, 1944 ('the Rules'), which was amended on 25th June, 1999, whereas the assessments pertain to the period 1986 to 1998, although the assessments were finalized on 14th October, 2005 by the Asst. Commissioner?.

The appellant submitted that while finalizing the assessments the Assistant Commissioner, has determined the following amounts:

Short payment:-Rs. 1,38,44,234.20/-

Excess payment:-Rs. 1,13,31,052.99/-

The Asst. Commissioner has given credit for an amount of Rs.1,00,81,512.28/- and demanded balance payment of Rs.37,62,721.92/-. The Asst. Commissioner rejected in toto the claim for refund of excess payment of Rs.1,13,31,052.99/-. The Commissioner(Appeals) adjusted Rs.37,62,721.92/- out of the excess payment of Rs.1,13,31,052.99 and ordered the balance amount of Rs.75,68,271.07/-.

The appellant submitted that the clearances for the entire period have to be taken into account and wherever there is an excess payment, the same must be adjusted against short payment. It was further been submitted that the rejection of the refund claim in terms of the provisions of Rule 9B(5) introduced w.e.f. 25-6-1999, on the ground of unjust enrichment are not applicable inasmuch as the assessments relate to the period 1986 to 1988, when refund under Rule 9B was not subject to the bar of unjust enrichment. The finalization of the assessments in the year 2005 is not on account of any lapse on the part of the appellant and as such subsequently introduced bar should not be invoked against them. However, it was fairly conceded that there are conflicting decisions and hence the matter needs to be referred to the Larger Bench.

View in favour of the assessee:-

(a) CCE, Guntur v. Asian Peroxide Ltd. [2006 (205) ELT 266].

(b) M.N.A. Mohamed Sultan & Sons v. CCE, Trichy (2005-TIOL-1474-CESTAT-MAD).

(c) Dr. Reddy's Laboratories Ltd. v. CC & CE, Hyderabad-IV (2007-TIOL-511-CESTAT-Bang).

View against the assessee:-

(a) CCE, Chennai v. Wockhardt Lift Sciences Ltd. [2005 (192)ELT 594].

(b) CCE, Mumbai-IV v. Khandelwal Lab. Ltd. [2006 (195)ELT 300].

(c) CCE, Pune v. ShriWarnaSahakariUtpadakPrakriyaSangh Ltd. [2007 (81) RLT 48 (Mum.)]

Accordingly, the matter came to be referred to the Larger Bench. (See - (2008-TIOL-2805-CESTAT-AHM))

The appellant argued that the first proviso to Rule9B(5), making Section 11B(2) applicable to refunds under Rule-9B, was added with effect from 25/06/1999 only and cannot be made applicable to refund claims pertaining to the periods prior to 25/06/1999 even if the provisional assessments were finalized after 25/06/1999.

Reliance is placed on the following judgments:

(i) Commissioner of Central Excise vs. T.V.S. Suzuki Ltd.   (2003-TIOL-08-SC-CX)

(ii) CC.EX. vs. Allied Photographic India Ltd. (2004-TIOL-27-SC-CX)

(iii) CC vs. Hindustan Zinc Ltd. (2009-TIOL-484-CESTAT-AHM-LB)

(iv) CC vs. Hindalco Industries Ltd. (2008-TIOL-477-HC-AHM-CUS)

The Revenue representative submitted that the amendment carried out in Rule-9B of the CER, 1944 on 25/06/1999 is only a clarificatory amendment and will be applicable to pending claims in view of the following judgments –

(i) CCE, Mumbai-III vs. Standard Drum & Barrel Mfg. Co. (2006-TIOL-39-HC-MUM-CX)

(ii) SahkariKhandUdyogMandfai Ltd. Vs. CCE &Cus. (2005-TIOL-48-SC-CX-LB)

(iii) Excel Rubber Ltd. vs. CCE, Hyderabad. (2011-TIOL-536-CESTAT-DEL-LB)

The Larger Bench extracted the provisions of Rule 9B(5) of the CER, 1944 and the proviso added thereto by notification 45/99-CE(NT) and observed that similar amendments were made in the Customs Act, 1962 by insertingsub-section (5) to Section 18 of the Customs Act with effect from 13/07/2006 by theTaxation Laws (Amendment) Act, 2006 and in the context as to whether the amendments in Section 18 of the Customs Act, 1962 viz. applicability of doctrine of unjust enrichment would apply to refunds for the provisional assessments prior to 13/07/2006,the jurisdictional Gujarat High Court in the case of  Commissioner of Customs vs. Hindalco Industries Ltd. (2008-TIOL-477-HC-AHM-CUS) has held -

“21. Therefore, on both counts, in light of the authorities referred to hereinbefore, and on interpretation of provisions of Section 18 of the Act, on finalisation of assessment if any excess duty is found to have been paid at the time of provisional assessment Revenue is bound in law to make the refund without any claim being required to be made by an assessee. This would be the position in law upto 12-7-2006 and not thereafter."

The Bench further observed -

“8. After analyzing the law laid down by Supreme Court in the case of  CCE, Mumbai-II vs. Allied Photographic Ltd. (2004-TIOL-27-SC-CX) , Hon'ble High Court in para -18 of the order in the case of Commissioner of Customs vs. HINDALCO Industries Ltd. (supra) has held that there is distinction between making of a refund and claiming of a refund and that the amendment carried out in Sec. 18 (5) on 13/07/2006 cannot be held to be clarificatory and retrospective in nature. In para-21 of the judgment in the case of Hindalco Industries Ltd. (supra) it has been held that department is bound by law to make the refund without any claim being required to be filed for the period up to 12/07/2006. Entitlement to refund and finalization of provisional assessment under sec 9B of the Central Excise Rules 1944 is independent from the provisional of refund under sec. 11 B of the Central Excise Act, 1944. Even under the amendment made by Notification No.45/99-CE (NT) dt. 25.06.1999 only the procedure established under sub-sec. (2) of sec. 11 B of Central Excise Act, 1944 has been made applicable to the refunds arising out of finalization of provisional assessments under Rule 9B of the Central Excise Rules, 1944. Accordingly the procedure regarding application of unjust enrichment to refunds on finalization of provisional assessments will be applicable to the provisional assessments made after 25.06.1999 and not before that date. The addition of proviso to Rule-9 B (5) has not been made with retrospective effect. Based on the ratio of the law laid down by Hon'ble Supreme Court in the case of CCE, in the case of Commissioner of Customs VsHindalco (Supra), the doctrine of unjust enrichment will, therefore, not be attracted to the refunds pertaining to the finalization of provisional assessments for period prior to 25/06/1999 when the linking proviso under Rules 9 B (5) of Central Excise Rules 2004 was not existing. The linking provision under proviso to Rule 9B(5) was made by an amendment with effect from 25.06.1999 and will be applicable only w.e.f. 25.06.1999. The opinion of this bench on the issue, therefore, goes in favour of the assessee and against the Revenue that for the period prior to 25.06.1999 unjust enrichment will not be applicable for refunds arising out of finalization of provisional assessments pertaining to the period prior to 25.06.1999 even if assessments are finalized after 25.06.1999….”

(See 2013-TIOL-1367-CESTAT-AHM-LB)