Any refund has to pass the test of time bar and unjust enrichment.

PJ/Case law/2014-15/2244

Case:- STRAW BOARD MFG. CO. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MEERUT

Citation:-2014 (299) E.L.T. 315 (All.)

Brief facts:- The appellants manufactured Gummed paper Tape Slit into required sizes of width and length. A dispute therefore arose whether Gummed paper Tape is dutiable or not. The Department alleged that gummed paper tape was dutiable. The appellants contested stating that gummed paper tape is not dutiable, When matter came up to this Tribunal, this Tribunal held that gummed paper tape was not covered by the old Central Excise Tariff Item No. 68 and was not liable to duty. This Tribunal passed this order on 2-2-1990. Against this decision of this Tribunal, Revenue filed appeal before the Hon'ble Supreme Court in 1992. The Hon'ble Supreme Court rejected the said appeal. The appellants submitted refund claim on 21-7-1990, which was received in the office of the Asstt. Commissioner on 23-7-1990. The claim was rejected. Against this rejection the appellants pled appeal before the Collector (Appeals). The Commissioner (Appeals) examined this case and observed that "the view of the judgment of Calcutta High Court in Haryana Plywood v. CCE - 1994 (74) E.L.T. 224 about the theory of undue enrichment is not to be applied to pending claims as the same is in a Customs case and moreover the judgment of the Supreme Court in Union of India v. fain Spinners - 1992 (61) E.L.T. 321 (SC.) is different from that. Even though refund was applied in Sept. 91, this will attract the undue enrichment principle in view of the Supreme Court judgment and the amount of Rs. 64,450/- will not be admissible to the appellants. Similarly endorsement of duty paid under protest on PLA will not be of any help and the amount of Rs. 51,025.00 also does not become to be refunded. The appellant is not entitled to any interest as there was no provision at that time for grant of interest in CESA, 1944 other claims remain unsubstantiated by the appellants. Appeal rejected accordingly.

Appellant’s contention:- The appellant states that even if refund is not admissible, since the amount has to go to the Consumer Welfare Fund, the order of refund must be passed, otherwise the claim would be left unattended and the amount will not come to the benefit of the Revenue.

Respondent’s contention:- The respondent reiterated the findings of the lower authorities.

Reasoning of judgment:- Having perused records and observing submissions, it was concluded that the appellant had filed refund claim for the period 1-3-1971 to 26-2-1986. On TR6 from 18-1-1982 to 23-2-1983 for an amount of Rs. 51,025/- it was not mentioned that the duty was paid under protest, and so up to that period the claim was barred by time. They added that the Asstt. Commissioner, Central Excise, Saharanpur by his order dated 24-8-1995 found that an amount of Rs. 64,451/- is payable under Section 11B, which would be credited to the Consumer Welfare Fund out of claim of Rs. 20,58,844.30. The Tribunal after discussing the facts, recorded findings that the refund claim except for short period had been hit by limitation because it was only for a period from 18-1-1982 to 23-2-1983, when there was an endorsement on PLA regarding the duty paid under protest. Further it was informed that it was not denied that under the then existing Rule 223B of the Central Excise Rules, 1944, the endorsement on PLA account was not sufficient. Sub-rule (4) provides that endorsement "duty payable to protest" shall be made on all copies of the gate pass, the application for removal and on Form RT.12 (or Form RT.13, as the case may be). They also observed the decision of the tribunal that after the decision of the Apex Court in Mafatlal Industries Ltd. [1997 (89) E.L.T. 247 (S.C.)], laying down the law relating to unjust enrichment, and on the basis of which the amended Section 11B was inserted in the Central Excise Act, where a person proposes to contest his liability by way of appeal, revision in the higher courts, he would naturally pay duty, whenever he does, under protest. It was difficult to imagine that a manufacturer would pay the duty without protest even when he contests levy of duty, its rate, classification or any other aspect. If one reads second proviso to sub-section (1) of Section 11B along with definition of 'relevant date', there is no room for any apprehension. In above case the Supreme Court thus held that no refund shall be ordered unless claimant establishes that he has not passed on the burden to others.
Hence at the last part of the case , the Hon’ble High court found that the tribunal had not committed any error in recording the findings that the claim was barred by time, as even on the procedure prevalent prior to Mafatlal's case, Rule 2236 was not fully complied with. If it is necessary to show that burden has not been passed on to the consumer, Rule 223E had to be complied with, and in that case not only endorsement in the PLA account but also gate passes should have indicated that the passes have been issued under protest. The ground of findings recorded by the Tribunal was proper. Thus the question is decided in favour of the Revenue, and against the appellant-assessee.

Decision:- Appeal dismissed.

Comment:- The refund claim filed by the appellant was rejected on being time barred and for not following the proper procedure as prescribed. It is well settled that an assessee can not avail double benefit by claiming for refund when the duty was collected from the customers.

Prepared by: Kushal Shah

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PJ/Case law/2014-15/2244

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