Whether the clause of unjust enrichment will apply on finalization of provisional assessment under Rule9b and refund will allowable if clearances was made in 1991 ?

PJ/Case Law /2016-17/3410

Case- COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III VersusFGP LTD.

Citation- 2016 (342) E.L.T. 308 (Tri. – Mumbai)

Brief Facts- These two appeals are filed by the Revenue as well as the appellant-assessee against the very same order-in-appeal. Accordingly, both the appeals are taken up for disposal by a common order.
The issue involved in this case is that during the period 29-2-1988 to 5-11-1990, the appellant-assessee was engaged in the manufacture of “chopped strand mat” (hereinafter referred to as the final product); during the process of manufacturing an intermediate product, glass filament was manufactured. The excisability of this product is in dispute. The appellant was directed to pay the duty “under protest”. They filed a classification list wherein they sought provisional assessment of the goods which was acceded to by the lower authorities. All the procedures required for the provisional assessment were complied by the appellant. The excisability of the product was settled by the lower authorities in favour of the appellant-assessee who immediately filed refund claims of the amounts which were paid by them “under protest”. The Assistant Commissioner allowed the refund claims, but credited the same to the Consumer Welfare Fund on the ground that the appellant-assessee has not been able to pass the hurdle of unjust enrichment. On an appeal, the first appellate authority, out of the refund of approximately Rs. 91.99 lakhs, allowed the refund claim of Rs. 75 lakhs and ordered for reversal of Modvat credit of Rs. 16.11 lakhs. This was done so by the first appellate authority on an order of remand from the Tribunal. Against such order of reversal of Rs. 16 lakhs, the appellant is before the Tribunal, while the Revenue is before the Tribunal against the sanction of refund claim of Rs. 75 lakhs.

Appellant’s Contention-Main contention of the Revenue is that the assessee had wrongly claimed that the goods were assessed provisionally. He would then draw our attention to the provisions of Rule 233B of the erstwhile Central Excise Rules, 1944 and submit that once a duty is paid under protest, the question of provisional assessment does not arise. It is his submission that unjust enrichment is also a question which has not been properly satisfied by the appellant-assessee and the provisions of Section 11B would be applicable in this case. He would rely upon the decisions of the Hon’ble Bombay High Court in the case of Bussa Overseas and Properties Pvt. Ltd. v. UOI - 2003 (158)E.L.T. 135 (Bom.) and Indian Dyestuff Industries Ltd. v. UOI - 2003 (161)E.L.T. 12 (Bom.).

Respondent’s Contention- The learned counsel would submit that the entire assessment of the intermediate product was provisional is evidenced from the classification-cum-price list filed by them and also various letters of the lower authorities. It is his submission that once the classification and the valuation were provisional, any amount arising as refund out of finalization of the provisional assessment will not attract the hurdle of unjust enrichment as hurdle of unjust enrichment was brought into Rule 9B in 1999, while they have filed the refund claims in 1991. He would submit that the law is now squarely settled on this issue.

Reasoning of Judgement- On consideration of the submissions made by both sides, The Hon’ble court find that as regards the Revenue’s appeal against the sanctioning of refund claim of Rs. 75 lakhs, this has no merits inasmuch as that there is no dispute that the clearances affected by the appellant-assessee had been under provisional assessment as per Rule 9B of the erstwhile Central Excise Rules, 1944. Under the said Rule, an assessee can seek provisional assessment and on finalization, either excess duty paid by him has to be refunded or short payment has to be paid by him to the Government. The factor of satisfying that unjust enrichment does not arise on the finalization of the provisional assessment was brought into Rule 9B in the year 1999. It is undisputed that the refund claims were filed by the appellant in 1991. The law is now settled that the provisions of Rule 9B before the amendment of bringing the question of unjust enrichment cannot be applied for rejecting the refund claims arising out of provisional assessment. On this ground, we hold that the Revenue’s appeal is devoid of merits and is rejected.
6.As regards the appellant-assessee’s appeal, we find that the first appellate authority has directed the appellant-assessee to reverse the Cenvat credit taken by them on the inputs used in manufacture as intermediate products were exempted from payment of duty. In fact, the factual matrix is that the appellant-assessee had used this credit for discharging the duty liability on the intermediate products which were held subsequently as non-excisable/non-dutiable but further consumed in manufacture of final product “chopped strand mat” which is excisable. In view of this, having paid the duty and provisional assessment being finalized in their favour, we hold that the impugned order to the extent challenged by the appellant-assessee is liable to be set aside and we do so.
7.Revenue’s appeal is rejected and the assessee’s appeal is allowed.

Decision- Appeal rejected

Comment- The gist of the case is that the assessee has made clearance under provisional assessment (rule 9b) and had paid duty “under protest” in 1990 and also filed the refund of same in 1991 when excisability was settled in favour of assessee. The clause of satisfying that unjust enrichment does not arise on finalization of provisional assessment was brought into Rule 9B ibid in the year 1999and refund was filed in 1991. Therefore the question of unjust enrichment cannot be applied for rejecting refund claims arising out of provisional assessment. Hence appeal is allowed in favour of assessee.
Prepared by- Akshit Bhandari

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PJ/Case Law /2016-17/3410

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