Refund claim of cesses under the exemption Notification No. 11/2017 CE(NT) dated 24.04.2017; Refund of Cenvat Credit if the final products become retrospectively exempted; Whether the addendums to the SCNs can allege denial for an amount that is more than

PJ/Case Study/2016-17/

CASE STUDY

                                                                                                                      Prepared By: Prateeksha Jain

Introduction: :- M/s Prem Mehandi Center, (hereinafter referred to as appellant) is having Central Excise Registration No. AFNPG4306BEM004 and is engaged in manufacturing of Henna Powder/Heena Paste.A show cause notice no. V(Rfd)18/Pali/70/2017/397 dated 09.03.2018 was issued to the appellant alleging that refund claim of the cess amounting to Rs. 3,82,457/- shall not be granted as the same was not exempted under Notification No. 11/2017-CE dated 24.042017 and refund of duty paid through cenvat credit amounting to Rs.30,08,440/- on henna powder and cone shall not be allowed as they were not taxable at all . After receipt of the defence replies to the SCNs the Adjudicating Authority further issued addendums dated 20.06 2018 to SCNs alleging that the refund claims should be rejected on the grounds that doctrine of unjust enrichment has been compromised as the applicant has passed on the burden of Central Excise Duty to the customer and the refunds claims have been filed after six months from the date of issue of exemption notification hence time bar. Thereby, the addendums rejected the whole amount of refund claim amounting to Rs.1,45,92,582/-. The appellant filed reply to the show cause notice. The submissions made by the appellant in their reply to the show cause notice and addendums during the course of personal hearing were not adhered to by the learned adjudicating authority and the impugned order in original no. 132/GRK/2017-18 dated 31-07-2018 was passed thereby rejecting the refund claim of Rs. 1,45,92,582/-.
Relevant Legal Provisions:
·        Section 11B of Central Excise Act, 1944.
·        35G of Central Excise Act, 1944
·        Section 35C of Central Excise Act, 1944
·        Section 11C Central Excise Act, 1944
·        Section 93 and Section 95 of Finance Act, 2004
·        section 136 and Section 138 of Finance Act, 2007
Issue Involved: Refund claim of cesses under the exemption Notification No. 11/2017 CE(NT) dated 24.04.2017; Refund of Cenvat Credit if the final products become retrospectively exempted; Whether the addendums to the SCNs can allege denial for an amount that is more than that proposed in the original SCNs ; Whether the refund claims are hit by the time bar as per Section 11C(2) of Central Excise Act, 2017; Whether the refund claims are hit by the clause of unjust enrichment.

Brief Facts:M/s Prem Mehandi Center, (hereinafter referred to as appellant) is having Central Excise Registration No. AFNPG4306BEM004 and is engaged in manufacturing of Henna Powder/Heena Paste. The appellant are despatching the above goods without payment of duty. The anti evasion team has visited to their factory premises and seized the goods and asked to pay Central Excise Duty on these product. The appellant have taken Central Excise Registration and started paying central excise duty on above these product under protest.

The Government gave retrospective exemption vide notification 11/20117-Central Excise (N.T.) dated 24.04.2017 issued under Section 11C for the period from 01.10.2007 to 01.03.2013 to the final product of appellant viz. Mehandi powder and Mehandi paste.Thereafter, the appellant have applied for refund claim of amounting to Rs.1,45,92,582/- before Assistant Commissioner, Central Excise and Service Tax Division, Pali in respect of duty paid under protest for the period 01.04.2011 to 01.03.2013.
The department issued a Show Cause Notice No. V(Rfd)18/Pali/70/2017/397 dated 09.03.2018 and alleged that the refund amount should not be rejected. The appellant have filed reply to show cause notice vide our letter dated 27.03.2018 before Assistant Commissioner, Central Excise Division, Pali.

Thereafter, the department has issued addendum to Show Cause Notice vide letter No. V(RFD)18/Pali/70/2017/1282 dated 20.06.2018 and alleged that the refund should be filed within six months from the date of such Notification. The appellant have filed reply to addendum of Show Cause Notice vide letter dated 29.06.2018 .But the adjudicating authority has ignored all the submission made by the appellant and reject the refund claim vide order-in-original No. 132/GRK/2017-18 dated 31.07.2018.Aggrieved by the impugned order in original, the appellant prefer to file this appeal before your good honour on the following grounds which are without prejudice to each other and are independent of the grounds to be taken at the time of personal hearing:-

Assessee’s Contention: The impugned order in original rejecting the refund claim is wholly and totally erroneous and is liable to be set aside. The appellant submits that addendum to the show cause notice contains substantial allegations that were not part of the impugned show cause notice which is not at all sustainable. In this regard, reliance is placed on the following judicial pronouncements:-

·        CHAWLA TRADING CO. VERSUS COMMISSIONER OF CUS. (EXPORT), NHAVA SHEVA [2015 (330) E.L.T. 470 (TRI. – MUMBAI)] wherein it was held that-

Confiscation and penalty - Misdeclaration - Seizure of export consignments containing non-basmati rice prohibited for export as per DGFT Notification No. 38/2007 along with consignment of basmati rice - Addendum to show cause notice stating test reports by Chemical examiner established seized goods non-basmati rice - Validity of - HELD : After filing of reply to show cause notice, no corrigendum/addendum can be issued - Said addendum also vitiated on ground that no reference in show cause notice of any samples forwarded for testing - Test report brought on record subsequently not reliable as not based on prescribed parameter of test regarding prescribed length and ratio of length to breadth of grains to ascertain category of rice and samples drawn not sent to ‘Agmark Testing Center’ as per DGFT Policy Circular No. 33/2008 - Said circular refers to DGFT Notification No. 39/2008 which allows export of non-basmati Pusa 1121 variety of rice which not considered by adjudicating authority - Impugned goods not liable to confiscation - Sections 113(i), 113(d) and 114(i) of Customs Act, 1962. [para 5]
·        MAHINDRA & MAHINDRA LTD. VERSUS COMMISSIONER OF C. EX., MUMBAI-V [2006 (196) E.L.T. 62 (TRI. – MUMBAI)] wherein it was held that:-
Show cause notice - Corrigendum to show cause notice - Issuance of - Corrigendum/Addendum to show cause notice cannot be issued after receipt of reply of noticee to the original notice.[para 2(a)]

In light of the above cited decisions, the addendum issued after filing reply to the show cause notice by the appellant is not sustainable and consequently, the impugned order in original also deserves to be quashed. It is pertinent to mention that the above decisions were cited by the appellant before the adjudicating authority but these have not been considered while passing the impugned order in original. As such, the impugned order in original turns out to be a non-speaking order which is not tenable in light of the decision given in the case of State of Himachal Pradesh Vs Sardara Singh [2008-TIOL-160-SC-NDPS].

The appellant further submits that even otherwise, the addendum to the show cause notice cannot allege denial of refund claim for an amount that is more than that proposed in the original show cause notice. The appellant submit that the original show cause notice proposed to reject an amount of Rs. 33,90,897/- pertaining to Central Excise Duty paid through CENVAT account alongwith cess paid through cash out of the total refund claim of Rs. 1,45,92,582/-. However, the addendum proposes to reject the entire refund claim which is not legally permissible. The appellant submit that the addendum to the show cause notice cannot increase the quantum of demand/refund rejection and the same is non-est. Hence, the addendum increasing the scope of show cause notice in terms of amount of rejection of refund claim is not at all tenable and consequently, the impugned order deserves to be set aside.

The appellant further submit that the education cess is levied @2% by Section 93 read with Section 95 of Finance Act, 2004. It is to be calculated on the amount of Excise duty. Similarly, the secondary and higher education cess is levied @1% by section 136 read with Section 138 of Finance Act, 2007. It is levied on the aggregate of all duties of excise levied and collected by the Central Government. Hence, the cesses could not be levied independently nor collected in absence of any duty of excise and the entire process of levy and collection of cesses is only of Central Excise duty and not of cesses at all as a standalone levy. Therefore the refund duty collected on excisable goods must necessarily include the cesses collected. Hence, the retrospective exemption to Heena powder means that there was no duty on such product during relevant period. When the duty of excise is not leviable then cess leviable on duty of excise cannot be collected. Hence, the cesses paid by the appellant should also be refunded. However, the impugned order in original has rejected the refund claim on totally new grounds as mentioned in the addendum issued by them without even considering the submissions made by them with respect to allegations levelled in the show cause notice issued to them. As such, the impugned order is not at all tenable and deserves to be set aside.

In continuation to the above, the appellant submit that the Honourable Mumbai High court has held in case of COMMISSIONER OF CUSTOMS (EXPORT) V. RELIANCE INDUSTRIES LIMITED [2015(322)E.L.T. 121 (BOM.)] as under:-

EXIM - Imports under DEPB - They are fully exempt, and Customs duty is nil - Hence, Education Cess being 2% of Customs duty is also nil, and no debits can be made on that account from DEPB scrip. [paras 11, 12, 13]

Hence, it is clear cut ratio of above judgment that the exemption from the basic excise duty will mean education cess @2% will also be nil. Hence, in the present case also, the retrospective exemption from excise duty will mean that the education cess @2% and secondary and higher education cess 1% on basic excise duty is also nil. Hence, the rejection of refund claim pertaining to cesses as alleged in the impugned show cause notice is not justifiable and the impugned order rejecting refund claim without considering the submissions made in this regard deserves to be set aside.

The appellant submit that the allegation that they were required to file refund claim within the period of six months from the date of retrospective exemption notification issued under section 11C of the Central Excise Act, 1944 is totally baseless. The appellant submits that every refund claim filed under Central Excise Laws is governed by the provisions of section 11B of the Central Excise Act, 1944. The appellant submits that the allegation that they were required to file the refund claim as per proviso to section 11C (2) of the Central Excise Act, 1944 is not tenable as far as the refund claim is being filed within the time limit specified under the provisions of section 11B of the Central Excise Act, 1944. The appellant submit that it has been held by the Hon’ble Hyderabad Tribunal in the case ofHYDERABAD POWER INSTALLATIONS (P) LTD.VERSUSC.C.E., C. & S.T., HYDERABAD-II [2016 (45) S.T.R. 217 (TRI. - HYD.)] that since there is conflict in the time limit prescribed by the provisions of section 11C and section 11B, the provision of section 11B of the Central Excise Act, 1944 would prevail by applying the legal principle of harmonious construction. The synopsis of the case is as follows:
Erection, Commissioning or Installation Services (ECIS) - Service Tax - Notification No. 45/2010-S.T., dated 20-7-2010 clarified that no Service Tax required to be paid for all services relating to transmission of electricity upto 26-2-2010 and for all services relating to distribution of electricity upto 21-6-2010 - Hence, Service Tax not payable on Erection, Commissioning or Installation Services.[paras 8, 9]
Refund - Limitation - Issue of taxability of services provided by service providers such as appellant in categories like “Erection, Commissioning or Installation Services (ECIS)” in dispute and matter clarified only with issue of Notification No. 45/2010-S.T., dated 20-7-2010 - Main issue per se being in agitation/sub judice in respect of this appellant at least till the date of Tribunal’s afore-cited Final Order viz., 23-5-2016, time limit of one year will start from date of judgment in view of clause (ec) of Explanation B of Section 11B(5) of Central Excise Act, 1944 as applicable to Service Tax vide Section 83 of Finance Act, 1994 - Refund not hit by time-bar. [paras 10, 12, 13, 14]
Interpretation of Statute - Harmonious Construction - Time limit whether applicable under Section 11B or Section 11C of Central Excise Act, 1944 - Notification being issued under Section 11C ibid, normally time limit of six months from date of notification applicable - However, where duty becomes refundable as a consequence of judgment, time limit of one year applicable vide clause (ec) of Explanation (B) of Section 11B(5) ibid - In fact, the apparently conflicting provisions in Section 11B vis-à-vis Section 11C ibid, are harmonious with each other - Issue involved in such Section 11C ibid notification when sub judice in any Court etc., the said provision of Section 11C ibid will stand eclipsed by the general provision of Section 11B of Central Excise Act, 1944 as applicable to Service Tax vide Section 83 of Finance Act, 1994 and time limit of one year from the date of judgment will be applicable. - [AIR 1964 SC 207 relied on]. [paras 11, 12]

The appellant submit that the issue regarding levy of central excise duty on heena powder/heena paste was sub-judice and was pending in case of various assessees before the Delhi Tribunal including in their own case. The appellant submit that the Hon’ble Delhi Tribunal allowed the appeal of various assessees by extending the benefit of retrospective exemption notification issued under section 11C of the Central Excise Act, 1944 as listed below:-

·        M/S PREM MEHANDI CENTRE- FINAL ORDER NO. A/54095/2017-EX [DB] DATED 31.05.2017
·        M/S PUSHP ENTERPRISES- FINAL ORDER NO. 56890/2017 DATED 29.09.2017

The appellant submit that since the matter pertaining to retrospective exemption notification was sub-judice, the provision contained in explanation (ec) to section 11B of the Central Excise Act, 1944 would prevail and hence, the refund claim filed by the appellant on 15.12.2017 is well within the time limit of one year as prescribed under section 11B of the Central Excise Act, 1944. Therefore, the impugned order in original rejecting their refund claim on the grounds that it was not filed within the period of six months from the date of notification no. 11/2017 is not at all tenable in light of the above cited decision and the same deserves to be set aside.
The impugned order in original has held that the effect of protest was ceased with the issuance of notification no. 11/2017-CE (NT) dated 24.04.2017. The main provision under section 11C(2) of the Central Excise Act, 1944 requires refund claim to be filed within six months from the date of issuance of the notification. The second proviso to section 11B(1) states that the limitation of six months shall not apply where duty has been paid under protest. Subsequently, the explanation (d) and (ec) of the Explanation to the section 11B provides that where the duty becomes refundable as a consequence of any judgment, decree, order or direction of the appellate authority, appellate tribunal or any court, the limitation of six months shall be computed from the date of such judgment, decree, order or direction. It is alleged that both these provisions are required to be read harmoniously so that either of the provision is not rendered redundant. Thus in this case the effect of ‘under protest’ was very much effective from the date of payment of duty till issuance of notification under section 11C. The impugned order in original has also placed reliance on the decision given in the case of M/s Redington India Ltd. Vs Commissioner of Customs, Chennai [2011-TIOL-863-CESTAT-MAD]. In this regard, the appellant submit that they have filed refund claim of duty paid under protest and so the provisions contained for the same under section 11B of the Central Excise Act, 1944 would apply and not that contained in section 11C(2) of the Central Excise Act, 1944. The appellant submits that section 11B of the Central Excise Act, 1944 contains the provisions relating to claim for refund of duty and interest. According to second proviso to section 11B(1) of the Central Excise Act, 1944, the limitation period of one year is not applicable for refund claim of duty paid under protest. The proviso reads as follows:
Provided further that the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest.
The appellant submit that when there is no time limit to file refund of central excise duty paid under protest, the time limit of six months prescribed under section 11C (2) cannot be made applicable in the present case. The appellant submit that when it is expressly stated that the limitation period is not applicable for duty paid under protest, the time limit for filing refund claim within period of six months will not be applicable in the present case. The appellant submits that the interpretation which brings harsh consequences on the assessee should not be followed. In this regard attention is also invited towards the ratio of Supreme Court judgment in the case of SNEH ENTERPRISES VERSUS COMMISSIONER OF CUSTOMS, NEW DELHI [2006 (202) E.L.T. 7 (S.C.)], in which the hon’ble Apex Court has held that:-

“25. While dealing with a taxing provision, the principle of ‘Strict Interpretation’ should be applied. The Court shall not interpret the statutory provision in such a manner which would create an additional fiscal burden on a person. It would never be done by invoking the provisions of another Act, which are not attracted. It is also trite that while two interpretations are possible, the Court ordinarily would interpret the provisions in favour of a tax-payer and against the Revenue.”

The analysis of above decision makes it clear that the interpretation of any provision should not create additional fiscal burden on the assessee. In the instant case,the interpretation taken by the impugned order in original is denying the rightly admissible refund claim to the appellant which will lead to additional fiscal burden on the assessee. Hence, the interpretation taken by the impugned order in original that the time limit of six months as stated in section 11C(2) would be applicable is not tenable and the same deserves to be set aside.
The appellant further submit that erroneous reliance has been placed on the decision given in the case of M/s Redington India Ltd. Vs Commissioner of Customs, Chennai [2011-TIOL-863-CESTAT-MAD]. The appellant submit that they have placed reliance on recent decision given by the Hon’ble Hyderabad Tribunal in the case of HYDERABAD POWER INSTALLATIONS (P) LTD. VERSUSC.C.E., C. & S.T., HYDERABAD-II [2016 (45) S.T.R. 217 (TRI. - HYD.)] that since there is conflict in the time limit prescribed by the provisions of section 11C and section 11B, the provision of section 11B of the Central Excise Act, 1944 would prevail by applying the legal principle of harmonious construction. The appellant submit that since the decision relied upon by them is the latest one, the benefit of the said decision should be extended to them and the refund claim should be allowed.
The impugned order in original has alleged that during the course of examination of the invoices forwarded along with the claim and draft OIO it is observed that the assessee was paying central excise duty on the MRP declared. On verification of invoice, it appears that they had not charged central excise duty from their immediate buyer, i.e., their dealer and wholesaler, however the product was ultimately sold on MRP to the ultimate customer. The MRP was cum duty price that constituted Central Excise Duty also and thus duty had been passed on to the ultimate consumer and thus the concept of unjust enrichment taken place. The impugned order in original has placed reliance on the decision given in the case of Shree Baidyanath Ayurved Bhavan Ltd. Vs Commissioner of C.Ex., Nagpur [2009 (238) E.L.T. 680 (Tri-Mumbai)]. In this respect, the appellant submits that the deduction of amount pertaining to central excise duty on the invoices clearly indicate that the burden of central excise duty has not been passed on by them. Furthermore, in order to substantiate their submission that they have not passed on the burden of central excise duty to the buyers, they have enclosed the Certificate issued by Chartered Accountant. The appellant submit that the certificate is conclusive proof of the fact that the burden of central excise duty is being borne by them and the concept of unjust enrichment is not applicable. The appellant also wish to place reliance on the decision given in the case of COMMR. OF C. EX. & CUS., GUNTUR VERSUSCRANE BETEL NUT POWDER WORKS [2011 (274) E.L.T. 113 (Tri. - Bang.)]and affirmed by Supreme Court reported as [2014 (305) E.L.T. A109 (S.C.)] wherein it was held that Chartered Accountant’s Certificate which indicates that duty liability has not been passed on and has been absorbed by the assessee cannot be rejected as evidence in support of non-passing of burden of incidence of duty. In light of the above cited decision, the allegation of unjust enrichment is not tenable and the refund should be allowed to them.

The impugned order in original has also relied upon the decision given in the case of Euro Merchandise (I) Ltd. Vs Commissioner of Customs, Kandla [2015 (318) E.L.T. 445 (Tri.-Ahmd.)]. In this respect, the appellant submit that erroneous reliance has been placed on the above cited decision as the issue involved in this case was whether CVD on the ceramic tiles imported by the appellant was required to be discharged at the time of imports on MRP basis under section 4A of the Central Excise Act, 1944. This is not the subject matter for consideration in the present case and so the reliance placed on the decision is improper.
The impugned order in original has placed reliance on the decision given in the case of Dinesh Pouches Ltd. Vs Commissioner of C.Ex., Jaipur-II [2016 (340) E.L.T. 570 (Tri.-Del)]. The appellant submits that erroneous reliance has been placed on this decision as in the said case there was no evidence that the duty recovered from customers has been paid back. However, in the present case, they have clearly established that they have not recovered the central excise duty from the buyers and this fact is clearly reflected in the invoices issued by them. Moreover, they have also enclosed Chartered Accountant Certificate which clearly reflects that the incidence of duty has not been passed on to buyers. Therefore, since the appellant have substantiated that the duty burden has been borne by them, the principle of unjust enrichment is not applicable in the present case and the impugned order in original should be set aside.
The impugned order has also placed reliance on the decision given in the case of Sahakari Khand Udyog Mandal Ltd. Vs Commissioner of C.Ex. & Cus [2005 (181) E.L.T. 328 (S.C.)]. The appellant submit that the reliance placed on this decision is also misplaced as this decision also concluded that before claiming relief of refund, it is necessary to show that the assessee has paid the amount for which relief is sought and has not passed on burden on buyers. The appellant submit that they have also borne the burden of central excise duty and have not passed on the burden to buyers and this fact can be verified from the invoices submitted by them. Furthermore, Certificate from Chartered Accountant also confirms the fact that incidence of central excise duty has not been passed by them. Therefore, the impugned order in original placing reliance on this decision is not tenable and deserves to be set aside.
The impugned order has also placed reliance on the decision given in the case of Union of India & Others Vs I.T.C. Ltd. Vs Commissioner of C.Ex. & Cus [1993 (67) E.L.T. 3 (SC)]. The appellant submits that the case is clearly distinguishable in the present case as in the relied upon case, ITC Ltd. had not filed any evidence or material whatsoever to show that the burden of excess excise duty was borne by them and not passed on to any other person. However, in the present case, they have provided copies of invoices clearly reflecting that the burden of central excise duty has not been passed on and the Chartered Accountant Certificate also verifies the said fact. As such, they have passed the hurdle of unjust enrichment and the above cited case law is not applicable in the present case. Hence, the impugned order in original should be set aside.
The impugned order in original has alleged that though the assessee has shown the element of duty in the invoices and claimed that the same has not been recovered from their buyer, i.e., their dealer, wholesaler and their own branch, however they had not submitted any documents to prove that the said duty was not passed on to their ultimate consumer as the units were sold on MRP basis which is inclusive of all taxes therein including VAT and other local taxes. The impugned order in original has placed reliance on the decision given by the Hon’ble Supreme Court in the case of Mafatlal Industries Ltd. Vs Union of India [1997 (89) E.L.T. 247 (S.C.)]. The appellant reiterate that the decision given in the case of Mafatlal Industries Ltd. also lays down the principle that refund is admissible only where burden of duty has been borne by the claimant filing refund. The appellant have already established with evidences that they have not passed on the incidence of central excise duty to their buyers and this fact is substantiated by the invoices and Chartered Accountant Certificate enclosed by them. As such, the allegation of the impugned order in original is not sustainable and the same deserves to be quashed.

The impugned order in original has also alleged that during the scrutiny of the claim it was observed that M/s Prem Mehandi Centre had sold and issued invoices to its own branches to Jalgaon, Indore and others. This transaction is not one buyer to another buyer and duty has been paid to themselves only. In this case, buyer and seller relationship has not been established and no evidences have come forward to prove that no incidence of duty has been passed on. The appellant submit that the allegation that they have not submitted any evidence with respect to proving that the incidence of duty burden is borne by them is not proper as they have enclosed invoices clearly deducting the central excise duty amount and Chartered Accountant Certificate. As such, the principle of unjust enrichment is not applicable in the present case and the impugned order in original should be quashed.
It is also alleged that on scrutiny of Trading cum Profit and Loss account of the assessee it is revealed that the total value shown in the invoices do not match with the value of the sales invoices shown therein. On this issue, it was clarified that the sales figure was taken on the basis of MRP irrespective of the amount charged from the buyer in the invoices and hence the difference accrued. Therefore, it was an admitted fact that the sale value shown in the Trading Account is MRP value and assessee has actually recovered MRP value from the party. In this regard, the appellant submits that they have not recovered the MRP and have only received the transaction value mentioned in their invoices after deducting the element of central excise duty. They also submit that the difference in the sales value shown in the Trading cum Profit and Loss Account and that reflected in invoices is due to the fact that they have claimed refund of only henna powder and henna paste sold by them. The appellant also manufacture hair dye and other cosmetics, the value of which is included in the Trading cum Profit and Loss Account and for which they have not claimed refund. As such, the difference is due to the said reason and the allegation of the impugned order in original is not at all sustainable.

It is further alleged that since the excise duty has been shown in the Profit and Loss account, the component of duty has been included in the costing of the goods and become integral part of the value of the product. In this regard, reliance is placed on the decision given in the case of Commissioner of C.Ex. Mumbai-II Vs Allied Photographics India Ltd. [2004 (166) E.L.T. 3 (S.C.)]. The appellant submit that erroneous reliance has been placed on the above cited decision as the refund of duty paid under protest is not hit by the bar of unjust enrichment. In this respect, reliance is placed on the decision given by the Hon’ble Supreme Court in the case of SINKHAI SYNTHETICS & CHEMICALS PVT. LTD. VERSUS C.C.E., AURANGABAD [2002 (143) E.L.T. 17 (SC)] and COMMISSIONER OF CENTRAL EXCISE, HYDERABAD VERSUS I.T.C. BHADRACHALAM [2015 (319) E.L.T. 547 (S.C.)].The appellant submit that since there are favourable decisions of the Supreme Court stating that unjust enrichment is not applicable for duty paid under protest, the benefit of this decision should be extended to them and the order in original should be set aside.
It is alleged that the amount of excise duty paid and borne by the assessee, if it was disputable as per accounting standard should have been shown as receivable in the balance sheet so that it should be part of the costing and profit and loss thereof. In this respect, reliance was placed on the decision given in the case of Uniword Telecom Ltd. Vs Commissioner of Central Excise, Noida [2017 (358) E.L.T. 666 (Tri.-All)]. In this regard, the appellant submit that erroneous reliance has been placed on the said decision as in the relied upon case, the assessee was able to prove that amount claimed as refund was not realised from the buyer and matter was remanded to the adjudicating authority to examine books of accounts of the appellant. The appellant submit that in the present case also they have not recovered any amount from the buyers and this fact is substantiated by the invoices issued by them. The appellant submit that the central excise duty has been deducted from the final invoice value and no recovery in lieu of excise duty has been made by them. Furthermore, they submit that the fact that they have not passed on the burden of excise duty to the buyers can be verified from the invoices issued by them. They submit that merely because the duty amount was not shown as receivable cannot mean that unjust enrichment is applicable. This is supported by decision given in the case of ELANTAS BECK INDIA LTD. VERSUS COMMISSIONER OF C. EX. & S.T., LTU [2016 (339) E.L.T. 325 (TRI. – MUMBAI)] wherein it was held that-
Refund - Unjust enrichment - Duty paid under protest on intermediate goods - Incidence of duty, non-passing of - Proof - No direct duty chargeable or can be shown in invoices in such cases - Price structure having remained same even after paying duty on intermediate goods, indicating that incidence of duty not passed on -Mere not showing such amount as receivable in account books but showing it as expenditure does not mean otherwise because assessee has slashed his profit margin by keeping same sale price - Bar of unjust enrichment not applicable and refund available - Section 11B of Central Excise Act, 1944. [para 5]
Consequently, invoking the concept of unjust enrichment in the present case is not at all proper as duty burden has been borne by them and the burden of central excise duty has not been passed on by them. Hence, the impugned order in original is not at all sustainable and deserves to be quashed.
The appellant further wish to place reliance on the following judicial pronouncements in support of their contention that since the duty has been expensed of in the Profit and Loss Account, the principle of unjust enrichment is not applicable in the present case:-
·        COMMISSIONER OF C. EX., COIMBATORE VERSUS FLOW TECH POWER [2006 (202) E.L.T. 404 (MAD.)]
Refund - Unjust enrichment - Composite price fixed by Ministry of Agriculture - Duty absorbed by assessee - Chartered Accountant’s certificate and profit and loss account also confirm that duty paid on impugned goods had been absorbed by assessee and had been shown as expenditure in profit and loss account and not passed on to customer - CESTAT’s order require no interference - No substantial question of law arises for consideration of High Court - Sections 11B and 35G of Central Excise Act, 1944. [paras 3, 4]
Refund - Limitation - Protest - Factual finding by authorities below that duty paid under protest and question of time bar would not arise - No substantial question of law arises for consideration of High Court - Sections 11B and 35G of Central Excise Act, 1944. [paras 3, 4]
·        KESORAM CEMENT VERSUS COMMISSIONER OF CENTRAL EXCISE, HYDERABAD-I [2005 (183) E.L.T. 302 (TRI. - BANG.)]

Refund - Limitation - Protest - Duty paid under protest - Fact not disputed - Appellants claiming refund only to the extent of amount not hit by unjust enrichment as they absorbed such amount in their profit and loss account without passing on to the buyer - Such fact noted by adjudicating authority - Refund claim not hit by time-bar - Section 11B of Central Excise Act, 1944. [para 4]
The appellant submit that the benefit of the above cited decisions should be extended to them and the refund should be allowed.
The appellant further submits that they have controverted each and every allegation of the impugned show cause notice and the addendum issued to them but the impugned order in original has not even taken the pain to discuss and distinguish the submissions made by them and have simply rejected their refund claim by reiterating the allegations levelled by the impugned show cause notice. Consequently, the impugned order in original turns out to be a non-reasoned order which has no relevance in the eyes of law in light of the decision given in the case of    COMMISSIONER OF CENTRAL EXCISE, BANGALORE VERSUS SRIKUMAR AGENCIES [2008 (232) E.L.T. 577 (S.C.)] wherein it was held that:-
“Appellate Tribunal’s order - Non-speaking order - Facts not analysed in detail in impugned order by Tribunal - Disposal of appeals by mere reference to decisions not proper way to deal with appeals - Applicability of decision cited by Revenue not considered - Appeals involving different goods - CESTAT ought to have examined cases individually and articles involved - Manner of disposal not proper - Impugned order set aside - Question referred to Larger Bench of Supreme Court not answered as matter remitted to CESTAT for fresh decision by appropriate Bench - Section 35C of Central Excise Act, 1944. - By clubbing all the cases together and without analyzing the special features of each case disposing of the appeals in the manner done was not proper. [para 6]”8
In view of above decision, an order passed without discussing and distinguishing the submissions given by appellant is void ab initio. Therefore, extending the benefit of this decision, the impugned order, being a non speaking and non reasoned order, deserves to be quashed and the appeal should be allowed.

Reasoning adopted by the Appellate authority: - On the basis of the analysis of the submissions made by the applicant the Appellate authority held that
       Regarding rejection of the refund of cesses the Notification No. 11/2017-CE(NT) dated 24.04.2017 does not grant retrospective exemption to cesses, further cesses are to be calculated on the amount of excise duty. It is to be noted that, cesses could neither be levied independently nor collected in absence of any duty of excise and the entire process of levy and collection of cesses is only of CE duty ad not of cesses at all as a standalone levy. When the duty of excise is not leviable then cess leviable on duty of excise cannot be collected and therefore it is held that the cesses paid by the appellant should also be refunded.
Regarding proposal of rejection of refund claim paid through cenvat credit on the ground that excise duty payment made by the appellant through cenvat credit is not refundable when the final products of the appellants become retrospectively exempted. The products have become retrospectively exempted hence they are not liable to avail cenvat credit. Therefore, the excise duty payment made by the appellant through cenvat credit is not refundable.
Regarding whether or not the addendums to the SCNs contain substantial allegations were part of the impugned SCN and such the addendums to the SCNs can allege denial for an amount than that proposed in the original SCNs it was held that addendums were issued after receipt of replies to original SCNs. The Appellate Authority cited the decisions of the following cases:
·        CHAWLA TRADING CO. V/S COMMISSIONER OF CUSTOMS (EXPORT) , NHAVA SHEVA -2015(330) E.L.T.470 (Tri. MUMBAI)
·        MAHINDRA AND MAHINDRA LTD. V/S COMMISSIONER OF CUSTOMS (EXPORT) , Mumbai-V -2006 (196) E.L.T. 62 (Tri. MUMBAI)
On the basis of the above decisions it was held that a corrigendum to a Show Cause Notice cannot be issued after the noticee has sent the reply to the original notice issued. So, it was concluded that the addendums to the SCNs cannot deny the refund claims of the amount which is more than that proposed in the original SCNs.
Further, the applicant was denied the refund claim on the grounds that they were required to file refund claim within the period of six months from the date of retrospective exemption notification issued under section 11C of the Central Excise Act, 1944. Every refund claim filed under Central Excise Laws is governed by the provisions of section 11B of the Central Excise Act, 1944. In the case ofHYDERABAD POWER INSTALLATIONS (P) LTD.VERSUSC.C.E., C. & S.T., HYDERABAD-II [2016 (45) S.T.R. 217 (TRI. - HYD.)] that since there is conflict in the time limit prescribed by the provisions of section 11C and section 11B, the provision of section 11B of the Central Excise Act, 1944 would prevail by applying the legal principle of harmonious construction. The time limit of six months provided in Section 11C will normally be applicable in respect of refund claims emanating out of notifications issued under that section. However, if the issue involved in such Section 11C ibid notification when sub judice in any Court etc., the said provision of Section 11C ibid will stand eclipsed by the general provision of Section 11B of Central Excise Act, 1944 and time limit of one year from the date of judgment will be applicable.
Consequently, since the matter pertaining to retrospective exemption notification was sub-judice, the provision contained in explanation (ec) to section 11B of the Central Excise Act, 1944 would prevail and hence, the refund claim filed by the appellant on 15.12.2017 is well within the time limit of one year as prescribed under section 11B of the Central Excise Act, 1944.
The addendums also submitted that applicant has violated the doctrine of unjust enrichment on the grounds that the assessee was paying central excise duty on the MRP declared. . The MRP was cum duty price that constituted Central Excise Duty also and thus duty had been passed on to the ultimate consumer and thus the concept of unjust enrichment is attracted. On verification of the invoices it was found that the deduction of amount pertaining to central excise duty on the invoices clearly indicate that the burden of central excise duty has not been passed on by them .In order to ratify their submission they also have enclosed the Certificate issued by Chartered Accountant. Hence the Appellate Authority held reliance on the following case:
·        COMMR. OF C. EX. & CUS., GUNTUR VERSUSCRANE BETEL NUT POWDER WORKS [2011 (274) E.L.T. 113 (Tri. - Bang.)]
In this case it was held that Chartered Accountant’s Certificate which indicates that duty liability has not been passed on and has been absorbed by the assessee cannot be rejected as evidence in support of non-passing of burden of incidence of duty.
It is also alleged that on scrutiny of Trading cum Profit and Loss account of the assessee it is revealed that the total value shown in the invoices do not match with the value of the sales invoices shown therein. On this issue, it was clarified that the sales figure was taken on the basis of MRP irrespective of the amount charged from the buyer in the invoices and hence the difference accrued. The applicant also submits that they have recovered only the transaction value from the customers.
It is further alleged that since the excise duty has been shown in the Profit and Loss account, the component of duty has been included in the costing of the goods and become integral part of the value of the product. In this respect, reliance was placed on the decision given by the Hon’ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, HYDERABAD VERSUS I.T.C. BHADRACHALAM [2015 (319) E.L.T. 547 (S.C.)]wherein it was held that unjust enrichment is not applicable for duty paid under protest.
It is alleged that the amount of excise duty paid and borne by the assessee, if it was disputable as per accounting standard should have been shown as receivable in the balance sheet so that it should be part of the costing and profit and loss thereof. In this regard, the Appellate authority has placed reliance on the following cases:
·        ELANTAS BECK INDIA LTD. VERSUS COMMISSIONER OF C. EX. & S.T., LTU [2016 (339) E.L.T. 325 (TRI. – MUMBAI)]
·        COMMISSIONER OF C. EX., COIMBATORE VERSUS FLOW TECH POWER [2006 (202) E.L.T. 404 (MAD.)]

·        KESORAM CEMENT VERSUS COMMISSIONER OF CENTRAL EXCISE, HYDERABAD-I [2005 (183) E.L.T. 302 (TRI. - BANG.)]

On considering the above cases it was held that merely because the duty amount was not shown as receivable cannot mean that unjust enrichment is applicable. Further, the duty amount was deducted from the final invoices so no burden has been passed.
Consequently, on the basis of the above discussions and findings the Appellate Authority allowed the refund of Rs. 1,15,84,142/- through GAR-7 challans as per notification no.11/2017 CE(NT) dated 24.04.2017. However, the applicant was denied the refund of Rs. 30,08,440/- as the final products of the appellants have become retrospectively exempted.
Conclusion: The kernel of the case is, refund claim of cesses cannot be denied on the grounds that Notification No. 11/2017-CE(NT) dated 24.04.2017 only grants exemption of excise duty and not cesses. Cesses are never levied or collected independently in absence of excise duty as it is not a standalone duty. So if an exemption notification grants refund of excise duty then the same would be applicable in the case of cesses also.
Further, the excise duty paid through Cenvat credit at the time of manufacture shall not be refunded if final product becomes retrospectively exempted. When no duty is required to be paid at the final products then no cenvat credit is available hence no amount is refundable.
It is to be noted that the addendums to the SCNs can never allege denial of refund claims for an amount that is more than that proposed in the original SCNs, the reason behind this is addendum to the SCN can never be issued after the noticee has sent reply to the original SCN. This is very good reasoning given by appellate authority to decide the issue.
Furthermore, the refund claims not received within the limit under Section 11C of the Central Excise Act, 1944 shall not be denied on the grounds of being time barred. Section 11B of Central Excise Act, 1944 provides that where duty becomes refundable as a consequence of judgment or order then the time limit of six months shall not be applicable. In this case we need to adopt the principle of harmonious interpretation of Section 11B and 11C. It was held as per the recent court judgments that Section 11C would prevail over Section 11B accordingly the refund claims are not time barred.
It is also to be noted that the refund claims are not hit by the clause of unjust enrichment when no burden of the excise duty is passed on by the applicant to the ultimate customer. It is an accepted principle that refund is admissible only where burden of duty has been borne by the claimant filing the refund.

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PJ/Case Study/2018-19/141
29 December 2018

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PJ/Case Study/2018-19/141 29 December 2018

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PJ/Case Study/2018-19/141
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