2003 JTR(SC) 241
2003 5 AIC 363 ; 2003 AIR(SC) 1775 ; 2003 AIR(SCW) 1213 ; 2003 151 ELT 11 ; 2003 153 ELT 11 ; 2003 2 JCR(SC) 50 ; 2003 3 JCR(SC) 91 ; 2003 2 JT 272 ; 2003 2 RCR(Civ) 210 ; 2003 2 Scale 474 ; 2003 3 SCC 559 ; 2003 2 SCR 404 ; 2003 KHC 928 ; 2003 2 Supreme 289
2003(2) Supreme 289
SUPREME COURT OF INDIA
(From Central Excise, Customs and Gold (Control) Appellate Tribunal, New Delhi)
M.B. Shah & D.M. Dharmadhikari, JJ.
M/s. Hindustan Metal Pressing Works -Appellant
versus
Commissioner of Central Excise, Pune -Respondent
Civil Appeal No. 2050 of 2000
Decided on 27-2-2003
Counsel for the Parties :
For the Appellant : Vikram Nankani, Ramesh Singh, Ms. Divya Roy, Ms. Vanita Bhargava and Ms. Bina Gupta, Advocates.
For the Respondent : N.K. Bajpai, Hemant Sharma and B. Krishna Prasad, Advocates.
IMPORTANT POINT
Possession of Section 11B of the Central Excise Act, 1944 do not apply where refund has been finally and unconditionally made.
Act
Referred
:CENTRAL EXCISE ACT : S.11(b)(2), S.11(a), .
CENTRAL EXCISE RULES : R.173
(A) The Central Excise Act, read with the Central Excise Rules, governs the assessment, recovery, and refund of excise duty on excisable goods. Sections 11A and 11B, inserted through amendments, introduce the principle of unjust enrichment, allowing recovery of erroneously refunded duty provided the manufacturer has not passed on the incidence of such duty. Section 11D mandates that any excess amount collected over the assessed duty be paid to the Central Government. Rule 173-I provides the procedure for assessment by the proper officer, enabling adjustment of self-assessed duty against the officers final determination. In the present case, the statutory framework under Section 11-B and Rule 173-I was invoked to challenge a refund granted under Rule 173-I on the ground of unjust enrichment, but the applicability of these provisions was contested on the basis that the refund was finalized and unconditional. The Court examined whether principles of unjust enrichment under amended provisions could apply after the refund had been granted and the assessment completed.
(B) Key legal principles include: (i) refund of excise duty on self-assessment is governed by Rule 173-I and does not attract the unjust enrichment provisions unless a further claim is made; (ii) Section 11B and Section 11D apply only prospectively from their commencement date and do not revive or apply to already finalized and unconditionally granted refunds; (iii) past finalized transactions cannot be reopened merely on the ground of alleged erroneous refund; (iv) the doctrine of unjust enrichment is not attracted where the refund was legally warranted and no application for revision was pending; (v) the proper officers assessment under Rule 173-I results in a final adjustment, leaving no scope for challenge on the basis of unjust enrichment once the assessment is complete.
Facts of the case:
The assessee removed excisable goods after paying duty at the effective rate, following the approval of a classification list that granted exemption. The refund of excise duty for a few months was granted based on the self-assessment return (RT-12) and Rule 173-I. Subsequently, a show-cause notice was issued alleging unjust enrichment, and the authorities sought to recover the refunded amount. The assessee contended that the refund was not erroneous and that the principles of unjust enrichment did not apply.
Findings of Court:
The Court held that the refund was lawfully granted under Rule 173-I and was not erroneous. Since the refund was unconditional and finalized, the provisions of Section 11B (unjust enrichment) and Section 11D were not attracted. The authorities erred in applying the principles of unjust enrichment to a past finalized transaction. The assessment under Rule 173-I was complete, and no show-cause notice could be issued on the basis of unjust enrichment.
Issues:
(i) Whether principles of unjust enrichment apply to a refund already granted under Rule 173-I on the basis of self-assessment? (ii) Whether a past finalized transaction can be reopened by alleging erroneous refund after the assessment is complete? (iii) Whether Sections 11B and 11D apply to refunds granted prior to their commencement date?
Ratio Decidendi:
The refund granted under Rule 173-I on the basis of self-assessment was final and unconditional. The principles of unjust enrichment under Section 11B and the procedural safeguards under Section 11D do not apply to such refunds, and a completed assessment cannot be reopened merely on the ground of alleged overpayment. The doctrine of unjust enrichment is inapplicable where the refund was legally warranted and no subsequent claim for recovery arose.
Result:
The appeal is allowed. The impugned order confirming the demand for refund is set aside. No costs are ordered.
(A) The Central Excise Act, read with the Central Excise Rules, governs the assessment, recovery, and refund of excise duty on excisable goods. Sections 11A and 11B, inserted through amendments, introduce the principle of unjust enrichment, allowing recovery of erroneously refunded duty provided the manufacturer has not passed on the incidence of such duty. Section 11D mandates that any excess amount collected over the assessed duty be paid to the Central Government. Rule 173-I provides the procedure for assessment by the proper officer, enabling adjustment of self-assessed duty against the officers final determination. In the present case, the statutory framework under Section 11-B and Rule 173-I was invoked to challenge a refund granted under Rule 173-I on the ground of unjust enrichment, but the applicability of these provisions was contested on the basis that the refund was finalized and unconditional. The Court examined whether principles of unjust enrichment under amended provisions could apply after the refund had been granted and the assessment completed.
(B) Key legal principles include: (i) refund of excise duty on self-assessment is governed by Rule 173-I and does not attract the unjust enrichment provisions unless a further claim is made; (ii) Section 11B and Section 11D apply only prospectively from their commencement date and do not revive or apply to already finalized and unconditionally granted refunds; (iii) past finalized transactions cannot be reopened merely on the ground of alleged erroneous refund; (iv) the doctrine of unjust enrichment is not attracted where the refund was legally warranted and no application for revision was pending; (v) the proper officers assessment under Rule 173-I results in a final adjustment, leaving no scope for challenge on the basis of unjust enrichment once the assessment is complete.
Facts of the case:
The assessee removed excisable goods after paying duty at the effective rate, following the approval of a classification list that granted exemption. The refund of excise duty for a few months was granted based on the self-assessment return (RT-12) and Rule 173-I. Subsequently, a show-cause notice was issued alleging unjust enrichment, and the authorities sought to recover the refunded amount. The assessee contended that the refund was not erroneous and that the principles of unjust enrichment did not apply.
Findings of Court:
The Court held that the refund was lawfully granted under Rule 173-I and was not erroneous. Since the refund was unconditional and finalized, the provisions of Section 11B (unjust enrichment) and Section 11D were not attracted. The authorities erred in applying the principles of unjust enrichment to a past finalized transaction. The assessment under Rule 173-I was complete, and no show-cause notice could be issued on the basis of unjust enrichment.
Issues:
(i) Whether principles of unjust enrichment apply to a refund already granted under Rule 173-I on the basis of self-assessment? (ii) Whether a past finalized transaction can be reopened by alleging erroneous refund after the assessment is complete? (iii) Whether Sections 11B and 11D apply to refunds granted prior to their commencement date?
Ratio Decidendi:
The refund granted under Rule 173-I on the basis of self-assessment was final and unconditional. The principles of unjust enrichment under Section 11B and the procedural safeguards under Section 11D do not apply to such refunds, and a completed assessment cannot be reopened merely on the ground of alleged overpayment. The doctrine of unjust enrichment is inapplicable where the refund was legally warranted and no subsequent claim for recovery arose.
Result:
The appeal is allowed. The impugned order confirming the demand for refund is set aside. No costs are ordered.
Assessment - Cited to establish that Rule 173-I governs self-assessment and adjustment of duty in account-current, and that no show-cause notice under Section 11-A arises at that stage.
Refund - Cited to hold that Section 11B does not apply where refund has been finally and unconditionally made, supporting the appellant's contention.
ExciseDuty - Cited as a similar precedent where the Court allowed the appeal and rejected the Revenue's contention that excise duty paid under protest falls under Section 11B.
JUDGMENT
Shah, J.-M/s Hindustan Metal Pressing Works removed the excisable goods at the effective rate of duty awaiting approval of their classification list No. 2/88 in which they claimed benefit of exemption Notification No.175/86-CE dated 1-3-1986. In pursuance of the approval of the classification list on 21-6-1988, the Range Superintendent granted the refund of excise duty for the months of April 1988 to August 1988.
2. Thereafter, a show-cause notice dated 22.2.1989 was issued for recovering the said amount on the ground that it was erroneously refunded. By order dated 8.2.1990, the Assistant Collector, Central Excise confirmed the demand for a sum of Rs.2,36,515.55 on the basis of principles of unjust enrichment by the assessee. The appeal against the said order was dismissed by the Collector (Appeals) by judgment and order dated 20.11.1990. The Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi (hereinafter referred to as the Tribunal ) also dismissed the appeal by impugned judgment and order dated 20.10.1999. That order is challenged by filing this appeal.
3. Learned counsel appearing on behalf of the appellant submitted that the orders passed by the authorities below are, on the face of it, illegal and de hors the statutory provision. He contended that the foundation for initiating the proceedings under Section 11-A of the Central Excise Act, 1944 (hereinafter referred to as the Act ) in the present case is so-called erroneous refund of the excise duty paid by the appellant. At the time when the refund order was passed on the basis of Rule 173-I of the Central Excise Rules (hereinafter referred to as the Rules ), there was no question of erroneous refund. It was based on assessment of RT-12. Admittedly, there is no mistake or error in such assessment or refund. Hence, it is his submission that principles of unjust enrichment would not be applicable in the present case.
4. As against this, it has been pointed out that though classification list was approved in June 1988, the appellant continued to collect duty of excise on enhanced rate from the beginning of financial year 1988-89 even though they were availing benefit of exemption Notification No. 175/86 in the preceding financial year and, therefore, Assistant Commissioner was justified in coming to the conclusion that the appellant had intentionally paid excise duty with an intent to get the same by way of refund and to become enriched with the public money.
5. In the present case, it is admitted that duty was paid in excess of effective rate of duty and the excess duty paid was refunded while assessing the RT-12 Returns. The question, therefore, is - whether the principles of unjust enrichment as incorporated in amended provisions would be applicable to the facts of the present case?
6. Admittedly, refund of the excise duty paid in excess was granted in 1989. Thereafter, sub-section (2) of Section 11-B which incorporates the principle of unjust enrichment had come into force w.e.f. 20.9.1991, which inter alia provides that duty of excise paid in excess would be refunded if the manufacturer had not passed on the incidence of such duty to any other person. This provision is not at all attracted. There is basic error in approach by the Authorities below as the assessee has not filed any application under Section 11B of the Act for refund of the excise duty paid by him. There is no question of application of principles of unjust enrichment as incorporated in Section 11B. Other relevant provision would be Section 11D which also came into force from 20.9.1991. It inter alia provides that every person who is liable to pay duty under the Act or the Rules made thereunder, and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods under the Act or the rules made thereunder from the buyer of such goods in any manner as representing duty of excise is required to forthwith pay the amount so collected to the credit of the Central Government. If such amount is not paid to the credit of the Central Government, the Central Excise Officer can serve a notice requiring him to show cause why the said amount should not be paid by him to the credit of the Central Government. As stated above, the amount was refunded to the assessee in 1989, hence there is no question of application of this provision.
7. Further, it would be difficult to hold that past finalized transaction could be reopened by holding that refund was erroneously granted as there was unjust enrichment. Considering Rule 173-I of the Rules and Section 11A of the Act, this Court in Serai Kella Glass Works Pvt. Ltd. v. Collector of Central Excise, Patna [(1997) 4 SCC 641] held thus:-
"Rule 173-I. Assessment by proper officer.-(1) The proper officer shall on the basis of the information contained in the return filed by the assessee under sub-rule (3) of Rule 173-G and after such further inquiry as he may consider necessary, assess the duty due on the goods removed and complete the assessment memorandum on the return. A copy of the return so completed shall be sent to the assessee.
(2) The duty determined and paid by the assessee under Rule 173-F shall be adjusted against the duty assessed by the proper officer under sub-rule (1) and where the duty so assessed is more than the duty determined and paid by the assessee, the assessee shall pay the deficiency by making a debit in the account-current within ten days of receipt of copy of the return from the proper officer and where such duty is less, the assessee shall take credit in the account-current for the excess on receipt of the assessment order in the copy of the return duly countersigned by a Superintendent of Central Excise.
16. The assessee is entitled under Rule 173-F to determine his liability for duty on the excisable goods manufactured by him and to remove such goods on payment of duty on self-assessment in accordance with the provisions laid down in the Rules. But this is only the first step in making of the assessment, The proper officer is empowered to assess the duty on the goods so removed by the assessee and complete the assessment on the return filed by the assessee. A copy of the return so computed by the proper officer has to be sent to the assessee. The duty assessed and paid by the assessee on self-assessment will be set off against the duty assessed by the proper officer. If the duty paid by the proper officer on final assessment is more than the duty determined and paid by the assessee, the assessee has to pay the deficiency by making a debit in the account-current within ten days of the receipt of the copy of the return from the proper officer. If the duty on final assessment payable by the assessee is less than what he has actually paid, the assessee is entitled to take credit in the account-current for the excess payment. No question of any show-cause notice under Section 11-A arises at this stage. The duty has to be paid by making adjustment in the account-current which has to be maintained by the assessee within ten days time."
8. Further, similar contention was specifically dealt with in Mafatlal Industries Ltd. and others v. Union of India and others [(1997) 5 SCC 536] and it has been held that provisions of Section 11B do not apply where refund has been finally and unconditionally made. The relevant discussion (in paragraph 104) is as under: -
"104. Rule 9-B provides for provisional assessment in situations specified in clauses (a), (b) and (c) of sub-rule (1). The goods provisionally assessed under sub-rule (1) may be cleared for home consumption or export in the same manner as the goods which are finally assessed. Sub-rule (5) provides that "when the duty leviable on the goods is assessed finally in accordance with the provisions of these Rules, the duty provisionally assessed shall be adjusted against the duty finally assessed, and if the duty provisionally assessed falls short of or is in excess of the duty finally assessed, the assessee shall pay the deficiency or be entitled to a refund, as the case may be". Any recoveries or refunds consequent upon the adjustment under sub-rule (5) of Rule 9-B will not be governed by Section 11-A or Section 11-B, as the case may be. ...."
9. Relying upon the aforesaid judgment, in a similar matter, the Court in Sinkhai Synthetics & Chemicals (P) Ltd. v. Collector of Central Excise, Aurangabad [(2002) 9 SCC 416] allowed the appeal and rejected the contention of the Revenue that the excise duty paid under protest also would be covered by the provisions of Section 11B.
10. In the result, the appeal is allowed. The impugned order passed by the Tribunal confirming the orders passed by the Assistant Collector and the Collector (Appeals) is set aside. There shall be no order as to costs.
(N.K.R.) Appeal allowed.
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