IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED 24.08.2010 CORAM THE HONOURABLE MR. JUSTICE F.M.IBRAHIM KALIFULLA AND THE HONOURABLE MR. JUSTICE M.M.SUNDRESH C.M.A. NO.2936 OF 2004 AND C.M.P.NO.19305 OF 2004 Commissioner of Central Excise, Chennai - I 121, Uthamar Gandhi Road Nungambakkam, Chennai – 34. .. Appellant Versus M/s.Manali Petrochemicals Ltd., Manali, Chennai – 600 068. .. Respondent Civil Miscellaneous Appeal filed under Section 35G of the Central Excise Act, 1944 to set aside the order of the Tribunal dated 10.03.2004 in Final Order No.299 of 2004. For Appellant : Mr.K.Ravi Anantha Padmanabhan For Respondent : Mr.Nasser Abdullah J U D G M E N T M.M.SUNDRESH, J The Revenue has come up on appeal challenging the order passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Chennai in Appeal No.E/295/2003 confirming the order in Appeal passed by the Commissioner of Central Excise (Appeals) in Appeal No.27 of 2003 dated 27.02.2003 by formulating the following substantial questions of law. "1.Whether the Tribunal is right in holding that there is no "unjust enrichment" when the first respondent had issued credit notes reimbursing the duty burden to the buyer, collected at the time of clearance of goods? https://hcservices.ecourts.gov.in/hcservices/ 2.Whether the Hon'ble Tribunal is right in holding that the doctrine of "unjust enrichment" is not applicable for the case, since the refund is filed under Rule 173L of Central Excise Rules 1944 and whether the provisions of refund under Section 11B of the Central Excise Act are not applicable to this case, when there is Apex Court judgment ruling all refunds are subject to the test of unjust enrichment?" Facts in brief: 2.The respondent/assessee is a Company manufacturing chemicals falling under Chapter 39 of the Customs Excise Tariff Act, 1944. The assessee has been having running accounts with various buyers and the goods manufactured by the assessee used to be sent to the buyers at various places in the country. The goods have been cleared from the factory of the assessee on payment of central excise duty at its factory gate. 3.For the relevant year 1992 to 1994, some of the goods despatched by the assessee were returned by the consignees, as they did not meet the required specifications. The assessee after the receipt of the said goods back made an application under Rule 173-L of the Central Excise Rules, 1944 (hereinafter called as "the Rules") after informing the jurisdictional Superintendent of Central Excise about the return of the goods by enclosing the relevant documents, such as D-3 Declaration, Gate Pass, Transporters weigh bill etc. Totally 8 refund claims have been made. In so far as the refund claim dated 04.12.1992 is concerned, an order of refund was passed. However, show cause notices were issued by the jurisdictional Assistant Commissioner of the Department of Central Excise, Chennai, seeking to cancel the refund order made already and also to deny the refund claims on the sole ground that the assessee company has not complied with the procedure prescribed under Rule 173-L of the Rules. 4.The assessee gave a detailed reply to the said show cause notices issued. However, the jurisdictional Assistant Commissioner after considering the reply given by the assessee company has rejected the same thereby cancelling the refund granted earlier and declining the application filed for refund. The details of the refund claims and the corresponding orders passed by the jurisdictional Assistant Commissioner are extracted hereunder: https://hcservices.ecourts.gov.in/hcservices/ Sl. No. Refund Claim Date Amount Claimed (Rs.) Show Cause Notice dated Order of Rejection of Assistant Commissioner 1 4/2/93 3,09,233/- 1/6/94 Order No.83/94 dtd.28.11.1994 2 16.09.199 3 1,16,299/- 1/6/94 Order No.86/94 dtd.28.11.1994 3 19.03.199 3 2,26,427/- 9/6/94 Order No.82/94 dtd.28.11.1994 4 27.01.199 3 1,31,040/- 10/6/94 Order No.88/94 dtd.28.11.1994 5 19.01.199 4 2,58,177/- 18.07.1994 Order No.84/94 dtd.28.11.1994 6 27.02.199 4 1,29,072/- 18.07.1994 Order No.85/94 dtd.26.11.1994 7 12/4/94 1,50,867/- 18.07.1994 Order No.87/94 dtd.28.11.1994 Total amount claimed in above seven refund claims Rs.13,21,745/- 8 4/12/92 9,44,414/- 20.10.1993 Order No.50/94 dtd.14.07.1994 (to recover refund already granted) 5.Appeals have been preferred by the respondent/assessee to the Commissioner of Central Excise (Appeals) Chennai. In and by its order dated 28.02.1995, the said authority has allowed all the appeals by holding that the procedures contemplated under Rule 173-L of the Rules have been duly complied with. Therefore in pursuant to the said order, the respondent/assessee was given the consequential relief for refund. 6.However not being satisfied with the said order passed in the appeals, the Department preferred a further appeal to the Tribunal and the Tribunal in and by its order dated 03.10.1996 in Appeal Nos.2108 to 2115 of 1996 was pleased to dismissed the same by holding that the respondent/assessee has complied with the procedures contemplated under Rule 173-L of the Rules and therefore it is entitled to get the refund. However while dismissing the appeals the Tribunal was pleased to observe that in as much as the quantum of payment in accordance with Rule 173-L of the Rules has not been determined by the authorities below, the same has to be done by the original authority in accordance with Rule 173-L of the Rules. The Tribunal has further observed that the contention of the Department regarding unjust enrichment cannot be considered having https://hcservices.ecourts.gov.in/hcservices/ been raised for the first time in the appeals and it is open to the Department to consider the same in accordance with law. With the above said observation, the appeals preferred by the Department were dismissed by the Tribunal. The said orders passed by the Tribunal have become final between the parties. 7.Thereafter, the Department instead of complying with the directions of the Tribunal has issued the show cause notice, as to why the refund given already should not be cancelled and the claim for refund should not be rejected on the ground of unjust enrichment and as the respondent/assessee has not shown any proof that they have borne the incidence of excise duty and not the consignees. 8.The respondent/assessee gave a detailed reply to the combined show cause notice for the 8 refund claims stating that there is no question of unjust enrichment, since there was no sale with the consignees as the goods have been returned even prior to the sale. Therefore it was submitted that in as much as there was no sale, Section 11-B of the Act does not have any application to the present case on hand. It was further submitted that there was sufficient proof to show that the incidence of customs duty has not been passed on to the consignees in the form of credit notes, D-3 declaration, gate pass, debit notes issued by the consignees, letter for rejection of goods and the weigh bill of the transporter etc. 9.However, the jurisdictional Assistant Commissioner has passed an order on the ground that in as much as the goods have been returned to the assessee factory after a period of 6 months, the same raises a doubt and therefore the assessee has not proved the fact that the incidence of excise duty has not been passed on to the consignees. The jurisdictional Assistant Commissioner has also invoked the presumption available under Section 12-B of the Central Excise Act (hereinafter called as "the Act") and held that the said presumption has not been dispelled by the respondent/assessee and therefore has ordered to refund the amount granted earlier to the assessee as erroneous and further rejected the claim for refund on the very same grounds. 10.Challenging the said order, the respondent/assessee filed an appeal to the Commissioner (Appeals), Chennai. The Commissioner (Appeals), in and by its order dated 27.02.2003 in Appeal No.27 of 2003 has allowed the appeal on the ground that the jurisdictional Assistant Commissioner has exceeded the jurisdiction by deciding the issues beyond the scope of the order passed by the Tribunal between the parties, on the earlier occasions. It was further held that the proceeding initiated against the recovery of refund is beyond the period of limitation as provided under Section 11-A of the Act. https://hcservices.ecourts.gov.in/hcservices/ 11.It was also observed that the Tribunal on the earlier occasion has dismissed the appeals filed by the Revenue and therefore the Revenue cannot try to over-reach or circumvent the decision of the Tribunal by trying to invoke the provisions contained under Section 11-B of the Act. A further finding has been given that the credit note entries made by the respondent/assessee are material evidence and considering the other evidence available on record the assessee has satisfactorily proved that there was no sale and the element of excise duty has not been passed on to the consignees. Hence by way of a detailed order and on a consideration of the materials available on record, the Commissioner (Appeals) allowed the appeal filed by the respondent/assessee. 12.However not satisfied with the said decision, a further appeal was made by the Revenue before the Tribunal. The Tribunal in Appeal No.E/295/2003 dated 10.03.2004 has confirmed the order passed by the Commissioner (Appeals) by holding that in as much as the assessee has proved that only Rule 173-L of the Rules is applicable to the goods which were returned after rejection and it has been proved on facts that the duty paid was reimbursed by way of credit notes, the entitlement of refund cannot be denied. It was further held that the assessee has proved that the incidence of duty has not been passed and there is no contra evidence let in by the Revenue to dispute the said fact. Accordingly, the Tribunal has confirmed the order passed by the Commissioner (Appeals). Challenging the same, the present appeal has been filed. Contentions of the Revenue: 13.Shri.K.Ravi Anantha Padmanabhan, learned counsel appearing for the Revenue submitted that it is for the assessee to prove its claim for refund the incidence of the payment of excise duty has not been passed on to the consignees concerned. The presumption under Section 12-B of the Act has not been dispelled by placing sufficient evidence on record. There is no bar for issuing a fresh show cause notice in as much as the question of unjust enrichment has not been considered earlier. The learned counsel further submitted that the applications for refund are not maintainable in law having been filed beyond the period of limitation. It is also submitted that the judgment of the Hon'ble Apex Court reported in MAFATLAL INDUSTRIES LTD. v. UNION OF INDIA [1997 (89) E.L.T. 247] is not applicable to the facts on hand. In view of the said submissions, the learned counsel prayed that the appeal is to be allowed. https://hcservices.ecourts.gov.in/hcservices/ Submissions by the respondent/assessee: 14.Shri.Nasser Abdullah, learned counsel appearing for the respondent/assessee submitted that the issue raised is covered by the Hon'ble Apex Court in MAFATLAL INDUSTRIES LTD. v. UNION OF INDIA [1997 (89) E.L.T. 247]. In as much as there is no sale between the assessee and the consignees, Section 11-B of the Act is not applicable and consequently Rule 173-L of the Rules alone has to be made applicable. In so far as the cancellation of refund made already, the same is contrary to the provisions contained in 11-B of the Act as its stood at the relevant point of time, since the same has been initiated after the period of 6 months. The assessee has furnished sufficient materials such as Form D-3 declaration, credit notes, weigh bill of the transporter, gate pass, debit notes and the letter for rejection of goods. Therefore the findings given by the authorities below based upon the above said documents cannot be assailed. The order passed by the Tribunal earlier is binding between the parties and the Revenue has acted contrary to the same. It was further submitted that there is no evidence to the contra that the consignees have borne the burden of excise duty as it is nobody's case. Therefore on the above said submissions, the learned counsel submitted that a decision made and confirmed between the parties as early as on 03.10.1996 by the Tribunal cannot be reviewed in a subsequent proceedings especially when there are sufficient materials in support of the assessee. 15.Heard Shri.K.Ravi Anantha Padmanabhan, learned counsel appearing for the Revenue and Shri.Nasser Abdullah, learned counsel appearing for the respondent/assessee. 16.From the above said facts, it is manifestly clear that the subject matter of the earlier proceedings between the parties is the granting of refund in accordance with Rule 173-L of the Rules. Both the Commissioner (Appeals) and the Tribunal have held that the respondent/assessee has complied with Rule 173-L of the Rules so as to get the refund for the return of goods from the consignees. Even on the earlier round of litigation, the assessee has placed all the relevant documents. The Tribunal while upholding the order of Commissioner (Appeals) held that in as much as the exact amount eligible under Rule 173-L of the Rules has not been quantified the said exercise will have to be done by the jurisdictional Assistant Commissioner. The Tribunal has refused to consider the question of unjust enrichment as it was raised only for the first time before it. Hence the Tribunal has observed that it is open to the Revenue to deal with the said issue in accordance with law. Accordingly, the Tribunal has dismissed the appeals filed by the Revenue. 17.The above said facts would clearly indicate that the only issue as per the order of the Tribunal is to consider the amount of quantum in accordance with Rule 173-L of the Rules. In the https://hcservices.ecourts.gov.in/hcservices/ present case on hand, the assessee on facts has established with relevant materials such as Form D-3 declaration, credit notes, weigh bill of the transporter, gate pass, debit notes and the letter for rejection of goods, issued by the consignees that the goods have been returned by way of rejection and the return of the goods was also verified by the authorities. Under the proviso to Rule 173-L of the Customs Excise Rules, 1944, a period of one year is provided for rejecting the goods and in the present case on hand, the consignees returned the goods within a period of 6 months. This alone cannot be a ground to reject the claim for refund in the absence of any other material. 18.The assessee has also proved that there was no sale with the consignees and the goods have been returned on the ground of non-compliance of the required specifications. It is also not the case of the Revenue that the assessee is claiming the refund erroneously after the said payment made by the consignees. 19.A question of unjust enrichment would arise only based upon a finding that the assessee is making a false claim for the refund of excise duty in a case it has been paid by the consignee concerned. As observed earlier, the assessee has proved with sufficient documentary evidence of its own and also of the consignees that there is no element of sale and consequent on that the consignee has paid the said duty. As found by the authorities below, the assessee has discharged its duties satisfactorily by producing sufficient evidence which cannot be described as inadmissible or irrelevant for the purpose of consideration of a refund. 20.We also find considerable force in the submissions made by Shri.Nasser Abdullah, learned counsel appearing for the respondent/assessee that Section 11-A of the Act as it stood provides for a period of 6 months for the cancellation of refund made already. As found by the Commissioner (Appeals) the show cause notice has been issued nearly after a period of 4 years. It is not the case where the assessee has suppressed any material fact and obtained the refund. He has produced sufficient records while making the application. 21.The only ground on which the request for the assessee for refund was rejected and cancelled was that the goods were not returned immediately and the presumption under Section 12-B of the Act has not been discharged. Therefore, we are of the opinion that the proceedings initiated against the respondent/assessee in so far as the cancellation of refund is concerned is barred by limitation. The Hon'ble Apex Court in NATIONAL PLYWOOD INDUSTRIES [2002 (145) E.L.T. A25] has held that for the recovery of erroneous refund made, the limitation would start from the date of the refund and not from https://hcservices.ecourts.gov.in/hcservices/ the date from which the refund was found to be erroneous. In the present case on hand, the refund was made on 05.05.1993 and the show cause notice was issued on 28.10.1997 which is after a period of 4 years and hence the same is barred by limitation. 22.The Tribunal has in fact dismissed the appeals filed by the Revenue on the earlier occasion and directed the quantum alone to be fixed. Therefore, it is not open to the Revenue to go into the merits of the case once again. As observed earlier, there is no material available on record to indicate that the assessee is attempting to enrich itself by making an unjust claim. The order passed by the Tribunal earlier having become final cannot be reviewed by the Revenue in a collateral proceedings between the parties. The said order enures to the benefit of the assessee and the same is binding on the Revenue. 23.The authorities below have also given a factual finding that the assessee has discharged its burden by placing sufficient records. The said records have also been considered by the authorities while granting the relief for refund. The said finding being the finding of fact based upon material available on record cannot be interfered by this Hon'ble Court. An order considering the request for refund has to be made based upon the materials available and the same cannot be rejected merely on surmises. A presumption under Section 12-B of the Act is a presumption of fact and the same is rebuttable in nature. As observed earlier, the assessee has proved on record that the consignee has not paid the excise duty and the goods have been returned on the ground of not satisfying the required specifications without the element of sale. 24.The other contention of the learned counsel appearing for the revenue regarding the period of limitation for making the application for refund is concerned, we find from the records that the said contention has not been raised either in the earlier occasion or in the present proceedings. Even before this Hon'ble Court, there is no substantial question of law raised on that ground. Considering the scope of the order passed by the Tribunal on the earlier occasion and also considering the fact that the appellant has not raised this issue before the authorities below, we do not think fit to go into the said issue raised by the learned counsel appearing for the revenue at the time of arguments, even though the learned counsel appearing for the assessee submitted that the period of limitation would start from the date of return of the goods from the consignee concerned (as per Section 11-B of the Act). We also find that the said issue which involves a question of fact cannot be raised at this stage. https://hcservices.ecourts.gov.in/hcservices/ 25.Hence on a consideration of the above said facts and law, we are of the opinion that there is no merit in the appeal and therefore the same is dismissed. The substantial questions of law raised are answered against the Revenue. No costs. Consequently, connected miscellaneous petition is closed. Sd/- Asst.Registrar. /true copy/ Sub Asst.Registrar. sri To The Commissioner of Central Excise, Chennai - I 121, Uthamar Gandhi Road Nungambakkam, Chennai – 34. 1 cc to Mr.K. Ravi Anantha Padmanabhan, Advocate, Sr. 62294 2 ccs to Mr. Nasser Abdullah, Advocate, Sr. 62233 C.M.A. NO.2936 OF 2004 AND C.M.P.NO.19305 OF 2004 BVN (CO) kk 3/9 https://hcservices.ecourts.gov.in/hcservices/