CX - Refund - if claimant himself has treated refund amount due as 'expenditure' and not as 'claims receivable', claimant cannot be said to have passed test of unjust enrichment: CESTAT

MUMBAI  : THERE was a dispute between the department and HPCL regarding the dutiabilityof HSD/Naptha captively used in the generation of electricity which was consumed within the refinery. The department was of the view that the appellant was not eligible for the benefit of captive consumption Notification No. 67/95-CE as electricity was not excisable. While duty of Rs.2.33 Crore

was paid after clearance of the goods, an amount of Rs.5.17 crores was paid on monthly basis. These duty payments pertained to the period December, 1998 to June 2001.

The original authority confirmed these duty demands but the Tribunal set aside the orders in the year 2005. Revenue challenged this order and the Bombay High Court dismissed the appeal in February, 2008. Thereafter, the appellant filed the refund claim on 19-5-2008.

On 24-12-2008, the jurisdictional AC, CEX wrote to the appellant to furnish evidence that the incidence of duty was not passed on and was borne by the claimant himself. The appellant replied that the principle of unjust enrichment would not apply as the goods were under the Administered Price Mechanism (APM) and the price had no nexus to the cost of production.

Thereafter on 4-2-2009, a SCN was issued to the appellant proposing to reject the refund claim on the ground that the claim was filed much after the period of one year from the date of CESTAT order.By order dated 9-4-2009, the refund claim was rejected on account of time bar.

The appellant challenged the said decision and the lower appellate authority held that the payment of duty during the period of dispute should be held as “under protest” and therefore, the question of time bar would not apply. However, he rejected the refund claim on account of unjust enrichment on the ground that the claimant did not submit any evidence to show that the incidence of duty was not passed on. Accordingly, he ordered that the amount of refund be credited to the consumer welfare fund.

So, both the assesseeand the Revenue are before the Tribunal.

The appellant assessee submitted that while the Commr(A) accepted the claim that the duty payment ought to be considered as “under protest”, he rejected the refund claim on a ground not alleged in the SCN and which is bad in law. Reliance is placed on the decisions inMafatlal Industries Ltd. 2002-TIOL-54-SC-CX-CB, Beekalene Fabrics 2006-TIOL-1412-CESTAT-MUM.

It was also submitted that the bar of unjust enrichment would not apply when the goods are sold at a price fixed by Govt./Statutory Authority [ Karnataka Antibiotics [1996 (83) ELT 114 (T)], Indian Oil Corporation 2011-TIOL-1534-CESTAT-AHM]. Further, the amount paid at the instance of the department and the amount paid during investigation should be considered as pre-deposit and hence refund/return of deposit should have been made by the Revenue without insistence on a refund application in view of CBEC Circulars 275/37/2000 dated 2-1-2002, 802/35/04-CX dated 8-12-2004 and decision in the case of Gujarat Insecticides Ltd. 2005-TIOL-86-HC-AHM-CX. And since the matter was finally settled by the decision of the High Court [in February, 2008] when the Revenue appeal was dismissed the period of limitation, if at all, should be computed from this date and since the refund claim was filed on 19-5-2008, it is not hit by time bar.

The Revenue representative submitted that the conclusion by the Commr(A) that the payment of duty was under protest and hence the time bar would not apply is not legal and proper since a protest can said to remain/exist only upto the point of time when the original authority decides the issue; that the procedure for payment of duty under protest was not followed; that the cause of action for grant of refund arose with the decision of the Tribunal dated 15-7-2005 and, therefore, the time limit should be computed from this date; as the refund claim was filed by HPCL only on 19-5-2008, almost 3 years after the cause of action arose the claim is grossly time-barred. [ Dena Snuff (P) Ltd. 2003-TIOL-73-SC-CX]; section 11B of the CEA, 1944 was amended by Finance Act, 2007 which provided that the time limitation of one year would start from the date of the judgment, decree, order or direction, in a case where duty becomes refundable as a consequence of judgment, decree, order or direction of the appellate authority, Appellate Tribunal or any court; the principle of unjust enrichment would apply in view of the apex court decision in Solar Pesticides [2002-TIOL-57-SC-CX].

Incidentally, during the appellate proceedings, a query was raised by the Tribunal about the treatment given to the refund amount of Rs.7,50,44,129/- in the books of account of the appellant. In reply thereto, the appellant vide letter dated 28-1-2014, informed that the above amount was not shown as receivables in their books of account.

The CESTAT made the following observations -

Whether payments made should be treated as being made Under Protest:

++ A reading of the said decision [Mafatlal Industries] makes it absolutely clear that to consider the payment duty as payment under protest, the procedure prescribed under the statute must be followed. The only situation where this is not required is when the duty is paid under the orders of the Court or appellate authority during the interlocutory stage of stay, suspension, injunction or otherwise. In the present case before us HPCL paid the duty on theirown pending adjudication of the matter and they did not follow the procedure prescribed for payment of duty under protest. It was not on account of any directions from the court or appellate authority the payment of duty was made. If that be so, the payment of duty by HPCL cannot be considered as payment under protest at all and we hold accordingly.

++ In the present case, it is an admitted position that the appellant HPCL did not follow the procedure for payment of duty under protest prescribed in rule 233B of the Central Excise Rules, 1944 or other provisions prescribed at the relevant time. Having failed to do that they cannot claim that merely because they had challenged the assessment order dated 30-01-2002, the payment made much earlier to the assessment order should be deemed as “payment under protest”. J.K.Cotton Spinning and Weaving Mills Co. Ltd. Vs. State of U.P. and Ors. [1961 AIR 1170] refers. It is a well-settled statutory principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other. Chandra Kishor Jha Vs. Mahabir Prasad &Ors. [(1999) 8 SCC 266] refers.

Whether refund claim is time barred:

Clause (ec) [Explanation B to s.11B of CEA, 1944] deals with a situation where the duty becomes payable as a consequence of the judgment, decree, order or direction of the appellate authority, Appellate Tribunal or any court of and the time limit has to be computed from the date of judgment, decree or order. This clause was inserted in the Statute with effect from 11-5-2007. Clause (f) stipulates that in any other case, the period of one year has to be computed from the date of payment of duty. In the present case, the refund arose consequent to the decision of the Tribunal dated 15-7-2005. The appellant's contention that the department had challenged the said decision of the Tribunal before the Bombay High Court and the high court dismissed the appeal of the department on 19-5-2008 is not acceptable as the refund claim first became due on account of the Tribunal decision and not on account of the Bombay High Court decision.The payments were made much before, that is during December 1998 to June 2001 and part of the payments were made in June and September 2002 and in July, 2003. The refund claim was filed only on 19-5-2008, that is about 3 years after the decision of the Tribunal and more than 5 years after the payment of duty. Thus the refund claim has been filed much after the stipulated period of one year under section 11B and hence they are clearly time-barred. It is in this context the decision of the Apex Court in the Dena Stuff (P) Ltd case (supra) becomes relevant.

Whether refund claim was required to be filed:

+ As regards HPCL's contention that as per the CBEC circulars, the appellant was not required to file any refund claim as the refund arose on account of the decision of the Tribunal, this argument is bereft of any logic. The Tribunal's decision pertained to eligibility to benefit of notification No. 67/95-CE. Consequent upon such decision, the refund has to be granted in accordance with the provisions of section 11B of the Central Excise Act which stipulates a time limit for allowing the claim and the issue of unjust enrichment. Therefore, even if refund becomes due, these two conditions relating to refund have to be satisfied and the onus of proving that these conditions are not violated lies on the claimant. Therefore, the claimant of refund has to lead evidence that the claim has been filed on time and they have crossed the bar of unjust enrichment. It thus becomes mandatory that the claimant files a refund claim along with the requisite evidences. Further the law itself provides for computation of time limit in cases of refund arising out of order of appellate authority, Appellate Tribunal or any court which also pre-supposes filing of a refund claim by the person concerned. In view of this legal position, CBEC circulars cannot be of any relevance and accordingly, we reject this contention raised by the appellant.

Whether refund hit by unjust enrichment:

++ In the Mafatlal Industries case (supra), the hon'ble Apex Court held that all refund claims under the Central Excise Act whether arising out of orders of the appellate authority, Appellate Tribunal or court will be governed by the unjust enrichment provisions stipulated in the section 11B and sub-section (3) of section 11B makes this position very clear.

++ In the present case, it is an admitted position that the refund amount due was not reflected in the books of account of HPCL as claims receivable. This implies that the duty paid was shown as current expenditure and formed part of the Profit and Loss account of the assessee. Thus, if the claimant himself has treated the refund amount due as expenditure and not as “claims receivable”, the claimant cannot said to have passed the test of unjust enrichment. This is the settled position in law. The appellant has also contended that the appellant's goods are sold at prices determined by the Govt. and therefore, it should be presumed that the appellant has borne the incidence. Similar argument has been negated by the hon'ble Apex Court in Allied Photographic India Ltd. 2004-TIOL-27-SC-CX, wherein it was held that “uniformity in price before and after the assessment does not lead to the inevitable conclusion that incidence of duty has not been passed on to the buyer as such uniformity may be due to various factors”. Therefore, in the present case, the appellant HPCL has failed to cross the bar of unjust enrichment also and hence they are not eligible to claim the refund.

In fine, the appeal of HPCL was rejected and that of the Revenue allowed.