The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that Unjust Enrichment is not applicable for duty paid under the Provisional Assessment during the period under dispute.
The Appellant , K.G.Denim Ltd. is engaged in the manufacture of cotton fabrics and holds Central Excise registration. They commenced production of Denim fabric in January 1994. They filed classification list with the Superintendent of Central Excise classifying the products under heading 5206, claimed total exemption from excise duty vide Notification No. 31/93 dated 28.02.1993 and so discharged only additional excise duty at the rate specified in the Notification No.48/90 CE dated 20.03.1990 as amended.
Subsequently on 09.12.1994 the appellant filed classification list claiming classification of Denim fabrics under tariff heading 5206 and claiming benefit of exemption Notification No.253/82 dated 08.11.1992 which allows total exemption from Basic Excise Duty and additional Excise duty under the erstwhile Central Excise and Salt Act, 1944 read with Goods of Special Importance Act, 1957.
Appellant contented that the Denim fabrics manufactured by them could not be considered as shrink proofed‘.
Accordingly the Assistant Commissioner finalized the provisional assessment by passing Order in Original under Rule 9B (5) of Central Excise Act, 1944 holding that the process undertaken by the appellant amounts to manufacture‘ and that the appellant is liable to pay duty on the Denim fabrics cleared by them for the period 16.12.1994 to 29.02.1996.
Aggrieved by the order the appellant filed appeal before the Commissioner (Appeals) who upheld the order passed by the Original Authority. Against such order the appellant preferred an appeal before the Tribunal (CEGAT). Accordingly the Tribunal remanded the matter to the Original Authority for de novo adjudication.
The original authority held that the process undertaken by the appellant does not amount to manufacture‘. It was therefore held that the appellant is not liable to pay excise duty. Against the order the respondent (Department) filed an appeal before the tribunal.
During the case the appellant approached the High Court by filing Writ Petition No.8324 of 1999 seeking for refund of the duty paid by them. The High Court directed the department to refund the entire amount due to the writ petitioner within 12 weeks from the date of communication of the order.
Against such sanction of refund, the department filed an appeal before the Commissioner (Appeals) and the Commissioner (Appeals) set aside the sanction of refund.
After the de novo Order in Original dated 13.07.1999 by which the original authority held that the process undertaken by the appellant does not amount to manufacture and that the appellant is not required to pay duty, the appellant filed this refund claim on 04.11.1999 for refund of duty paid by them from 01.04.1996 to 12.05.1999. Show Cause Notices were issued proposing to reject the refund claim.
After due process of law, the original authority rejected the refund claim in holding that the claim is hit by limitation as well as the doctrine of unjust enrichment. Against such order, the appellant preferred appeals before the Commissioner (Appeals) who upheld the rejection of refund claims. The appellant has thus filed an appeal before the tribunal.
Raghavan Ramabhadran, Counsel for appellant submitted that the unjust enrichment is not applicable to provisional assessment during the period under dispute. Further submitted that Rule 9B of CER 1944, which provides for provisional assessment, did not provide for the principle of unjust enrichment during the period of dispute
M. Selvakumar, Counsel for the department, supported the order of lower authorities.
It was observed that “it is a settled position in law that the principle of unjust enrichment is not applicable to the refund claims arising out of the finalization of the provisional assessment prior to 25.06.1999.”
A Two-Member Bench comprising Sulekha Beevi C.S. (Judicial) and Vasa Seshagiri Rao (Technical Member) held that Unjust Enrichment is not applicable for duty paid under the Provisional Assessment during the period under dispute .Hnece the tribunal allowed the appeal.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
