Bar of Unjust Enrichment not Applicable to Provisional Assessment: Bombay HC [Read Judgment]

Provisional Assessment - Bombay High Court - Taxscan

In The Commissioner of Central Excise vs. M/s. CEAT Ltd., the Bombay High Court held that the doctrine of unjust enrichment would not be attracted to the refunds pertaining to the finalization of the provisional assessment for the period prior to 1999 and sub Rule 5 to Rule 9B of the Central Excise Rule, 1944 would not operate retrospectively.

In the instant case, the Assistant Commissioner Central Excise had refunded the claim of Rs.91.59 Lacs on 31st March 2003 based on finalization of the provisional assessment for the year 1998-99 by and order dated 4th June 2001 passed by the Deputy Commissioner of Central Excise. The said order has reached finality as the Revenue had preferred an appeal which came to be allowed by the Commissioner but the CESTAT on an appeal by the assessee, by judgment dated 28.04.2004 had allowed the appeal of the assessee and the issue was put to rest by upholding the order dated 04.06.2001 wherein the adjudicating authority allowed the deduction from the accessory value on account of the interest on the receivables.

However, on the ground that the amount sanctioned should have been credited to the consumer welfare fund as provided and, on the ground, that the assessee has not produced any evidence to prove that they had not passed on the incidence of duty to the customers a demand notice came to be issued to the assessee and it was alleged that the respondent M/s. CEAT Ltd has in built the element of “interest on receivables” in the price itself and interest is neither charged nor realized over and above the sale price of the goods. In this background it was alleged that the deduction on

account of the interest on receivables claimed by M/s.CEAT Ltd is not allowable and the amount and on account of such deduction which was sanctioned and refunded is liable to be recovered.

However, the Commissioner of Central Excise allowed the appeal of the assessee and dismissed the contentions of the revenue. Aggrieved, Revenue filed appeal before the Customs Excise Service Tax Appellate Tribunal (CESTAT). CESTAT dismissed the appeal. Thereafter an appeal was filed before the High Court.

The bench comprising of Justice Bharathi H. Dangre and Justice S. C. Dharmadhikari relying on the decision of the Supreme Court in Commissioner of C.EX. Banglore-II vs. ITC Limited observed “In view of the settled position of law, it is clear that the entitlement to refund and finalization of the provisional assessment under Rule 9B of the Central Excise Rules, 1944 is independent from the provisions of refund under Section 11B of the Central Excise Act, 1944. Even if the amendment made by the notification 45/99 with effect from 25.06.1999, is noted, only the procedure established under subsection 2 of Section 11B of the Central Excise Act has been made applicable to the refund arising out of the finalization of the provisional assessment under Rule 9B of the Central Excise Rules, 1944. The procedure regarding unjust enrichment of finalization of provisional assessment will be applicable to the provisional assessment made after 1999 and not before that date as the proviso to Rule 9B in the form of sub Rule 5 did not have a retrospective effect.”

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