Refund claim of Duty paid for Clearance of branded Garments Rescinding benefit of Excise Exemption: CESTAT restores Refund Application [Read Order]

The Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) restored the refund application of duty paid for clearance of branded garments by rescinding the benefit of excise exemption.

M/s Ginza Industries Ltd, the appellant is a manufacturer of ‘branded garments’ and is excluded from liability to duties of central excise by notification no. 30/2004-CE dated 9th July 2004, claimed to have paid stock duties manufactured before 1st March 2011 and lying unsold in their warehouse owing to lack of clarity in law and, consequent upon communication dated 25th March 2011 of Central Board of Excise & Customs (CBEC) from F No. B-1/3/2011-TRU filed a claim for a refund of ₹ 95,169 out of the liability of ₹ 3,06,745 paid for clearances of March 2011 upon rescinding of the benefit of exemption to ‘branded garments’ vide notification no. 12/2011-CE dated 1st March 2011.

The appellant claimed that details of the goods had already been furnished to central excise authorities in the letter of 4th March 2011 and a copy was also enclosed along with other relevant documents.

The application was responded to with notice proposing rejection which was confirmed by the competent authority on the finding that the impugned goods were merely ‘stock transfer’ from which clearances are subsequently made and that, in the absence of challan evidencing clearance at ‘nil’ rate of duty, these should be presumed as liable to duty.

It was submitted that, after the benefit of exemption availed by them was rescinded, duty liability had been discharged on the entire stock sold by them even as those reported as removed from the factory before the levy came into force were not liable to duty.

The original authority held that the transfer to the warehouse was merely a ‘stock transfer’ and duty is liable on all stock, as and when sold after the levy became applicable, and rejected the claim of the appellant for non-production of challans showing ‘nil’ payment of duty on those goods in the warehouse.

The first appellate authority, citing the essentials of prescribed documents and the bar of ‘unjust enrichment’, held that lack of evidence to substantiate the latter warranted rejection of the claim. It was well-settled that show cause notice is the foundation of all proceedings and in appellate disposal, only the issue in appeal may be argued or abetted.

Failure to challenge assessment as an impediment to sanction of refund was not an issue thus far in the present dispute and the absence of appeal/memorandum of cross-objections on behalf of Revenue, a fresh ground entered by the Authorized Representative does not merit consideration.

It was observed that the claim of the appellant being that duty had, nonetheless, been discharged, it was incumbent upon them to demonstrate such payment. The appellant had submitted details of goods lying elsewhere and to the extent that these can be correlated, that onus will stand discharged. It is on record that the appellant had, in proceedings before the original authority, submitted that challans could be produced and it is on record that these had not been.

Section 11B mandates that all refunds undergo the test of the bar of ‘unjust enrichment’ and it falls upon the appellant to successfully navigate that. To fulfil the pre-requisites, the two-member bench of Mr C J Mathew, Member (Technical) and Mr Ajay Sharma, Member (Judicial) set aside the impugned order and restored the refund application before the original authority for fresh processing.

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