Incidence of Differential Duty Not Transferred to Third Parties: CESTAT Grants BPCL’s ₹6.6Cr Protest Refund u/s 11B [Read Order]

The Mumbai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has allowed Bharat Petroleum Corporation Limited’s refund claim of ₹6.62 crore, ruling that the differential excise duty paid under protest was not transferred to third parties, thereby satisfying the core condition under Section 11B of the Central Excise Act, 1944.

BPCL cleared petroleum products from its Mumbai and Kochi refineries on 12 November 2014 and 2 December 2014 at the pre-revised excise duty rates. Later on the same days, the Central Government issued Notifications No. 22/2014-CE and 24/2014-CE, enhancing the excise duty.

BPCL thus contended that on the date of clearance, these notifications were not published in the Gazette and were not made available to the public for sale. However, BPCL deposited the differential duty of ₹397.42 lakh for Mumbai and ₹265.35 lakh for Kochi, amounting to ₹6.62 crore, under strict protest, and filed refund claims under Section 11B.

BPCL thus claimed that the enhanced duty notifications were not legally enforceable on the dates of clearance as the statutory requirements under Section 5A(5), the publication in the Gazette and its availability to the public on the same day-were not met.

It was also the case of the company that its invoices would establish conclusively that no customer was charged at the enhanced rate of duty; this would mean that no buyer suffered a pass-on of additional duty burden, and therefore the essential ingredients of unjust enrichment for Section 11B refund were duly satisfied.

The differential duty, having been deposited under protest, also enabled BPCL to disregard the normal limitation period of one year.

The Revenue, however, asserted that the notifications took effect immediately upon issuance and that BPCL was liable to pay the higher duty for all clearances made on those dates. It argued that the refund was not admissible because BPCL had allegedly passed on the duty burden.

While setting aside the Revenue's plea, the Tribunal Bench comprising Central Government[Judicial Member] and Mr P. Dinesha [Technical Member], underscored that notifications modifying the duty rates are effective only when they are actually published and made known to the public.

The courts have, through a line of decisions, consistently held so. The Bench placed strong reliance on the decisions in Param Industries and G.S. Chatha Rice Mills, wherein the Court held that unless a notification is published and made available to the public, it is not effective.

Applying these principles, CESTAT held that BPCL could not be subjected to enhanced duty because the notifications were neither Gazette-published nor accessible when the goods were cleared. The Tribunal further found that BPCL had convincingly shown that the incidence of differential duty was not passed on to third parties, thereby fully satisfying the requirements of Section 11B.

Accordingly, the impugned orders were set aside, with a direction to grant the refund claims made by BPCL amounting to ₹6.62 crore in full.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates