Section 12B of Central Excise Act and Rule 7 in applicable when Provisional assessment is made: Karnataka HC upholds CESTAT ruling in favour of J K Tyre Industries [Read Order]

The Revenue filed a bunch of appeals under Section 35G of the Central Excise Act, 1944, challenging the final order passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bengaluru (‘CESTAT’) in ruling in favour of J K Tyre Industries Ltd.

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The respondent-assessee is engaged in the manufacture of tyres. Three of its units cleared goods to the depots on provisional assessment under Rule 7 of the Central Excise Rules, 2002, on the ground that the value of the goods was not ascertainable at the time of removal. Upon finalization of the provisional assessment, adjustment of short-paid and excess paid duty was sought.

The Adjudicating Authority held that the incidence of duty had been passed on to the ultimate customers and, therefore, the assessee was not entitled to netting off or adjustment of excess payment against the duty short-paid.

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The assessee challenged the adjudication order before the Commissioner (Appeals), contending that the doctrine of unjust enrichment was not applicable and that compliance with Section 11B of the Central Excise Act, 1944 and Rule 11(6A) of the Central Excise Rules, 2002 was not required. The Commissioner (Appeals), by order dated 01.02.2018, rejected the contentions of the assessee and upheld the view of the Adjudicating Authority.

Aggrieved by the order of the Commissioner (Appeals), the assessee preferred an appeal before the CESTAT. The CESTAT, following its earlier order in the assessee’s own case, held that where provisional assessment is made, Section 12B of the Act and Rule 7 of the Rules are not applicable. The Revenue has called in question the said orders of the CESTAT in these appeals.

The appellant-Revenue, submitted that since the goods were moved from the place of manufacture to the depots of the assessee, the value of the goods was not ascertainable and, therefore, duty was paid provisionally. In the course of such provisional payment, there were instances of both excess and short payment of duty. Upon final assessment, the assessee sought netting off or adjustment of excess payment against the duty short-paid.

In this regard, it is contended that the burden lies on the assessee to establish that the incidence of duty has not been passed on to the end user/customer. It is further submitted that Rule 7 of the Rules and Section 12B of the Act have to be read conjointly, thereby imposing an obligation on the assessee to discharge the burden of proving that the duty has not been passed on to the customer. Failing such proof, any refund would amount to unjust enrichment in the hands of the assessee.

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Per contra, Sri. Dattatrey D. Bhat, counsel for the respondent-assessee, submitted that the Tribunal was justified in following its earlier order dated 11.04.2018 passed in the case of the assessee. He further submitted that the said order of the CESTAT dated 11.04.2018 has been confirmed by the Court in CEA No.39/2018. It is his contention that, in view of the said order of the Court, the substantial questions of law raised in these appeals stand squarely covered in favour of the assessee.

In view of the judgment of the co-ordinate Bench of this Court in CEA No.39/2018, the substantial questions of law raised herein are squarely covered. The division bench of Justice S.G.Pandit and Justice K. V. Aravind observed that no justifiable or demonstrable ground is made out to take a different view or to depart from the order passed in CEA No.39/2018. The Revenue has not urged any other ground warranting independent examination of these appeals.

The court dismissed all the appeals stand dismissed.

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