Unjust Enrichment not extendable to Manufactures working under Compounded Levy Scheme under Section 3A of Central Excise Act: CESTAT [Read Order]

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that the unjust enrichment not extendable to manufactures working under compounded levy scheme under Section 3A of Central Excise Act, 1944.

The issue before the Bench in the present appeal is regarding the sanctioned refund credited to the Consumer Welfare Fund, which arises out of the payment of cenvat dutyon compounding basis on higher side than applicable rates and the issue relating to the classification and applicable rates. The facts of the case in brief are that the Appellant is the manufacturer of Branded Chewing Tobacco, meriting Classification under 2403 of the erstwhile Central Excise Tariff and the period of dispute is from June 2015 to February 2016, during which the Appellant was discharging levy under erstwhile compounded levy scheme.

The counsel for the appellant submitted that the duty demanded in excess of the declaration filed was only pre-deposit in compliance of the direction of the Department while assessment was always under challenge and till the time the provisional assessment, running as a carousal to final assessment, the case of the appellant that the discharge of levy of the cenvat duty under compounding basis was a fixed duty which remained unrealized with respect to the quantity and value of the manufacture and hence was not recoverable from the buyers. The payment of duty in advance was mandatory.

It was also contended that because the Appellant had argued on the ground that there was a distinction in discharge of levy under erstwhile section 3 of the Central Excise Act and section 3A of the Central Excise Act. Under section 3 of the Act, the charging provision carves out a levy of Cenvat either on ad-valorem basis or in terms of specific duty, measured with reference to the quantity of goods manufactured and cleared, whereas under section 3A of the Act, imposes mandatory levy, with no option or any correlation with the actual production and the said mandatory levy, in accordance with the annual capacity of production has to be discharged in advance.

A Two-Member Bench of the Tribunal comprising PK Choudhary, Judicial Member and Sanjiv Srivastava, Technical Member observed that “Therefore, the principle of the unjust enrichment, which is ordinarily applicable only on the goods manufactured and removed under the scheme of levy and more appropriately under Section 3 of the Act, the said principle cannot by any logically and economical be justifiable as legally tenable principle be extended to the manufactures working under compounded levy scheme under Section 3A.”

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