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Grasim Industries Limited v. Commissioner Of Central Excise .
Factual and Procedural Background
The appellant had cleared sodium hypochlorite (bleach liquor) between 1-3-1988 and 15-6-1989 and paid Central Excise duty via TR-6 dated 19-7-1989. On 28-11-1990 the appellant applied for a refund of that duty. The Assistant Commissioner allowed the refund on 22-9-1992 and issued a cheque for Rs 2,00,305.
Believing the refund to be erroneous, the Department issued a show-cause notice on 15-3-1993 asserting that the duty incidence had been passed on to the buyer, M/s Grasim Industries Ltd., Staple Fibre Division, and therefore refund was impermissible under the “unjust enrichment” bar in Section 11-B. After considering the appellant’s reply, the Assistant Commissioner passed an order-in-original directing recovery of the refunded amount under Section 11-A.
The appellant’s successive appeals to the Commissioner (Appeals) and thereafter to the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) failed. The Tribunal’s order dated 18-2-2003 upholding the recovery was challenged before the present court, leading to this decision.
Legal Issues Presented
- Whether the Department could invoke Section 11-A of the Central Excise Act, 1944 to recover the amount earlier refunded to the appellant.
- Whether, in the absence of contemporaneous evidence that the duty incidence was not passed on, the appellant was entitled to refund under Section 11-B of the Act.
Arguments of the Parties
Appellant's Arguments
- The show-cause notice seeking recovery of the refund was impermissible because the Department had already sanctioned the refund and could not reopen the matter bypassing statutory provisions.
- The appellant had issued a credit note to its buyer, demonstrating that the burden of duty had been passed back, hence the refund should have been upheld.
Respondent's Arguments
- The refund contravened Sections 11-A, 11-B and 12 because the duty incidence had in fact been passed on to the buyer; therefore recovery was proper.
- All lower authorities correctly applied the statutory provisions, and their concurrent findings warranted affirmance.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sangam Processors (Bhilwara) Ltd. v. CCE (1994) 71 ELT 989 (Tri) | Refund cannot be granted when duty incidence is passed on; affirmed by the Supreme Court. | The court found the factual matrix analogous and relied on the decision to uphold recovery of the erroneous refund. |
| Rajasthan Processors (India) Ltd. v. CCE (SC) | Supreme Court dismissal of appeal confirms the Tribunal’s view in Sangam Processors. | Used to reinforce that Sangam Processors remains binding. |
| S. Kumar's Ltd. v. CCE (2003) 153 ELT 217 (Tri) | Tribunal precedent reiterating principles of unjust enrichment and binding effect of higher-court orders. | Cited to support reliance on Sangam Processors and the doctrine of merger. |
| Kunhayammed v. State of Kerala (2000) 6 SCC 359 | Explains doctrine of merger and precedential value when the Supreme Court dismisses appeals/Special Leave Petitions. | Invoked to show that dismissal of appeals in similar matters makes lower-court reasoning binding. |
Court's Reasoning and Analysis
1. Jurisdiction to issue show-cause notice: Section 11-A expressly authorises recovery of duty erroneously refunded. Consequently, the Department’s initiation of recovery proceedings through a show-cause notice was legally sound, nullifying the appellant’s first objection.
2. Timing and credibility of the credit note: The duty was paid on 19-7-1989; the refund claim was filed on 28-11-1990; yet the credit note relied upon was issued later on 7-8-1991. Because Section 12 requires contemporaneous submission of sales invoices and related documents at clearance, the belated credit note could not rebut the presumption that duty incidence had been passed to the buyer. The court therefore rejected the appellant’s second contention.
3. Application of precedent: The Tribunal had relied on Sangam Processors, which squarely dealt with unjust enrichment in refund claims. Given that the Supreme Court had dismissed the appeal in Rajasthan Processors, the doctrine of merger (per Kunhayammed) rendered the principle binding. The court agreed with the Tribunal’s reasoning and its reliance on these authorities.
4. Concurrence with concurrent findings: Finding no procedural or legal infirmity in the orders of the Assistant Commissioner, Commissioner (Appeals), or the Tribunal, the court declined to interfere.
Holding and Implications
APPEAL DISMISSED. The Tribunal’s order directing recovery of Rs 2,00,305 from the appellant stands affirmed.
Implications: The appellant must repay the erroneously refunded amount. The decision reiterates that belated credit notes are insufficient to overcome the bar against unjust enrichment, but it does not establish a new legal principle beyond reaffirming existing precedent.
Order
1. By this judgment and order, we propose to dispose of this appeal, which is filed by the appellant being aggrieved by the judgment and order dated 18-2-2003 passed by the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (hereinafter referred to as “the Tribunal”) affirming the order dated 3-12-2001 passed by the Commissioner (Appeals) and the order of the Assistant Commissioner, who had passed the order-in-original.
2. The counsel appearing for the appellant has submitted before us that the respondent could not have issued a show-cause notice to the appellant demanding recovery of the amount which was paid to the appellant by the respondent as refund of the duty paid bypassing the statutory provision. The next contention which is raised before us is that the appellant had issued a credit note which was filed and, therefore, the refund which was given to the appellant by the Department should have been upheld by all the authorities.
3. The aforesaid submissions of the counsel appearing for the appellant were, however, refuted by the counsel appearing for the respondent, who has drawn our attention to the documents on record including the various orders passed by the authorities below as also the Tribunal. By relying on the provisions of Sections 11-A, 11-B and 12, he has submitted before us that the orders passed by all the authorities including the Tribunal are just and proper.
4. In the light of the aforesaid submissions made by the counsel appearing for the parties, the issue that arises for our consideration is, whether the appellant can be said to be eligible for refund of the duty claimed by it in terms of Section 11-B of the Central Excise and Salt Act, 1944.
5. The appellant herein deposited duty on clearance of sodium hypochlorite (bleach liquor) for the period from 1-3-1988 to 15-6-1989 vide TR-6 dated 19-7-1989. Subsequent thereto, on 28-11-1990, a refund claim was filed by the appellant. The aforesaid claim was allowed by the Assistant Commissioner by a letter dated 22-9-1992 by the following order:
“Please find enclosed herewith a cheque, No. A16835269 dated 22-9-1992 for Rs 2,00,305 (Rupees two lakhs three hundred and five) only in finalisation of your refund claim. That the payment will be received within three months from the date of issue of cheque drawn on Central Bank of India, Branch Ratlam.
Please send acknowledgment receipt for the cheque.”
6. Since according to the respondent, the said claim was wrongly sanctioned by the Assistant Commissioner, a show-cause notice dated 15-3-1993 was issued stating therein that the refund given to the appellant by the Assistant Commissioner was without jurisdiction as refund is admissible only when incidence of Central excise duty was not passed on to other persons. In the said show-cause notice, a reference was also made that buyer in the case was M/s Grasim Industries Ltd., Staple Fibre Division, Nagda and, therefore, Central excise duty was initially passed on to Staple Fibre Division. It was also stated that a credit note was issued on 7-8-1991 for Rs 2,00,305 and since the same was claimed at a much later stage, it would not establish that the initial Central excise duty incidence was not passed on.
7. After reply to the show-cause notice was filed, the matter was considered by the Assistant Commissioner, who passed the order-in-original holding that the refund order was passed illegally and without jurisdiction. In view of the aforesaid findings, it was ordered that the amount of Rs 2,00,305 which was erroneously refunded be recovered from the appellant in terms of Section 11-A of the Central Excise Act, 1944.
8. The aforesaid order was challenged by filing an appeal before the Commissioner (Appeals), who upheld the order of the Assistant Commissioner and the said order when challenged before the Tribunal was heard at length. The Tribunal by order dated 18-2-2003, dismissed the appeal and upheld the findings recorded by the Commissioner (Appeals) as also by the Assistant Commissioner, who passed the order-in-original.
9. The facts which are indicated hereinbefore would indicate that on the date when the appellant filed an application seeking claim for refund of the amount i.e on 28-11-1990, there was no credit note issued, which was issued much subsequently i.e on 7-8-1991. The duty was deposited on 19-7-1989 whereas the aforesaid credit note is dated 7-8-1991. But the claim appears to have been filed before the Assistant Commissioner seeking for refund on 28-11-1990 i.e prior to even issuance of the aforesaid credit note. However, the Assistant Commissioner initially issued letter dated 22-9-1992 without considering even the merit of claim and without even considering applicability of Sections 11 and 12 of the Act. Subsequently, the Assistant Commissioner again considered the records and in his order has also referred to the admission of the appellant to the fact that the burden of the said duty was originally passed on from Chemical Division to Staple Fibre Division. The refund application was not filed by Staple Fibre Division of Grasim Industries Ltd. in this case but the same is filed by the present appellant, which is another division.
10. Section 11-A provides for a right of issuance of show-cause notice, if, according to the Department, duty of excise has been erroneously refunded to a party. In the event of such erroneous refund of excise duty, the competent authority may then issue such a show-cause notice as provided for under Section 11-A, in which case the assessee has to show cause as to why the aforesaid amount of refund, which is erroneously refunded, should not be recovered from him. In such a case, there is no question of filing any appeal, as appropriate remedy as provided under Section 11-A is available. Therefore, in our considered opinion, the first contention of the counsel appearing for the appellant has no merit.
11. So far as the issuance of the credit note is concerned, the same was issued only on 7-8-1991 although the duty was paid on 19-7-1989 and, therefore, the credit note was issued after two years of the payment of the duty and the clearance of the goods. In this connection, Section 12 of the Central Excise Act becomes relevant which indicates that the party who is liable to pay excise duty on any goods, has to file the sales invoice and other documents relating to assessment at the time of clearance of the goods itself. Therefore, when at the time of clearance no such document was filed and what is sought to be relied upon is a document issued after two years, the same raises a doubt and cannot be accepted as a reliable document.
12. In that view of the matter, we are of the considered opinion that the decision in Sangam Processors (Bhilwara) Ltd. v. CCE (1994) 71 ELT 989 (Tri) which was a decision of the Tribunal and also upheld by this Court in Rajasthan Processors (India) Ltd. v. CCE becomes applicable as the appeal filed therefrom was dismissed. In our considered opinion the Tribunal did not commit any error in referring to and relying on the said decision.
13. The Tribunal, in our considered opinion, was also justified to rely on the decision of the Tribunal in S. Kumar's Ltd. v. CCE (2003) 153 ELT 217 (Tri) in which reference was also made to the decision of the Supreme Court in Kunhayammed v. State of Kerala (2000) 6 SCC 359 wherein the question of merger as well as binding nature of the decision of the Supreme Court as precedents when civil appeals and special leave petitions are dismissed was considered.
14. Considering the facts and circumstances of the case, we find no infirmity in the order passed by the Tribunal. The appeal has no merit and is dismissed but leaving the parties to bear their own costs.
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