Commissioner of Central Excise vs G.I.S. Cotton Mills Ltd.

The Court: Both the appeals are taken up for hearing analogously in terms of our previous order as in both the appeals the matter and controversy are same, the point involved as it was formulated earlier is as follows:

Whether without any final assessment of duty in the present case the question of any revenue of excess amount duty would arise at all?

The short fact leading to preferring this appeal is as follows:

The assessee/respondent manufactures dutiable goods and because of exigency the goods were allowed to be removed from the factory gate and then duty was paid on the basis of the provisional assessment. In spite of repeated demands and requests, no final assessment order was passed. It is the case of the assessee/respondent that in certain instances of sales, the assessee is not liable to pay the duty or is liable to pay lesser duty because of the price variation of the products. In certain cases on the basis of self-assessment the respondent/assessee has paid the duty more than what was payable earlier as the products could be sold at an increased price. In any view of the matter, the assessee is entitled to refund as a whole. As such, an application was made for refund of the duty before the Assistant Commissioner of Central Excise, who kept the same pending without either making final order of assessment or passing any order of refund. Ultimately, after a long time this application was rejected holding that such an application was not entertainable.

This order of the assessing officer was appealed against, and the learned Tribunal has held in favour, in notional sense, of the respondent/assessee. It has been held upon interpretation the provision of law and considering the judgment of the Supreme Court that application for refund consequent upon the provisional assessment is entertainable, and accordingly, the learned Tribunal directed to examine this aspect and to quantify the amount of the refund claimed.

Smt. Sarkar, learned Advocate appearing for the appellant, submits that Central Excise Act and the Rules framed thereunder do not envisage for refund of the duty payable in case of a provisional assessment, and this can only be done when the final assessment order is passed. She has also drawn our attention to the provision of Section 11B of the said Act. The position was different when the Supreme Court decided the case of Mafatlal Industries Ltd. and Others Vs. Union of India (UOI) and Others, . However, in order to get over the situation arising under the said Supreme Court decision by Notification No. 45/99-C.E. (N.T.), dated 25th June, 1999, an amendment has been made in sub-rule (5) of Rule 9B by adding a proviso thereto. The effect of proviso is that even after finalization of the provisional assessment under Rule 9B(5), if it is found that an assessee is entitled to refund, such refund shall not be made except in accordance with the procedure established under sub-Section (2) of Section 11B of the Act.

The aforesaid legal position has been accepted by subsequent decision of the Supreme Court in the case of Commissioner of Central Excise, Chennai Vs. T.V.S. Suzuki Limited, Hosur, ).

Mr. Khaitan, learned Senior Advocate appearing for the respondent/assessee, submits that the learned Tribunal below has not passed any order of assessment, and has merely restored the application for refund by setting aside the order of rejection passed by the first authority.

He is not disputing the legal proposition as laid down in subsequent decision of the Supreme Court in the case of TVS Suzuki''s case (supra). But by its the learned Tribunal has not quantified the amount of refund nor has given any direction for payment thereof. He further contends that on merit actually his client is entitled to refund but the problem has arisen because of inaction of the first authority for not making final assessment. Had it been so, by this time his client would have got refund of the excess duty, which is not to be paid legally.

We have heard both of them. We have seen the impugned judgment and order of the learned Tribunal. It appears to us that the learned Tribunal though, has not quantified the amount of refund nor has given any direction for payment of the same, but the effect of the order is a declaration given in favour of Mr. Khaitan''s client, as it is recorded that the appellant shall be entitled for the refund in question.

We find force in the submission of Smt. Sarkar. The development took place in post-Mafatlal''s case (supra) has to be taken note of. The proviso in sub-rule (5) of Rule 9B has been added. The said proviso reads as follows:

[Provided that, if an assessee is entitled to a refund, such refund shall not be made to him except in accordance with the procedure established under sub-section (2) of section 11B of the Act.]

[ [6] Notwithstanding the provisions of self-assessment in this rule, in cases of provisional assessment, the final assessment shall be made by the proper officer.]

The aforesaid insertion of the proviso makes it mandatory for final assessment as provided u/s 11B in the matter of grant of refund.

This aforesaid position of law has been accepted by the Supreme Court in TVS Suzuki''s [supra]. In paragraph 3 of the said judgment, it has been noted as follows:

In order to get over the situation arising under Mafatlal Industries Ltd. [supra] vide Notification No. 45/99-C.E. (N.T.), dated 25-6-1999, an amendment was made in sub-rule (5) of Rule 9B by adding a proviso thereto. The effect of the proviso is that even after finalisation of the provisional assessment under Rule 9B(5), if it is found that an assessee is entitled to refund, such refund shall not be made to him except in accordance with the procedure established under sub-section (2) of Section 11B of the Act.

Admittedly here, there has been no final assessment as yet, and the same is kept pending.

Under these circumstances, the declaration given by the learned Tribunal in the impugned judgment and order was not warranted in view of the aforesaid proviso. The attention of the learned Tribunal was not drawn to the aforesaid proviso.

In view of the aforesaid discussions, both the appeals are disposed of by the following order:

The judgment and order of the learned Tribunal is modified in the manner as follows:

We direct the assessing officer to conclude final assessment within a period of two months from the date of communication of this order upon giving hearing to the respondent-assessee.

In the event of failure of final assessment within the time as above, the provisional assessment shall be deemed to be final assessment and in that case, application for refund will be entertained and examined and amount, if any, refundable shall be quantified immediately thereafter and this exercise must be completed within a week from the date of expiry of two months. Accordingly, the application filed by Mr. Khaitan''s client is restored to its file. This should be processed within fortnight after the final order of assessment or after expiry of two months from the date of receipt of this order whichever is later. Urgent xerox certified copy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.