Commissioner of Central Excise vs Gokak Mills

V.G. Sabhahit, J.—This appeal is filed by the Revenue being aggrieved by the order passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bangalore (hereinafter called the "CESTAT"), in Appeal No. Excise/479/2004, dated December 1, 2006 wherein the appeal filed by the assessee has been allowed and it is held that the assessee is entitled to refund as claimed in the application. The material facts of the case leading up to this appeal are as follows:

An application was filed u/s 11B of the Central Excise Act, 1944 (hereinafter called "the Act") seeking refund of Rs. 45,438 averring that the assessee had paid the excise duty wrongly in respect of cotton yarn cleared on the strength of CT-3 certificate. It is the case of the assessee that refund is a claim on account of payment of duty by mistake as the goods were intended to be removed under CT-3 where no payment of duty is required. But the assessee has cleared the same under payment of duty dated March 24, 2002 and realising the said mistake, they issued AR-3A on March 24, 2002. Subsequently, after a gap of nearly four mouths, they issued credit note dated July 19, 2002 to the extent of the said duty. The assessing officer after considering the reply given to the show cause as to why the application cannot be rejected, by following the earlier order of the CESTAT, held that refund is admissible only if the credit note has been issued on passing on of duty at the time of clearance and not post-clearance transaction by issue of credit note and accordingly rejected the application for refund. Being aggrieved by the same, the assessee preferred Appeal No. 60/2004 on the file of the Commissioner of Central Excise (Appeals), Mangalore. The first appellate authority, by an order dated February 27, 2004 held that in view of the decision of the CEGAT in the case of 1997 (70) ECR 722 wherein the adjudicating authority rejected the refund, the order passed by the assessing officer is justified. The first appellate authority has also followed the decision in S. Kumar''s case and accordingly rejected the appeal. Being aggrieved by the same, the assessee preferred an appeal in E/479/2004 before the CESTAT. The CESTAT by an order dated December 1, 2006 held that in view of the ruling rendered in the cases of 2004 (168) ELT 511 2006 (108) ECC 10 and 2006 (113) ECC 7 the customer had issued CT-3 certificate which clearly indicated that they are not going to bear the burden of duty and the duty burden had been borne by the assessee and therefore, they are eligible for refund in terms of the cited judgments. Accordingly, the CESTAT allowed the appeal with consequential relief. Being aggrieved by the same, this appeal is filed by the Revenue.

The appeal was admitted for determination of the following substantial question of law:

Whether the transaction is on provisionality and amounts are settled in the end and higher payment made by the assessee and then in that case whether the assessee is eligible for refund?

We have heard the learned counsel appearing for the appellants and the learned counsel appearing for the respondent.

The learned counsel appearing for the Revenue submitted that once the duty has been paid unless credit notes have been issued prior to the date of payment of duty, no refund can be ordered and in support of his contention, he has relied upon the decision of the hon''ble Supreme Court in MRF Ltd. Vs. Collector of Central Excise, Madras, wherein the hon''ble Supreme Court has observed as follows:

Once the assessee has cleared the goods on the classification and price indicated by him at the time of the removal of the goods from the factory gate, the assessee becomes liable to payment of duty on that date and time and subsequent reduction in prices for whatever reason cannot be a matter of concern to the Central Excise Department in so far as the liability to payment of excise duty was concerned. Therefore, subsequent fluctuation in the prices of the commodity can have no relevance whatsoever so far as the liability to pay excise duty is concerned, unless it is shown that there was some agreement in this behalf with the Government and the latter had agreed to refund the excise duty to the extent of the reduced price.

The learned counsel appearing for the assessee submitted that the decision relied on by the learned counsel appearing for the Revenue is not applicable to the facts of this case as in the present case, there was no liability on the part of the assessee to pay any excise duty in view of the issuance of the CT-3 certificate and excess duty had been paid by mistake and therefore, the question of price adjustment does not arise and refund has rightly been ordered by the CESTAT. In support of his contention, he has relied upon the subsequent decision of the hon''ble Supreme Court in Commissioner of Central Excise Vs. International Auto Limited, wherein the hon''ble Supreme Court has observed as follows (page 10 of 3 GSTR):

In our view, with the entire change in the scheme of recovery of duty under the Act, particularly after insertion of Act 14 of 2001 and Act 32 of 2003, the judgment of this court in the case of MRF Ltd. Vs. Collector of Central Excise, Madras, would not apply. That judgment, was on interpretation of section 11B of the Act, which concerns claim for refund of duty by the assessee. That judgment was in the context of the price list approved on May 14, 1983. In that case, the assessee had made a claim for refund of excise duty on the differential between the price on the date of removal and the reduced price at which tyres were sold. The price was approved by the Government. In that case, the assessee submitted that its price list was approved by the Government on May 14, 1983, but subsequent thereto, on account of consumer resistance, the Government of India directed the assessee to roll back the prices to pre-14th May, 1983 level and on that account, price differential arose on the basis of which the assessee claimed refund of excise duty which stood rejected by this court on the ground that once the assessee had cleared the goods on classification, the assessee became liable to payment of duty on the date of removal and subsequent reduction in the prices for whatever reason cannot be made a matter of concern to the Department in so far as the liability to pay excise duty was concerned.

He has also relied upon the decision of the Division Bench of this court in Sudhir Papers Ltd. Vs. Commissioner of C. Ex., Bangalore-I, (C.E.A. No. 30/2009, disposed of on March 28, 2011) wherein in identical circumstances where excise duty had been paid and amount was credited to the consignee and duty was borne by the assessee only, the refund was ordered holding that conditions of section 11B of the Act have been satisfied.

We have given careful consideration to the contentions of learned counsel appearing for the parties and scrutinised the material on record.

The material on record would clearly show that CT-3 certificate had been obtained and therefore there was no liability on the part of the assessee to pay excise duty. However, excise duty of Rs. 45,468 was paid under mistake and there was no burden on the part of the consignee to pay the duty and therefore, the burden of paying duty has been borne by the assessee and in fact, there is no liability on him to pay the duty. The assessing officer and the first appellate authority have relied upon the case of Addison and Co. v. CCE but the said judgment has been set aside by the Madras High Court. On similar facts, in Sudhir Papers Ltd. Vs. Commissioner of C. Ex., Bangalore-I, C.E.A. No. 30/2009, disposed of on March 28, 2011 referred to above, the Division Bench of this court has held that if credit notes are raised and benefit is passed on to the customer, thus, not passing on the burden of excise duty, the assessee is entitled to refund of the same. The Division Bench of this court has also relied upon a decision by nine member Bench of the hon''ble Supreme Court in the case of Mafatlal Industries Ltd. and Others Vs. Union of India (UOI) and Others, wherein the hon''ble Supreme Court has held that the assessee is entitled to refund and conditions of section 11B are satisfied.

Therefore, having regard to the above said reasoning and following the judgment of this court in Sudhir Papers Ltd. Vs. Commissioner of C. Ex., Bangalore-I, C.E.A. No. 30/2009 disposed of on March 28, 2011, We answer the substantial question of law against the Revenue and in favour of the assessee. Accordingly, we pass the following:

ORDER

The appeal is dismissed.