Per Shri V.P. Gulati :

The issue in the appeal relates to respondents' eligibility to refund in terms of section 11B of the CEA 1944. The respondents had claimed refund in respect of excess duty paid by them by including certain element including turn over tax and additional sales tax which have been held to be abatable for arriving at the assessable value. Refund claim was allowed by the original authority consequent on the order in appeal passed by the CCE (A) that abatements are allowable. The original authority examined the issue with reference to Section 11B relating to unjust enrichment and the said authority held as under:

In this case, the percentage of turnover deduction that the buyer would be receiving from the assessee after the former crossed the slab limitation target fixed by the assessee was known, since the assessee had either given it in the invoice itself or passed it on, by way of credit notes to the buyers and adjusted the sale against subsequent supplies.

(b) Section 11-B (2) says that if the duty becomes refundable then the amount goes to the Consumer Welfare Fund. But if the assessee has paid the Excise duty and has not passed the incidence of such duty to any other person (Section 11B (2) (d)) then the refund goes to the assessee himself and as per Section 12-B, the proof of not having passed on the incidence should be provided by the assessee. Verification of credit notes has established that unjust enrichment will not occur if refund as claimed is granted to the assessee, since it is actually suo moto refund.

(c) The contention of the Assistant Director (Cost) that the benefit of the discount claimed has not reached the ultimate consumer is beyond the purview of the Central Excise Laws & Rules because, what is sought to be established when a discount is claimed by an assessee is whether the same has been passed on to his buyers (in this case the dealers) and hence whether the duty burden is borne solely by the assessee. This has been fully proved by the verification of the documents produced by the assessee to substantiate their claim.

(d) A bank guarantee has been obtained for 25% of the refund amount i.e. Rs. 11,42,000/- by way of abundant caution in view of the point made in para 3 (h).

(e) The party has also given an undertaking wherein they agree to pay the full duty of refund of Rs. 45,82,626/- to the Central Excise Department within 15 days of receipt of the CEGAT Order, if the CEGAT decision as specified in para 3 (h) goes against their favour.

It is seen that the matter regarding abatement was being agitated before the Tribunal when based on order of the Collector (A), refund due has been paid. This order of the original authority was reviewed by the Commissioner and in the appeal which was filed before the CCE (A) against this order under Section 356E (2) of the CEA 1944. The grounds taken in this application before the CCE (A) are as under :

While post auditing the above refund claims sanctioned by the Assistant Collector of Central Excise, Madras V Division, I find that the refund claim should have been rejected under the provisions of Sec. 11B and 11D in as much as the duty incidence has not been borne by the manufacturer. Even if tribunal orders are involved, the provisions of Sec. 11D are clear and statutorily binding on the Department and refund should have been rejected.

The Assistant Collector has stated in her Order-in-Original that unjust enrichment will not occur if refund as claimed is granted to the assessee since it is actually suo moto refund. The above argument of the Assistant Collector cannot be accepted in view of the provisions of Sec. 11D.

The argument of the Assistant Collector against the views expressed by Assistant Director (Cost) is also not in alignment with provisions of Sec. 11B. Moreover the incidence of duty has not been borne by the manufacturer.

The learned CCE (A) in his order has held that in as much as this application itself was filed after 6 months of refund