| SooperKanoon Citation | sooperkanoon.com/8604 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Mumbai |
| Decided On | Jul-27-1995 |
| Reported in | (1995)LC538Tri(Mum.)bai |
| Appellant | Perfect Engineering Works |
| Respondent | Collector of Central Excise |
The appellants, despite the fact that their value of clearances did not exceed the specified limits for exemption under Notification 175/86, paid duty by mistake in respect of clearances effected under GP 113 dated 25-3-1989, which they claimed by way of refund and the said refund claim, reportedly filed within time, was allowed by the Assistant Collector. The cheque dated 20-11-1989 was issued on 18-12-1989 to the appellants. However on 4-5-1990 a SCN was issued to them for recovery of the refund erroneously granted because the duty burden has already been passed on by the appellants to the consumers and the refund granted would cause unjust enrichment to them. The appellants resisted the notice by citing various case laws submitting that there is no provision in the statute for denial of refund on this ground and it is not open to review the refund sanctioned, without resorting to appellate proceedings Under Section 35E of the Central Excise Act. It is also pertinent to mention that the appellant never rebutted the allegation that they have passed on the duty burden to the consumer nor is it their contention that they have passed on the benefit of refund to the consumer. Their challenge to the proceedings is mainly on the ground that law, during the material period, does not allow such an issue to be raised for denial of refund. It was also pleaded that the demand is time-barred being beyond six months from the date of sanction of refund. The said contentions were rejected by the Assistant Collector, relying on the amended provisions of the Central Excise Act governing refunds. On appeal before the Collector (Appeals), their appeal was rejected, by placing reliance on the decision of the Supreme Court in the case of fain Spinners reported in 1992 (61) E.L.T. 321 holding that the amended provisions are retrospective in application and applicable to all earlier cases where directives for refund were given by any authority or court. The Collector (Appeals) also held that even during the relevant period, where the amended provision were not in force, Bombay High Court's judgment in Roplas (I) reported in 1988 (38) E.L.T. 27 bars grant of refund in such a case. On rejection of their appeal by the Collector (Appeals), the present appeal has come before the Tribunal.
3. The main tenets of the arguments of the ld. Counsel Shri Willingdon Christian can be summed up as below : (i) Going by the date of sanction order of refund the SCN is beyond six months.
(ii) Demand for refund amounts to review of the order passed by A.C. by himself without resorting to provisions of review Under Section 35E. (iii) There was no provision in law during the period when refund was sanctioned, to the effect that refund can be denied on the ground that duty burden has been passed on to the consumer. Even Roplas Judgment has not been followed by Bombay High Court themselves in some of the subsequent decisions and in one such a decision, the Bombay High Court have observed that Roplas judgment is not a good law. Hence, the statutory authorities cannot go into this question for denying refund.
(iv) In this case, the decision of the Supreme Court in Jain Spinner case is not applicable; because in that case, a refund application was pending before the Assistant Collector when the amended provisions of the law came into effect. Hence the Supreme Court referred to those relevant provisions of the law to hold that whatever be the decision of the court or appellate authorities allowing refund, where refund is to be granted, it has to be considered in the context of amended provisions. The said judgment does not seek to extend the amended provisions retrospectively even in cases where refund applications have already been disposed of by way of grant of refund. Even the observations of the Supreme Court in the case of Union of India v. M/s. ITC Ltd. - 1993 (67) E.L.T. 3 (S.C.) - would not be applicable in this case, because in that case refund was granted on the orders of the Court and the conditional order of the Court did not finally conclude refund. Since the appeal was still pending, where the amended provision came into operation the Supreme Court applied the amended provisions. In the present case covered by this appeal, refund has already been sanctioned and even cheque has been issued before the amended provision. Hence this is not a case of pending application for refund, where amended provision can be applied in terms of the above judgment. If it is construed that the amended provision of Section 11D can be invoked, even in cases, where refunds have been granted in the past, all such sanctioned refunds can be re-opened for this purpose.
(i) Relevant date for issue of demand Under Section 11A in the case of erroneous refund is the date of refund, which means the date on which the cheque was issued and not the date of preparation of cheque or the date of ordering sanction. This position is now settled in the various decisions. Hence refund sanctioned erroneously in this case without looking into the question of unjust enrichment has been demanded back well within the period of limitation prescribed Under Section 11A. (ii) In view of the above position, refund sanctioned has not been concluded and the issue of unjust enrichment agitated in the SCN was still pending on the date, when the amended provisions relating to refund came into force. Hence the Assistant Collector is justified in taking into account these provisions, which were held to be applicable in respect of all such refunds pending consideration, irrespective of orders of the courts or other authorities directing sanction of refund as per the decisions of the Supreme Court in fain Spinners and ITC Ltd. (iii) The decision of the East Regional Bench in the case of Sneh Builders reported in 1995 (25) ETR 347 relied upon by the other side is not applicable here, because in that case the demand was issued beyond six months and the issue was sought to be agitated by way of appeal Under Section 35E. In the present case, where SCN has been issued, refund sanctioned has not become a fait accompli but is sought to be recovered being erroneous. Hence it is to be equated with a case of pending refund case.
(iv) Even during the relevant period, when the refund was sanctioned by the Assistant Collector, he has totally ignored the case laws as laid down in Roplas case and hence refund sanctioned is erroneous and can be recovered, when such an error is sought to be rectified by issue of a timely demand.
5. After hearing the equally attractive arguments from both the sides, I identify the following issues which are required to be considered in this appeal.
(ii) If it is within time, whether it can be said to disturb the fait accompli nature of the refund already sanctioned so as to construe it to be a case of pending refund for applying the amended provisions of Section 11B. (iii) Whether the decision of the Supreme Court in the case of Jain Spinners and FTC Ltd. (supra) would stand attracted in this case 6. I will be proceeding to address myself on these issues in the light of the case laws cited before me as well as those not cited but noticed by me.
6.1 There is no dispute that cheque dated 20-11-1989 was issued to the appellants on 18-12-1989. As per Section 11A, relevant date in the case of erroneous refund is the date of refund. Hence going by the decisions of the various Benches of the Tribunal, wherein it has been held that in the case of refund [granted] by way of credit in PLA, date of taking credit in PLA is the relevant date and where refund voucher is issued, the relevant date is the date of issue of voucher (vide the decisions in the case of C. C. Ex. v. Cawnpore Sugar Works -1989 (39) E.L.T. 59 (Tri.) - I am to hold that the relevant date in the case is the date on which the cheque was issued (despatched). Hence going by this date, demand is within six months as contended by ld. S.D.R. Since it is held that SCN has been issued within six months for recovery of erroneous refund as per Section 11A, it is immaterial whether review Under Section 35E has been initiated or not. It is a settled law that Section 11A and 11B are independent provisions containing self-contained provisions for recovery of short levy of duty or erroneous refund or for grant of refund of excess duty paid as the case may be. Hence review of the refund order is not called for Under Section 35E, as pleaded by the ld. Counsel.
6.2 In the paper book filed, there is a reference to the decision of the judgment of the Rajasthan High Court in the case of Adarsh Metal Corpn. -1993 (67) E.L.T. 483 (Raj.). In this judgment Rajasthan High Court have held that in the case of refund arising out of appellate orders, no separate applications are required to be made Under Section 11B and the amended provisions can be applied, only where such applications are required to be filed and are pending on the date, when the amended provisions came into force. Though the above judgment elaborately considered various judgments, strangely the revenue seems to have not cited the decisions of the Supreme Court in the case of Jain Spinners and U.O.I. v. ITC Ltd. and hence those decisions were not considered by the Rajasthan High Court. Hence I feel it necessary to consider the issue in the light of the Supreme Court decision in the above two cases. It is also pertinent to observe that even the ld.Counsel did not base his arguments on the basis of the decision of Adarsh Metal Corporation, though a copy of this judgment has been filed in the Paper Book.
6.3 Taking up the second issue, the question to be considered is whether a demand issued within the parameters of Section 11A for recovery of erroneous refund could be construed to be a pending claim, I consider this question from two angles - one from the general principles of law and another from the way the Apex Court have viewed the question particularly with regard to applicability of the amended provisions of Section 11B and the principle of unjust enrichment in the two case laws cited by both the sides. There can be no dispute that an appeal is a continuation of the original proceedings. Likewise where an assessment is provisional, such an assessment can be said to have acquired finality, only when the same is finalised; where an assessment is defective and if such a defect is noticed, it is open for both the sides namely the Department or the assessees to resort to demand for short levy or claim refund of duty excess paid, Under Section 11A or 11B respectively. If these provisions have been invoked within the time limit, then the assessments get reopened and the issue is kept open till adjudication is concluded. The issue will continue to be open, if an appeal is filed against the order of adjudication. In the case of refund, normally the application for refund is adjudicated either by way of sanction or rejection. If an appeal is filed against such an adjudication the order does not become final. However, where law specifically provides for recovery of erroneous refund and a demand has been issued within the parameters of Section 11A, refund originally sanctioned cannot be said to have acquired finality.
6.4 Next issue to be considered is the applicability of the Supreme Court judgments in Jain Spinners and U.O.I. v. ITC Ltd. Taking up the case of Jain Spinners, I find that in this case, the disputed amount of duty, deposited in the High Court as per the interim order of the Court, was permitted withdrawal by the department by the High Court, on condition that it will be returned with interest, in case Jain Spinners succeeded in the Writ Petition. During the pendency of W.P., appeal filed before the Collector (Appeals) was allowed in their favour. Hence they filed a claim before the Assistant Collector for refund, apart from moving the High Court for disposing of the W.P. with direction to refund the amount deposited by them and withdrawn by the department with an undertaking to refund. This application was allowed by the High Court and the said order was challenged by the department before Supreme Court, on the ground of unjust enrichment inviting attention to the amended provisions of Section 11B. The Apex Court took note of the following factors and held as below : (i) Were it not for the stay granted by the High Court in its interim order, the amount of disputed duty would have been recovered.
(ii) The Collector (Appeals') order is for consequential relief, if otherwise admissible.
(iii) Refund application for the same amount was pending before Assistant Collector, who is the competent officer to consider the same. As per provisions of Section 11B(3), he has no option but to consider such a claim in accordance with Sub-section (2) of Section 11B, whatever be the decision of the Court/Tribunal or other provisions of law being contrary to the said provision. Hence the High Court's interim order could not be an exception to the aforesaid statutory provision of Section 11B(3).
6.5 In my view, Jain Spinners case is not quite explicit in giving retrospective effect in applying the amended provisions where the issue is pending in appeal etc., in view of the above factual position appreciated by the Supreme Court.
6.6 However, when I consider the application of the decision of the Supreme Court in Union of India v. ITC Ltd., the position seems to be more explicit. In that case, the Supreme Court took note of the following facts. Under a mistaken interpretation of valuation provisions, M/s. ITC Ltd. paid excess duty on cigarettes cleared during the period September 1970 to February 1973. The Assistant Collector rejected 5 refund applications filed by them on the ground of excess payment. On ITC preferring an appeal before Collector (Appeals), he allowed appeals relating to three refund applications and as regards the balance of two claims, they were held to be time-barred claim and rejected. M/s. ITC Ltd. filed writ petition before the High Court. The High Court held that duty that is legitimately due to the Government cannot be retained and such a right cannot be taken away by limitation prescribed in the Act or Rules, when the collection of duty is without the authority of law. Hence directions were issued to the department to refund the amount. Against the decision of the High Court, Union of India filed Special Leave Petition before the Supreme Court. When the Special Leave petition was under consideration, as per the interim order of the Supreme Court, the order of the High Court was directed to be complied with by giving the refund on ITC furnishing the bank guarantee to repay the amount, in case the Government succeeds in Special leave petition. On 15-4-1993 when the case came for hearing before the Apex Court, the Govt. Counsel pointed out the amended provisions of law and submitted the benefit of refund would unjustly enrich the ITC since the duty incidence has already been passed on to the consumer. However, the plea of the Govt. was resisted by ITC that this is a new ground taken for the first time and the amended provisions were not in force, even when the appeal was filed by the Government before the Apex Court and hence cannot be raised. The Supreme Court in paras 11 and 12 of their judgment rejected the objection of ITC pointing out certain averments in the affidavits filed by the Government in their memo of appeal and stay application against the High Court judgment. The relevant paras 11 and 12 of the judgment of the Supreme Court are reproduced below : 11. Let us first deal with the objection raised on behalf of the respondent that the plea based on Section 11B cannot be permitted to be taken during the hearing of the appeal for the first time. Indeed the respondent is right in contending that the plea of "unjust enrichment" had not been canvassed before the High Court in the writ petition. The writ petition was directed against the order of the appellate authority rejecting the refund claim petitions as time barred. The writ petition was decided in 1982. The amended provisions came into force with effect from 20-9-1991, while the appeal was pending in this Court. The appellant could therefore, not have taken the ground contained in Section 11B(2) or (3) of the Act in their written statement in the High Court. Though as pointed out by learned counsel for respondent, the appellant has not taken a specific plea based on the doctrine of 'unjust enrichment' in the Memo of appeal in this Court also but we find that in paragraph 7 of the Memo of appeal it has been said : "7. The High Court failed to note that it is not the case of the Respondent that they had received any claim for refund in this regard from even a single customer of theirs in respect of the various periods in question".
12. Again, in paragraph 3 of the stay application (CMP 24970 of 1982) it has been inter alia stated :- "... It may be further stated that the respondent will not be in any manner prejudiced since they have already realised from their customers the excise duty on the manufactured goods. The balance of convenience would also lie in favour of a stay of the judgment of the Delhi High Court pending disposal of the appeal...." The respondent did not controvert the above averments. Even otherwise, the appellants cannot be refused permission to raise a plea relating to the interpretation of the amended provisions of Section 11B of the Act, which came into force only during the pendency of the appeal. A plea which relates to the interpretation of a statutory provision which comes into existence during the pendency of an appeal under Article 136 can always be permitted to be raised during the hearing to do complete justice between the parties. Such a plea relating to interpretation of a statutory provision is essentially a question of law and can be allowed to be raised for the first time during the hearing of the appeal and that is why on the oral prayer of ld. counsel for the appellants we permitted that plea to be raised. In so far as the factual aspect of the enquiry is concerned, both for purposes of Section 11B(2) and 12B of the Act, this Court has itself granted an opportunity to the respondent to rebut the presumption which can be raised Under Section 12B of the Act. The objection raised by the respondent, thus, has no force on merit." 6.7 From the above observations of the Supreme Court, I find that the ground of unjust enrichment based on amended provisions of law is a point of law which can be agitated, when the new statute has come into being during the pendency of an appeal to do complete justice to both the parties, especially when there are averments to this effect in the affidavits filed by the Govt.
6.8 In the para 15 of the judgment, the Apex Court does not agree with the arguments of the Counsel for ITC that the amended provision can be applied only prospectively and the prohibition contained therein cannot be applied to their case where appeal is pending. The relevant portions in para 15 of the Apex Court judgment are reproduced below : 15. It is, thus, seen that Under Section 11B(3) (supra) no refund shall be made except as provided for in Sub-section (2), as amended, notwithstanding anything to the contrary contained in any judgment, order or direction of the Appellate Tribunal or any court or in any other provisions of the Act or the Rules made thereunder or under any other law for the time being in force. We are not persuaded to agree with learned counsel for the respondent that the amended provisions of Section 11B can be applied only prospectively i.e. to refund claims made after the introduction of the amendment and would not apply to pending cases and refund claims filed prior thereto and that the prohibition contained therein cannot apply to the present case. The refund in the present case was ordered by the High Court in the writ petition by setting aside the orders of the statutory authority refusing the claim for refund, as barred by limitation.
The judgment of the High Court is under appeal before us. It was during the pendency of the appeal in this Court, that Section 11B of the Act was amended by Act 40 of 1991 with effect from 20-9-1991.
The matter relating to refund was thus wide open before this Court in the present appeal and had not been finally settled when Act 40 of 1991 came into force. As per amended Section 11B, all pending claims for refund on or before 20-9-1991 are required to he dealt with and disposed of in accordance with the amended provisions of law. By operation of Section 11B(3), as amended, notwithstanding the order given by the High Court in the writ petition, no refund can be made to the respondent except in accordance with the provisions of Section 11B(2) of the Act. The direction to pay the amount to the respondent to the extent ordered by the Delhi High Court contained in the interim order of this court dated 8-10-1982 was a conditional one and subject to the respondent (i) furnishing bank guarantee to the Collector of Central Excise, Meerut for the amount in question; and (ii) that in case the respondent fails in this appeal, it shall be liable to pay interest @ 12% p.a. while refunding the amount to the appellant. Thus the amount in question was directed to be paid to the respondent by this Court only as an interim arrangement, during the pendency of the appeal and could not be construed to be an order of execution of the order and directions of the High Court.
The conditional order made on 8-10-1982 did not finally conclude the refund claim of the respondent and cannot take the case of the appellant out of the purview of Section 11B(3) of the Act read with the first proviso to Section 11B(1), as amended. The argument on behalf of the respondent to the contrary is not only spacious but also fallacious.
The Apex Court, while taking this view also relied on their previous decision in Jain Spinners case.
6.8A In para 17 of this judgment, the Apex Court also rejected the contention that refund has already been concluded by way of sanction holding that refund was granted only as per this interim order of the Apex Court during the pendency of this appeal against High Court judgment. The order of the Delhi High Court challenged has not acquired finality, when the amended provision came into force.
6.9 Thus on a careful and close reading of the above paras, it appears that even if refund has been granted, which is sought to be agitated by way of appeal, such a refund cannot be construed to have acquired finality. If during the pendency of the appeal proceedings, the amended provisions have come into force, they cannot be ignored.
7. Thus, I find that the ratio of the judgment of the Supreme Court would be applicable in this case. In the present appeal, refund though sanctioned by the Assistant Collector, is sought to be recovered as one erroneously refunded on the ground of unjust enrichment and such a course of action has been taken within the parameters of time limit laid down in the statute. The Supreme Court have rejected the contention that the amended provision can be applied only to cases of refund arising after the amendment. The I.T.C. judgment seeks to extend the provisions even to cases where the issue of refund is pending in appeal, though money has already been paid. Hence when the refund sanctioned itelf is sought to be recovered on the ground of unjust enrichment by a demand issued within the time limit, such a refund sanctioned cannot be said to have acquired finality. Hence during the pendency of adjudication on the issue of unjust enrichment if the amended provisions of the Act have come into force, in order to do complete justice to both the sides, these provisions have to be taken into account. I obseve that the Supreme Court have taken such a view in the facts and circumstances similar to one in the present appeal as identified below : (i) Though the dispute related to period September 1970 - February 1973, and the dispute was dragging on till 15-4-1993, when the appeal finally came up for hearing before the Supreme Court and ground of unjust enrichment was not a ground in the earlier dispute, the Apex Court allowed the plea and held the applicability of the amended law in such a case.
(ii) In that case of ITC, money was ordered to be refunded by the interim order of the Apex Court and the Department have refunded the amount already. Notwithstanding that, the Apex Court held that it is only an interim order to comply with the decision of High Court and permitted this ground of unjust enrichment based on the amended provisions of Section 11B, which have come into force, during the pendency of appeal before them.
(iii) The dispute related to valuation and time bar aspect of the refund claim, which was decided in favour of the assessees (ITC) by Bombay High Court against which Special Leave Petition was filed by Revenue. In that context, the Supreme Court held that when the amended law was available during the hearing of the appeal, that cannot be ignored.
Going by these factual factors involved in ITC case, I am to hold that if a remand issued for recovery of refund within time limit and is pending decision, when the amended provision came into play, the adjudicating officer an have recourse to these provisions. Hence the Assistant Collector is justified in ordering recovery and credit to the Consumer Welfare Fund.
8. I cannot subscribe to the apprehension expressed by the ld. Counsel that such a view would re-open all the cases of refunds already sanctioned. Refund sanctioned, which has not been challenged by way of demand or appeal would acquire finality and such cases cannot be reopened even as per the decisions of the Apex Court. Only where refund issue is open and during the pendency of appeal or adjudication, if the amended law has come into force, that could be applied. This is what has been laid down in ITC case.
9. The case of Oswal Agro Mills -1994 (70) E.L.T. 48 (SC) though not cited before us by the ld. Counsel., in fairness to the appellants, would call for consideration. Firstly, I observe that Oswal Agro Mills did not consider the case of FTC but only the fain Spinners and it is in the context of encashment of bank guarantee by the department, which was not the subject matter of Writ Petition before the High Court and the High Court was in error in ordering renewal of bank guarantee.
Hence they ordered the department to pay back to the Bank the sum realised by encashment. There was no decision to refund the amount to Oswal Agro Mills, overlooking the amended provision.
10. In the result, respectively following the ratio and approach of the Supreme Court in the case of Union of India v. ITC Ltd, I dismiss the appeal.