Telangana High Court
Vst Industries Limited vs The Commissioner Of Central Excise, on 12 June, 2025
Author: P.Sam Koshy
Bench: P.Sam Koshy
* THE HONOURABLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA
+CENTRAL EXCISE APPEAL NO.41 OF 2008
%12-06-2025
# VST Industries Ltd,
Azamabad, Hyderabad.
...Appellant
Vs.
$ Commissioner of Customs & Central
Excise, Hyderabad-II Commissionerate,
7th Floor, Kendriya Shulk Bhavvan,
Basheerbagh, Hyderabad - 500 004 ...Respondent
!Counsel for the Appellant: Ms.L.Maithili
^Counsel for the Respondent : Sri A.Ramakrishna Reddy,
Learned Standing Counsel for
CDEC.
<Gist :
>Head Note:
? Cases referred:
1. 1997 (94) E.L.T. 495
2. 1999 (114) ELT 162 (Tri.)
3. 2023 (385) ELT 94 SC
4. 2023 (384) ELT 626 SC
5. 2010 (252) ELT 502 (Cri)
6. 1997 (89) ELT 247 SC
7. 2006 (203) ELT 532 (SC) para 12
8. 1991 (51) ELT 278
9. Manu/OR/0616/2008, dated 18.03.2008
10. Civil Appeal No.2416 of 2000 & batch, dated 06.08.2003
11. 2003 (156) ELT 161 (SC)
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HIGH COURT FOR THE STATE OF TELANGANA, AT
HYDERABAD
MAIN CASE NO: CENTRAL EXCISE APPEAL NO.41 OF 2008
Between:
VST Industries Ltd,
Azamabad, Hyderabad. .. Appellant
And
Commissioner of Customs & Central
Excise, Hyderabad-II. .. Respondent
DATE OF JUDGMENT PRONOUNCED: 12.06.2025
SUBMITTED FOR APPROVAL:
THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA
1. Whether Reporters of Local news papers Yes/No
may be allowed to see the Judgments?
2. Whether the copies of judgment may be Yes/No
marked to Law Reporters/Journals
3. Whether Their Ladyship/Lordship wish to Yes/No
see the fair copy of the Judgment?
__________________________________________
JUSTICE NARSING RAO NANDIKONDA
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THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA
CENTRAL EXCISE APPEAL NO.41 OF 2008
JUDGMENT:
(per Hon’ble Sri Justice Narsing Rao Nandikonda)
This appeal has been filed under Section 35G of the
Central Excise Act, 1944 (for short, ‘the Act, 1944’) against
the Final Order No.731 of 2007, dated 28.06.2007, in Appeal
No.E/408/2005 on the file of Customs, Excise and Service
Tax Appellate Tribunal, South Zonal Bench, Bangalore,
whereunder and whereby, the appeal filed by the appellant for
refund of claim for an amount of Rs.1,12,30,127/- for the
period from 01.03.1986 to 30.09.1994, was rejected in respect
of excess of duty paid by it on printed shells used as inputs in
manufacture of Cigarettes packed in packets
2. Heard Ms.L.Maithili, learned counsel for the
appellant and Sri. A.Ramakrishna Reddy, learned Standing
Counsel for CDEC, appearing for the respondents.
3. Brief facts of the case are that the appellant is a
limited company registered under the Hyderabad Companies
Act, IV of 1320 Fasli, having its Registered Office and Factory
at Azamabad, Hyderabad. It manufactures cigarettes falling
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under Chapter 24 of the Central Excise Tariff Act, 1985 (for
short, the Act, 1985′). It also manufacture shells which are
consumed captively in packing of cigarettes, which are sold in
packets of 10s or 20s on the basis of MRP printed on such
packets. As per the Act, 1985, the appellant sought
classification of shells under Chapter 49 and filed a
classification list accordingly on 03.03.1986. Upon which,
the jurisdictional Assistant Commissioner vide its letter
C.No.V/48/17/12/86-Vo.II, dated 14.03.1986 classified that
under Chapter sub-heading 4818.13, for which the appellant
vide its letter, dated 14.03.1986 agreed to pay duty @15%
advance, applicable to Chapter sub-heading 4818.13 under
protest subject to the final outcome of the appeal pending on
the issue of classification, which according to the appellant
should be under Chapter 49. It is the further case of the
appellant that since the classification issue was not decided
finally till 1995 and as prices were based on costing method
under Rule 6(b)(ii) of the then Central Excise Valuation Rules,
1975, no final assessment was done. Therefore, the appellant
challenged the Department’s classification by filing appeal
before the Commissioner (Appeals), who upheld the stand of
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the Department. Aggrieved by the said order, the appellant
filed appeal before the Customs Excise & Gold (Control)
Appellate Tribunal (CEGAT), New Delhi. On 31.08.1995,
CEGAT disposed of the appeal vide Final Order Nos.253 to
256/95C holding that the disputed items were classifiable
under sub-heading 4848.90 upto 29.02.1988 and under sub-
heading 4823.90 from 01.03.1988 onwards. The said
classification was accepted by the appellant and sought for
refund of excess duty paid by it by addressing letter, dated
26.12.1995 to the Assistant Commissioner of Central Excise,
Division V, Hyderabad. In the said letter it is stated that
since the dispute between the company and the Department
has been finally resolved by CEGAT, the work sheets based on
reclassification of shells have been constructed for the periods
from 01.03.1986 to 30.09.1994 i.e., from the date of
introduction of Act, 1985 till the closure of shells
manufacturing activity in respondent factory premises, and a
differential duty of Rs.1,12,30,127.47 representing the
difference between the duties paid and the duty payable in
terms of CEGAT order. In response to the said letter, the
Superintendent (Tech), Central Excise, Hyderabad-V Division,
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gave reply vide, letter, dated 03.01.1996 asked the
respondent-company to furnish documents i.e., PLA Register
from March, 86 to March, 94, documentary evidence to prove
that the respondent-company has not passed on the burden
of the Central Excise Duty on its customers as required under
Section 12-B of the Central Excise and Salt Act, 1944 and
also furnish the documentary evidence to prove that they
have followed the procedure while paying duty under protest
as required under Rule 233-B of the Rules, 1944. Thereafter,
on 16.04.1996, the Assistant Commissioner of Central Excise,
Division V, Hyderabad, issued show cause notice to the
appellant stating that on verification of refund claimed by it,
as no documentary evidence is available to prove that the
excise duty paid by it was not passed onto the final customers
and as the said goods were utilized by it for captive
consumption within the factory in manufacture of cigarette,
there is no sale of the goods and requested the appellant to
produce all the evidence upon which they intend to reply in
support of their defence at the time of hearing of the case
The appellant gave reply on 30.05.1996 to the show-cause
notice, dated 16.04.1996, which reads thus:
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cea_41_2008“8) It is out of contention that the principles of
unjust enrichment do not apply in the instant case as the
issue here relates to classification of shells which are only
used as inputs in the manufacture of cigarettes packed in
packets and are not sold by us to the ultimate
consumers. They are only one of the many inputs that go
into the manufacture of cigarettes packed in packets
which we sell to the customers. It is a well settled
principle that where the goods are only used for captive
consumption or as inputs in the manufacture of other
finished goods, the question of unjust enrichment does
not arise.
10. Applying these principles to the present case
the duty paid shells are captively consumed by the
manufacturer of cigarettes. Since, they are not sold to
the consumer to whom the incidence of duty can be
passed on directly together with the right to receive the
refund, the principles of unjust enrichment cannot apply
in this case.
13. It is therefore, contended that as the principles
of unjust enrichment embodied in the Act do not apply to
shells, we are entitled to the refund of the differential
duty as claimed and our Refund claim should be
accordingly allowed.”
4. After receipt of the said reply, the Assistant
Commissioner of Central Excise, Hyderabad, passed an order,
dated 30.05.1997, vide C.No.V/48/18/3/96-R, rejecting
refund claim of the appellant. Against which, an appeal being
A.No.427/97 (H) CE, dated 17.05.1999 was preferred against
the order in Appeal No.57/99 (H-III) CE and the learned
Commissioner of Customs and Central Excise (Appeals) Lal
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Bahadur Stadium Road, Basheerbagh, Hyderabad, dismissed
the said appeal holding that on verification of refund claim in
the instant case, it was noticed that no documentary evidence
is available to prove that excise duty paid on shells was not
passed onto the final customers. The shells were used in
relation to the packing of Cigarettes for the purpose of selling
the same. To arrive value of the cigarettes, normally among
other ingredients, the basic cost of the shells plus central
excise duty would be paid at the relevant time and the same
be taken into account. The appellant has not disputed same.
It appears that the duty paid on shells was included in the
price of the Cigarettes and finally the incidence of duty was
not borne by the appellant. But the burden of payment of
excise duty was shifted onto the final customers. It is further
stated that as per the provisions of Section 12B of Central
Excise & Salt Act, 1944 (for short, ‘the Act, 1944’), every
person who paid the duty of excise on any goods under the
Act shall unless contrary is proved, it is deemed to have
passed on the full incidence of such duty to the buyers of
such goods. Further, it was held that the appellant has
passed on the duty incidence to the final customer and such
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amount so accrued shall be credited to the Consumer Welfare
Fund in terms of Section 11D of the Act, 1944, which reads
as follows:
“7. The appellant is a manufacturer of cigarettes
falling under Chapter 24 of the Central Excise Tariff.
Cigarettes are sold in packets of 10s or 20s on the basis
of MRP printed on such packets with Central Excise
Tariff Act, 1985, which came into effect from 28.02.1986.
The appellant sought classification of shells under
Chapter-49, rate of duty-NIL and filed a classification list
accordingly on 03.03.1986. The jurisdictional Assistant
Commissioner vide letter C.No.V/408/17/12/86-Vol.II,
dated 41.03.1986 classified the same under Chapter sub-
heading 4818.13. The appellant vide its letter, dated
14.03.1986 agreed to pay duty @ 15% advance applicable
to Chapter sub-heading 4818.13 under protest subject to
the final outcome of the appeal pending on the issue of
classification, which according to the appellant should be
under Chapter 49.”
5. As there was no classification decided till 1995,
the appellant is paying duty under protest and there is no
final assessment also done. Further, the appellant challenged
the department’s classification by filing an appeal before the
Commissioner (Appeals), New Delhi, wherein the CEGAT, New
Delhi, vide order No.253 to 256/95-C, dated 31.08.1995
properly classified under chapter sub-heading 4818.90 from
01.03.1986 to 29.02.1988 and under chapter sub-heading
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4823.90 from 01.03.1988 attracting duty @12% which was
later reduced to 10%. As such, re-classification of the appeal
has become final. Subsequent to re-classification, the
appellant filed refund claim for excess amount of
Rs.1,12,30,127/- paid under protest for the period from
01.03.1986 to 30.09.1994. After issuing show-cause notice,
the learned Assistant Commissioner passed an order in-
original bearing C.No.V/48/3/96-R, dated 30.05.1997
rejecting the refund claim under the provisions of Section 11B
and ordered to be deposited in the Consumer Welfare Fund in
terms of Section 11B of the Act, 1944. Against which, the
appellant filed an appeal before the Commissioner of Central
Excise Appeals, who upheld the order in Appeal No.57/99 (H-
III) CE, dated 17.05.1999 rejecting the claim over the
appellant on the purported ground of ‘unjust enrichment.’
The appellant carried the matter in appeal before CESTAT,
who set aside the order and remanded the matter back with a
direction to ascertain whether the duty paid by the appellant
was under protest or not and directed to pass orders afresh.
Thereafter, the Commissioner (Appeals) Hyderabad vide
Appeal No.12/2005 (H-II) CE dated 31.01.2005 rejected the
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entire refund claim on the ground that the payment under
protest was on the question of classification advanced by the
appellant.
6. The main contention of learned counsel for the
appellant is that the assessment made was only provisional
as on 14.03.1986 and the same stood effectively finalized on
17.04.1996 i.e., the date of the Show Cause Notice as to why
refund should not be rejected on the ground of ‘unjust
enrichment’ or at any rate by 30.05.1997. She also
contended that once the assessment is provisional, it remains
provisional in its entirety and cannot be partly provisional
and partly final. In support of her contentions she relied upon
the judgment of the High Court of Madras in Collector of
Central Excise, Madras v. India Tyre Rubber Company
Limited 1, wherein at paragraph No.4 it was held as under:
“We find that the issue that has been referred
to for our consideration is no longer res integra
and the matter is covered by more than one
decision of the Apex Court and the larger Bench
of the Tribunal constituted under the Act. In
the light of the judgment of the Apex Court
reported in Samrat International (P) Ltd. V.
Collector of Central Excise –
1 1997 (94) E.L.T.495 12 PSK,J&NNR,J cea_41_2008 MANU/SC/0544/1992 : 1991ECR19 (SC) and the subsequent decision MANU/CE/0112/1191 which came to be
rendered by the Larger Bench of the Tribunal
under the Act after considering not only the
decision of the Apex Court noticed supra, but
also several other judgments. We have to
answer the question referred to us in the
negative and hold that the provisional
assessment made should for all purposes to be
treated as provisional and not necessarily
provisional in respect of the particular ground
considered. No costs.”
7. She further contended that there is no legal basis
to provisionally assess valuation while treating the
classification separately. Rule 9B of the Rules, 1944,
mandates a single order for finalization as held by CESTAT in
CCE Madras v. Enfield India Ltd 2 . Further, it is settled
position of law that provisional assessment must be finalized
comprehensively covering both classification and valuation
and it cannot be partially finalized as held in appellant’s own
case in CCE, Hyderabad v. VST Industries Limited (Final
order No.A/30848/2018 in Appeal No.E/1219/2010) and
contended that the order dated 30.05.1997, effectively
2
1999 (114) ELT 162 (Tri.)
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concluded the proceedings under Rule 9B(5) of Rules, 1944
on adjusting the provisionally paid duties with the finally
assessed duties, thereby finalizing the provisional
assessment. However, the refund was rejected on the ground
of ‘unjust enrichment.’ She further contended that in the
present case, the principle of ‘unjust enrichment’ is
inapplicable prior to 25.06.1999 as proceedings under Rule
9B of the Rules, 1944 and the issue in this case is no longer
res integra. She also relied upon the judgment of the Hon’ble
Supreme Court in Commissioner of Customs v. Mangalore
Refinery and Petrochemicals Limited 3 reiterating that as
claim for refund is arising out of finalization of provisional
assessment prior to 25.06.1999, the principle of ‘unjust
enrichment’ does not arise. She also relied upon the
judgment of the Hon’ble Supreme Court in CCE v. Hindustan
Zinc Ltd 4 . Though the Department alleged that the
appellant failed to prove that the duty was not passed on to
the customers, however, in the case of CCE. C & ST
Bhubaneswar-I v. Paradeep Phosphates Limited 5, the High
Court agreed with the contention stating that “the assessee
3
2023 (385) ELT 94 SC
4
2023 (384)ELT 626 SC
5
2010 (252) ELT 502 (Ori)
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cannot be said to be guilty of ‘unjust enrichment’ and need
not furnish documents to prove that they have not passed on
the excise burden to customers.” She also further argued
that the said ruling is relevant in the present case for the
reason that the assessment was provisional and the appellant
was not required to provide proof during the provisional
assessment stage. She further argued that the refund
application has been made on 16.12.1995 and it was finalized
before 1997, and as such neither Section 11B of the Central
Excise Act nor the subsequent amendment to Rule 9B of the
Rules, 1944 would be attracted for invocation of the principle
of ‘unjust enrichment.’
8. Further, she also relied on a judgment of the
Hon’ble Supreme Court in Mafatlal Industries Limited v.
Union of India 6 , wherein it expressly held that refunds
arising from provisional assessment adjustments are not
covered under Section 11B Central Excise Act. She also
further argued that the impugned order is erroneous and it
travels beyond the scope of the show cause notice and it is
liable to be set aside. The only allegation raised in the show
6
1997 (89) ELT 247 SC
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cause notice, dated 16.04.1996 is as to why the refund
already determined should not be rejected on the ground of
‘unjust enrichment’ and the show cause notice did not
dispute the provisional assessment or its finalization or the
quantum assessed. The only issue raised was whether the
refund was barred by ‘unjust enrichment.’
9. She also further argued that the CESTAT had no
jurisdiction to introduce such an issue for the first time when
it was neither subject dispute, nor was it part of hearing
before it. The observation was that “these points were not
made before the lower authorities” was also mechanically
mentioned without verifying the records, and by losing sight
of the fact that no authority had ever disputed finalization of
assessment at any stage. She further contended that the
department actively processed the refund claim itself
presupposes that the provisional assessment was finalized.
Therefore, the observation made by the CEGAT in the order
with regard to refund for finalizing classification is erroneous,
as Departmental actions constitute finalization of provisional
assessment, making refund due under Rule 9B (5) of the
Rule, 1944. She further argued that finalization of
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provisional assessment is sine qua non observed by the
Hon’ble Supreme Court in CCE & Customs, Mumbai v. ITC
Limited 7 and she finally argued that the Department cannot
by any stretch of the imagination claim that the assessment
remains provisional after 30 years without concrete evidence.
The refund quantification sheet and RT-12 returns
unequivocally demonstrate that the duties were initially paid
provisionally at 15%, as also endorsed therein and was
always paid under protest. She argued that the CBEC has
issued instructions that provisional assessment should be
closed within 3-6 months vide Clause 2.7 of Circular
No.288/4/97-CX, dated 14.01.1997. For the reasons
mentioned above, the revenue department has not placed on
record at any point of time any evidence as part of the
payments constituted post-clearance under protest. In such
circumstances, the burden of proving ‘unjust enrichment’ lies
on the department. The department having failed to
discharge its burden, cannot improve the doctrine of ‘unjust
enrichment’ and placed reliance on the judgment of the
7
)2006(203) ELT 532 (SC) para 12
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Hon’ble Supreme Court in Kirloskar oil Engines limited v.
Union of India. 8
10. On the other hand, learned Standing Counsel for
the respondent contended that consequent upon finalization
of classification by the Tribunal, the claim of the appellant for
refund was rejected by the Assistant Commissioner under the
provisions of Section 11 B of the Central Excise Act and
ordered the amount to be deposited to Consumer Welfare
Fund. ‘Shells’ are used captively in manufacture and packing
of cigarettes. He further contended that as no evidence was
produced by the appellant as to the value of shell used in the
cigarette packets, the rate of duty included was limited to
10% or 12% only and not 15% which was paid under protest.
He further contended that the appellant was bound to pay
revised duty upon reclassification by CEGAT, he was entitled
to lower rate of duty and the amount of duty so paid excess is
of not refundable unless it can prove the amount of duty so
paid excess. He further submits that the CESTAT was right
in giving finding that the refund claim of the appellant has
not arisen on account of finalization of provisional assessment
8
1991 (51) ELT 278
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and the same arose only on finalization of classification by the
Tribunal. The finding given by CESTAT that the clause
‘unjust enrichment’ would be applicable to the appellant as
refund has arisen out of CEGAT order and not on finalization
of provisional assessment. He further submitted that there is
no substantial question of law in the present appeal and
therefore, the appellant is not entitled for any relief
11. On proper analysis of entire material placed on
record, admittedly, the petitioner’s company is a limited
company registered under Hyderabad Companies Act, IV of
1320 Fasli, having its Registered Office and Factory at
Azamabad, Hyderabad. It is manufacture of cigarettes falling
under Chapter 24 of the Central Excise Tariff. It also
manufactures shells which are consumed captively in packing
of cigarettes. Cigarettes are sold in packets of 10s or 20s on
the basis of MRP. Admittedly, there was a dispute regarding
classification of shells under Chapter 49 which states that the
duty was NIL and subsequently the same was classified under
3.3.86. The Jurisdictional Assistant Commissioner has
classified the same as 48.18.13 and the appellant has already
paid duty. It is not in dispute that @15% in advance under
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sub-heading as per said letter, dated 12.03.1986, he has paid
duty under protest and thus matter was carried to CEGAT
wherein the learned CEGAT has clarified under sub-heading
4818.90 upto 29-02-1988 and under sub-heading 4823.90
from, 01-03-88 onwards and directing the same under
chapter sub-heading 4823.1990 from 01.03.1955 attracting
duty @ 12% which was later reduced to 10%. It is also
admitted that refund claim is on account of decision of the
Tribunal i.e., subject to Section 12-B of the Act of the Central
Excise Act, 1944, reads as under:
“12B. Presumption that incidence of duty has
been passed onto the buyer-
Every person who has paid the duty of excise on
any goods under this Act shall, unless the contrary is
proved by him, he deemed to have passed on the full
incidence of such duty to the buyer of such goods.”
12. The appellant vide letter, dated 14.03.1986 has
agreed to pay duty at the rate of 15% on the claims made for
the period from 01.03.1986 to 13.09.1994. During which
period, the said classification was still limited. The main
contention of the appellant is that the said product was
consumed for the purpose of packaging of cigarettes, they had
definitely paid duty under protest. Pursuant to the order
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passed by the Collector, the appellant is seeking for refund of
excess claim made, as it has not extended the incidence of
such duty to the buyer of such goods. Admittedly, the
cigarettes are only in respect of adjudication of classification
but not the valuation of the said goods. It appears that there
is no finalization of assessment of the goods, and it was
pending only for provisional assessment. Even after
classification, it appears that the revenue Department has not
made any efforts to finalize the assessment. In the absence of
finalization of the assessment, the entire case revolves around
refund of the duty which is paid by the appellant. Since the
said payments were made provisionally and once the tenancy
is fixed, differential duty could be discharged after
certification of the actual cost. It is evident from the record
that there is no finalization of the same.
13. Finalization or evaluation of entire product or the
goods delayed, counsel for the appellant has placed reliance
on the judgment cited above. Once the classification has
been made, the next step is whether refund of duty was under
protest or not. The other aspect is in view of amendment
being made to the Central Excise Act 1984, the aspect of
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cea_41_2008‘unjust enrichment’ came on record. The ‘unjust enrichment’
has come to light and once without finalization of the
provisional assessment, the same cannot be treated as an
unjust enrichment and the same cannot be rejected. The
claim of the petitioners cannot be rejected or refund refused
only on the ground that it is amounts to unjust enrichment.
Once the assessment is provisional, it is deemed to be on all
counts that is not selectively provisional as there is no such
provision in Rule 9(b) of the Rules, 1944. As per provisional
assessment, duty was paid on receipt of provisional
assessment order under protest and the said order is based
on assumptions, which cannot be accepted. It is settled
proposition of law that as on the date, the principle of ‘unjust
enrichment’ is inapplicable prior to 25.06.1999, for such
proceedings, under Rule 9 (b) of the Rules, and the issue is no
longer re integra. The appellant failed to prove that the duty
was not passed on to the customers, as such, it has to be
presumed that the said duty was not passed on to the
customers, and it amounts to ‘unjust enrichment’. Learned
counsel for the appellant made her submissions relying upon
the judgment in C.C.E., C. & S.T., Bhubaneswar-I v.
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cea_41_2008Pradeep Phosphates Limited 9 , wherein the High Court of
Orissa confirmed that the order passed by the Customs,
Excise & Service Tax Appellate Tribunal, dated 25.06.2007
and held that Pradeep Phosphates Limited cannot be said
to be guilty of ‘unjust enrichment’ so that they need not be
called upon to furnish documents to prove that they have not
passed on the excise burden to the customers. Learned
counsel for the appellant contended that the said ruling is
very much relevant to the present case as the very
assessment was provisional. At the stage of provisional
assessment, the Appellant need not prove before the
authorities that there was no such passing of the duty on to
the customers. She also further relied upon the judgment of
Commissioner of Central Excise v. T.V.S. Suzuki Limited,
Hosur 10 and contended that the delay accounted in
finalization of provisional assessment would not defeat the
right of the assessees by subsequent amendment of
25.06.1999. She rightly contended that the refund application
was made on 16.12.1995 and the same was finalized in the
year 1997. It is not the case of the respondent that the said
9
MANU/OR/0616/2008, dated 18.03.2008
10
Civil Appeal No.2416 of 2000 & batch, dated 06.08.2003
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cea_41_2008amendment would be applicable retrospectively in respect of
the claims which are made prior to 1999, i.e., the date when
the amendment has come into force. Neither Section 11B of
the Central Excise Act nor the subsequent amendment to
Section 9B of the Act, 1944 would be attracted for invocation
of the principle of ‘unjust enrichment’ parallel to Mafatlal
Industries case (supra).
14. Section 11B of the Central Excise Act, 1944 reads
as follows:
“11B. Claim of refund of [duty and interest, if any, paid on such
duty].-
(1) Any person claiming refund of any (duty of excise and interest, if any,
paid on such duty) may make an application for refund of such (duty and
interest if any, paid on such duty) to the (Assistant Commissioner of
Central Excise or Deputy Commissioner of Central Excise) before the
expiry of (one year) (from the relevant date) (( in such form and manner)
as may be prescribed and the application shall be accompanied by such
documentary or other evidence to establish that the amount of “(duty of
excise and interest, if any, paid on such duty) in relation to which such
refund is claimed was collected from or paid by him and the incidence of
such (duty and interest if any, paid on such duty) had not been passed
on by him to any other person:
15. Section 9B of the Central Excise Act, 1944 reads
as follows:
“9B. Power of Court to publich name, plac of business etc., of
persons convicted under the Act.- (1) Where any person is convicted under
this Act for contravention of any of the provisions thereof, it shall be competent
for the Court convicting the person to cause the name and place of business or
24
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cea_41_2008residence of such person, nature of the contravention, the fact that the person
has been so convicted and such other particulars as the Court may consider to
be appropriate in the circumstances of the case, to be published at the expense
of such person, in such newspapers or in such manner as the Court may direct.
(2) No publication under sub-section (1) shall be made until the period for
preferring an appeal against the order of the Court has expired without
any appeal having been preferred, or such an appeal, having been
preferred, has been disposed of.
(3) The expenses of any publication under sub-section (1) shall be
recoverable from the convicted person as if it were a fine imposed by the
Court)”
16. As it is observed from the entire material on record
that the excess duty which was paid by the appellant is not
an excess payment and it is only basing on the provisional
assessment made under Section 9B of the Act, 1944.
Therefore, the question of ‘unjust enrichment’ could not
attract for the reason that the Hon’ble Supreme Court in the
case of Commissioner of Central Excise, Chennai v.
T.V.S.Suzuki Ltd 11, wherein it was held that the concept of
‘unjust enrichment’ could not be finalized by way of
provisional assessments. It was also held that the provisions
of sub-rule (5) of Rule 9B erstwhile Central Excise Rules,
1944 cannot be said to be retrospective in operation. The
Hon’ble Supreme Court also introduced sub-rule (5) of Rule
9B of the Rules, 1944. The proposal came into force on
11
2003 (156) E.L.T.161 (S.C)
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25.06.1999 and the authorities concerned and the Hon’ble
Supreme Court have rejected the contention of the
Department that the refund claim should be adjudicated in
accordance with the law as enforced on 25.06.1999 and the
Hon’ble Supreme Court upheld the decision to decide
according to the law laid down in Mafatlal Industry‘s case
(supra), wherein it was held that the burden of proof is passed
onto the Department to show that the appellant has passed
on the duty incident to final customers. The facts and the
relevant material placed before this Court. Undoubtedly, the
said payment was made under protest and subject to
assessment of the said product, the appellant was entitled for
refund the same. But initially, the same was rejected on the
ground that there was an ‘unjust enrichment’, and there is no
proof filed by the appellant to show that the duty paid was
passed on to the consumer. The said aspect of ‘unjust
enrichment’ was neither raised earlier nor proceedings were
initiated as on the date of the finalization of the final
assessment and the same was subsequent to 25.06.1999.
17. In the present case, the refund application is made
on 16.12.1995 and it was not finalized till 1997. As such,
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Section 11 (b) of the Act 1944 is applicable or subsequent
amendment of Rule 9(b) of the Rule, 1944 would be attracted
for invocation of principle of ‘unjust enrichment’. The
contention of the respondent is that the appellant has not
entertained for refund on the ground of ‘unjust enrichment.’
When the same itself is not applicable to the present facts of
the case, the question of unjust enrichment itself is not
applicable. Therefore, the question of burden of proving that
the said duty was not passed on to the customers does not
arise and the said amounts are paid by the appellant under
protest. It is contended that the said product was only for the
captive consumption. As the same is being for the captive
consumption, the contention of the appellant appears to be
just and fair and the same has to be accepted. The intention
of the respondent in raising the plea of ‘unjust enrichment’
which is not even applicable to the present set of facts as the
same is subsequent to the amendment, which clearly shows
that there are mala fides on the part of the respondent. As
rightly held, as per Rule 9B (5) of the Rules, 1944, it does not
prescribe any specific form or application to seek refund of
the claim and that once the provisional assessment has been
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finalized the proper officer has to make the necessary
adjustment. As per Rule 9(d) of the Rules, 1944 as it provides
for an automatic benefit to the assessee upon finalization of
the assessment. In Photographic’s case, this bench has no
hesitation to hold that the provisional assessment was
finalized and the refund must be processed automatically
upon finalization. In the present case, as we said provisional
assessment was already finalized in the year 1997. As
provisional assessment is finalized, the necessary prerequisite
for refund as held by the Hon’ble Supreme Court in CCE &
Customs, Mumbai‘s case.
18. Further, it is specifically stated that the refund
application, which was placed before the Assistant
Commissioner, contains the entire set of documents, such as
tax returns, challans PLA register etc. This bench is of the
opinion that the assessee is entitled to refund of excess duty
paid for finalization of provisional assessment and the
contention of the respondent that the appellant is not entitled
for the refund on the ground of ‘unjust enrichment’ cannot be
accepted for the reasons mentioned above
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19. Accordingly, this bench, after considering the
entire material and after assessing the facts and
circumstances of the case and also the judgments cited, is of
the considered opinion that the appellant has made out a
ground to interfere in the impugned order.
20. Accordingly, the appeal is allowed and the Final
Order No.731 of 2007, dated 28.06.2007, in Appeal
No.E/408/2005 on the file of Customs, Excise and Service
Tax Appellate Tribunal, South Zonal Bench, Bangalore, is set
aside and the respondent is directed to refund the amount of
Rs.1,12,30,127/- along with interest at the rate of 6% per
annum to the appellant from the date of the appellant’s had
made the application for refund till the date of realization.
There shall be no order as to costs.
Miscellaneous petitions, if any, pending in this appeal
shall stand closed.
_________________________________
JUSTICE P.SAM KOSHY
__________________________________________
JUSTICE NARSING RAO NANDIKONDA
Date:12.06.2025
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