Madhya Pradesh High Court
The Commissioner vs M/S National Fertilizers Ltd. on 28 August, 2019
Author: Sanjay Yadav
Bench: Sanjay Yadav, Vivek Agarwal
1
C.E.A. No. 96/2018
[The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited]
HIGH COURT OF MADHYA PRADESH
BENCH AT GWALIOR
DIVISION BENCH:
HON'BLE SHRI JUSTICE SANJAY YADAV
&
HON'BLE SHRI JUSTICE VIVEK AGARWAL
C.E.A. No. 96/2018
The Commissioner, CGST & Central Excise
Vs.
M/s National Fertilizers Limited
********************
Shri Praveen Surange, learned counsel for the appellant.
Shri R. Krishna, learned counsel with Shri Pawan Dwivedi, learned
counsel for the respondent.
********************
Whether approved for reporting : Yes/No
JUDGMENT
(28/08/2019) Per Justice Sanjay Yadav:
[1] This appeal by revenue is directed against the final order No. ST/A/57553-57555/2017-CU(DB) dated 27/10/2017.
[2] Preliminary objection is taken by the assessee as to maintainability of appeal that within the meaning of Section 35G(1) of the Central Excise Act, 1944 an appeal will lie only against an order where the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purpose of assessment is not in question.2 C.E.A. No. 96/2018
[The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] [3] The preliminary objection precisely turns on the provisions contained under Section 35G(1) of Act of 1944 which envisages:
"35G. Appeal to High Court. - (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law."
[4] Relevant facts are that the assessee is engaged in manufacture of Urea (Nitrogenous Fertilizer) which is sold to ultimate customers. Assessee filed a 'Form-R' vide their letter reference No. NFVP/F&A/PUR/S.Tax/Refund on 09/05/2011 claiming thereby refund of service tax amount to Rs. 1,95,37,953/- paid by them to (i) M/s Gas Sale and Transportation of APM Gas (Rs. 1,34,54,695/-), (ii) Gas Sale and Transportation of PMT Gas (Rs. 28,63,279/-), (iii) Gas sale and Transportation of SPOT Gas (Rs. 4,94,935/-) and (iv) Rs.27,25,044/-, for the period 20/11/2008 to 15/06/2010 in respect of claim No. (i) to (iii) and April 2009 to March 2010 for (iv) with regard to supply and Transportation Agreement.
[5] The service tax was paid on the Transportation of Natural Gas on provisional rate basis and vide its order No. TO/01/2010 and To/02/2010 dated 19/04/2010, the Petroleum and Natural Gas Regulatory Board has revised the Transmission Charges w.e.f. 20/11/2008.
3C.E.A. No. 96/2018
[The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] [6] The refund claimed led to issuance of show cause notice on 08/11.07.2011 observing that:
(a) invoice covered in refund claim which were issued prior to 09/05/2010 are hit by time limit of one year prescribed under Section 11B of the Act of 1944.
(b) No documentary proof of payment of service tax to Government account, as required under the statute has been provided.
The letter dated 31/03/2011 of M/s GAIL enclosing therewith the copy of letter dated 26/11/2010 addressed to the Superintendent, Central Excise & Customs Guna, can neither be equated with duty paying documents nor can be accepted as proof of payment of that portion of service tax which has been claimed as refund. Therefore, refund cannot be granted in absence of valid documentary proof of payment of service in Government account.
(c) once the service provided i.e. M/s GAIL have themselves assessed their service tax liability and paid the service tax as per statutory provisions, it is not open for the service provider to reassess the liability as they have not opted for provisional assessment. Thus neither the reduced value of services can be accepted nor can refund be granted.
(d) As per the provisions of Section 12B the Noticee are required to submit documentary proof that incidence of tax has not been passed on to any other person. No such proof has been provided 4 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] by them. The entry of recoverable amount of Service Tax shown in their Books of Account does not prove that incidence has not been passed on to the ultimate buyer of their manufactured products. The fact is that the Noticee has been using the gas, the transportation of which is subjected to tax, in or in relation to manufacture of fertilizers. The said fertilizers are sold at the subsidized rates as per Govt. policy and the differential cost with certain element of profit is paid by the Government to such fertilizer manufacturers. The Noticee have not provided any documentary proof to show that while working out the cost of production of their product and claiming subsidy from Government, they have not added, in the cost of production of their product, the element of Service Tax which sought to be refunded. Hence, the assertion of the Noticee that they have themselves borne the incidence of tax is not acceptable as not supported by documentary evidence, therefore, refund cannot be granted to the Noticee.
[7] The notice culminated into an order on 24/10/2011 rejecting the claim for refund for the self same reasons which finds mention in the notice. Commissioner (Appeals), vide order dated 14/03/2012 affirmed the order rejecting the refund.
[8] As regard to limitation, the Appellate Authority observed:-
"I find that regarding issue of time limit, the provisions of Section 11B of the Central Excise Act, 1944 are explicitly clear. The appellant's contention that the 5 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] rate for transportation of gas was fixed by PNGRB on provisional basis, which was finalized subsequently, and therefore, relevant date for computing the time limit would be the date of such reduction as provided under Section 11B(b)(d) of the Central Excise Act, 1944, is not sustainable as in the case of the appellant, the agreement for supply of gas was with IOCL, who in turn entered into an agreement with GAIL for transportation of gas. Since in this case, the Service Tax paid by M/s. GAIL to the Govt. of India, for which the appellant are claiming for refund. If the rate of transportation of gas claimed by the appellant was provisional; the Service Tax should have also been paid provisionally by M/s. GAIL. Whereas, in this case M/s. GAIL during the disputed period had paid Service Tax finally to the Govt. of India and assessed their Service Tax liability finally as per their ST-3 Returns submitted by them to the Department. Besides this, neither M/s GAIL requested for provisional assessment nor such order of provisional assessment had been issued to them, therefore, the assessment of M/s. GAIL cannot be treated as provisional. Accordingly, relevant date as provided under Section 11B(b)(d) of the Central Excise Act, 1944 for computation of time limit shall not be applicable to this case. Apart from this, the relevant date as prescribed under Section 11B(b)(d) of the Central Excise Act, 1944 is applicable to such cases where the rate of duty fixed by the Central Government by Notification in their Official Gazette to discharge duty liability for certain period and before the expiry of that period, such rates are reduced, then only the relevant date shall be the date of reduction, which is not the case here. In this case, it is not the rate of duty fixed by the Central Government but the charges of transportation of gas through pipeline had fixed by the Petroleum & Natural Gas Regulatory Board (PNGRB) as claimed by the appellant."
[9] Further while affirming the findings qua the proof that service provider, M/s GAIL in the instant case, deposited the service tax with the Government and passing of burden to customer, the Appellant Authority respectively found:-
6C.E.A. No. 96/2018
[The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] "6.2 I find that the appellant's contention regarding non-
submission of proof of payment of Service Tax is that first of all the service tax payment was the primary obligation on the part of M/s GAIL. The appellant was not obliged to pay service tax to the Central Govt., therefore, they cannot produce the original challan for proof of payment of Service Tax and the particular of service tax paid by M/s. GAIL to Government can be verified from the service tax returns filed by M/s GAIL with the Department. According to the appellant, this has to be got verified by the concerned Range which also comes under the jurisdiction of the adjudicating authority. The appellant had also contended that the factual verification of service tax payment of Range Superintendent of M/s GAIL is not difficult or impossible. According to the appellant even the CBEC's Manual of Supplementary Instructions stated in Chapter 9 Para 4 thereof that Report of the Superintendent of Central Excise should be obtained by the Divisional Office in refund cases. Further, in terms of Section 11B, refund can even be claimed by the service user or purchase of the goods user. The fact of duty/ tax burden having been paid can only be proved with reference to payment made by the appellant to IOCL/ GAIL as per the agreements which in the present case are not in dispute.
I find that the above contention of the appellant regarding non-submission of proof of payment of Service Tax is not convincing and acceptable as it is a settled principle of law that in case of refund whosoever claims has to substantive their claim that they are eligible for the claim on the basis of documentary evidence for payment of the amount of refund claimed by the appellant. The appellant instead of discharging their legal obligation to substantiate their claim by producing the documentary evidence of the payment of Service Tax made for which refund had been claimed and rejected by the adjudicating authority, they had simply suggested the way of Service Tax amount for which refund claim can be verified by the Department, which is neither legal nor practical, therefore not acceptable.
6.3 I find that the appellant's contention regarding the issue of unjust enrichment is that they had already produced a Chartered Accountant Certificate attached as part of their refund claim where the factual circumstances had been clearly and fully explained by the Chartered 7 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] Account and the appellant had also transferred the corresponding amount of refund claim to "Service Tax recoverable from Service Tax Department".
I find that the burden was on the appellant to discharge that the service tax paid by them had not been passed on to their customer on the basis of the documentary evidence upto the satisfaction of the adjudicating/ departmental authority, which they failed to do. In this context, reference is invited to the judgment of Hon'ble Supreme Court in the case of Solar Pesticides of India, reported in 2000 (116) ELT 401 (SC), wherein the Hon'ble Apex court had decided that the duty suffered on input or raw material consumed in the manufacture of final product which are sold to buyer deemed to have passed on the burden of duty suffered on input/ raw material as it forms the part of the costing of the final product. Similarly, in this case, the urea manufactured by using the Gas/ inputs supplied through pipeline and value of the Gas along with Service Tax became cost of the Urea, value thereof have been realized from the buyers and thus passed on the burden of service tax paid to their buyers. Therefore, any adjustment, by issue of credit note or any other means subsequent to clearance of the goods have no relevancy as has been held by the Hon'ble Supreme Court in the case is Hindustan Processors Ltd. Vs. CCE, reported in 2005 (118) ELT A-181 (S.C.)"
[10] In an appeal by the assessee, the CESTAT, however, reversed these orders. It found:-
"6. We note that on the question of limitation, the decisions relied upon by the appellant are applicable to the facts of the present case. The taxable value was not final and the same is determined by a statutory authority in terms of Petroleum and Natural Gas Regulatory Board (Determination Of Natural Gas Pipeline Tariff) Regulation 2008. The Board, which was constituted under the Petroleum and National Gas Regulatory Board Act, 2006 is entrusted with fixing the tariff, determination the actual tariff, which are to be followed by the gas companies. In such situation, it is apparent that the service tax payment is on a provisional value. The tariff is managed by statutory Authority as per law passed 8 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] by Parliament. As such, following the ratio of the Tribunal in the above mentioned decisions, we hold that the limitation has to be accordingly reckoned and the claims are to be processed.
7. Regarding the evidence of payment of service tax to the Government, the appellant claimed that the provider of service has given a certificate to this effect. These are Public Sector Undertakings and have categorically stated that about the payment of service tax. We note that, if need be, such payment can be cross- verified by the Original Authority with jurisdictional officer in order to satisfy the correctness of the claim. Similarly, the appellant claimed that they are not barred by the legal principles of undue enrichment. Their accounts as well as supporting certificate by the Chartered Accountant is to the effect that this amount is shown as receivables from the Government and not passed on to any other person. In such situation, we find that there is no applicability of concept of undue enrichment. The accounts of the appellant can be verified in this regard."
[11] The first and foremost question is whether the issue relates to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment as would bar jurisdiction of this Court. It is stressfully submitted by learned counsel for the respondent that the matter related to value of the services, i.e., the respondent had paid service tax on a higher value at which the service provider, M/s GAIL raises bills which got reduced subsequently due to downward revision in the values. Respondent relies on the decision by Division Bench of Allahabad High Court in Commr. of Cus., C. Ex. & Service Tax Vs. Jubilant Life Sciences Ltd: 2014 (306) ELT 212 (All.) and Division Bench judgment by High Court of Karnataka in CCE Mangalore Vs. 9 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] Mangalore Refineries & Petrochemicals Ltd : 2011 (270) ELT 49 (Kar.). These decisions besides respective facts turns on the decision by the Supreme Court in Navin Chemicals Mfg. & Trading Co. Ltd. Vs. Collector of Customs: 1993 (68) ELT 3 (SC); wherein while interpreting Section 129C of the Customs Act (wherein sub-section (3) contained similar expression as contained under Section 35G(1) i.e. "Every appeal against a decision or order relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment shall be heard by a Special Bench constituted by the President for hearing such appeals and such Bench shall consist of not less than two members and shall include at least one judicial member and one technical member"), their Lordships observed that where the appeal involves the determination of any question that has a relation to the rate of customs duty for the purposes of assessment that appeal must be heard by a Special Bench. And that "questions relating to the rate of duty and to the value of goods for purposes of assessment are questions that squarely fall within the meaning of the said expression. A dispute as to the classification of goods and as to whether or not they are covered by an exemption notification relates directly and proximately to the rate of duty applicable thereto for purposes of assessment. Whether the value of goods for purposes of assessment is required to be increased or decreased is a question that relates directly 10 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] and proximately to the value of goods for the purposes of assessment. The statutory definition of the said expression indicates that it has to be read to limit its application to cases where, for the purposes of assessment, questions arise directly and proximately as to the rate of duty or the value of goods". Hon'ble Supreme Court as evident, was dwelling on the aspect where the assessee was granted an advance import licence for the import of Crude Emetine under a duty exemption scheme (DEEC) which required the assessee to export the goods after processing them. The goods that were imported by the assessee was found, on chemical analysis performed at the request of Customs Authorities, to contain emetine hydrochloride, moisture and other impurities. The Additional Collector of Customs held that the goods imported being emetine hydrochloride, the license was not valid for the same. Accordingly, ordered that it being not an importation for individual sale and profit in India, but an importation under DEEC Scheme whereunder importers are bound to re-export Emetine Hydrochloride, B.P. Grade.
[12] Similar was the controversy in Jubilant Life Sciences Ltd. (supra) wherein dispute related to determination of the status of the Unit as to whether it is a EOU or a DTA as on 31/03/2011 when the duty was demanded on finished goods lying in stock. And as to rate of duty whether applicable as per Section 3(1) of the Act of 1944. It is accordance with Central Excise Tariff Act, 1985 or under proviso 11 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] clause (ii), the determination of rate has to be in accordance with Customs Tariff Act, 1975 and Excise Tariff Act, 1985. And that the determination of valuation for the purposes of assessment under Section 4, read with Rules 4, 5 and 8 at the time of removal of excisable goods. And whether in case of EOU (Export Oriental Undertaking) the valuation of goods has to be done as per Section 14 of the Customs Act, 1962. Whereon it was found that all issues were intrinsically linked and connected to the adjudication of an issue falling within the scope of Section 35L of 1944 Act under which an appeal would lie only before the Supreme Court. [13] Similar was the issue in Mangalore Refineries & Petrochemicals Ltd. (supra) wherein the controversy was in relation to manufacture of Lower Sulphur Heavy Stock (LSHS) captively consumed for the generation of steam, but was found being diverted for purposes other than the use in or in relation to the manufacture of petroleum product. It was found being used.
[14] In the case at hand, the controversy does not relate to either classification of service availed/provided, nor the rate at which the service is availed/provided. Because the transmission charges are filed by the Petroleum and Natural Gas Regulatory Board. The controversy as adverted supra is as to whether on the basis of the alleged credit note given by the service provider, M/s GAIL, the assessee is entitled for the refund de hors stipulations contained in 12 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] Section 11B and Section 12B of 1944 Act.
[15] In view whereof, the preliminary objection qua sub-section (1) of Section 35G of 1944 Act that the appeal is not tenable is negatived. [16] Another objection that in one of the refund claims involving Rs.1,44,10,336/- the Revenue had already granted refund as a result of order in Appeal No. IND-CEX-000-APP-305-14, dated 14/10/2014 passed by the Commissioner (Appeals) Indore and the Revenue has not gone in appeal challenging the order of refund. The submissions are taken note of and are rejected for the reasons that the present case besides limitation under Section 11B also turns on Section 12B. Whereas, the case referred to relates to only limitation under Section 11B. True it is that the order in appeal referred to was dwelling on three issues, viz (i) the claim is hit by limitation in terms of Section 11B of the Central Excise Act, 1944; (ii) the appellant had failed to produce the proof of payment of duty; (iii) the appellant had failed to prove that the burden of tax has not been passed on to the buyer. There is no material on record to establish that the assessee has not passed the burden of tax to their customers in response to the show cause notice. The order rejecting the claim for refund reveals discarding of Chartered Accountant's certificate dated 27/05/2011 AB/AC3 that as per the provisions of Section 12B, the Noticee are required to submit documentary proof that incidence of tax has not been passed on to any other person. No such proof has been provided by them. The entry of 13 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] recoverable amount of Service Tax shown in their Books of Account as per the Chartered Accountant Certificate dated 27/05/2011 of Shri Pawan Rathi does not prove that incidence has not been passed on to the ultimate buyer of their manufactured products. The fact is that the Noticee has been using the gas purchased by M/s NFL, the transportation of which was done by M/s GAIL is subjected to Service Tax and claimed to have paid Service Tax thereon the said gas were used in or in relation to manufacture of fertilizers. The said fertilizers are sold at the subsidized rates as per Government Policy and the differential cost with certain element of profit is paid by the Government to such fertilizer manufacturers. The Noticee have not provided any documentary proof to show that while working out the cost of production of their product and claiming subsidy from Government, they have not added, in the cost of production of their product, the element of Service Tax which sought to be refunded. Hence, the assertion of the Noticee that they have themselves borne the incidence of tax is not acceptable as not supported by documentary evidence, therefore, refund cannot be granted to the Noticee.
[17] In view whereof the assessee is not benefited from the decisions in Birla Corpn. Ltd. Vs. CCE [(2005) 186 ELT 266 (SC)], Indian Oil Corpn. Ltd. Vs. CCE [(2006) 76 ELT 548 (SC)] and Jayaswals Neco Ltd. Vs. CCE [(2006) 195 ELT 142 (SC)].
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[The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] [18] In view whereof, the second contention also fails. [19] Now coming to the merit of the matter. It is observed that issue involved in the matter relates to:-
(a) Can the assessee make a 'claim for refund' without documentary evidence for payment of the amount of refund claim stating that they are not obliged to pay service tax to the Central Government?
(b) Whether there is any relevancy in making adjustments (refund claim of service tax) by issue of credit note or any other means subsequent to clearance of goods when the burden of Service tax payment is passed on?
(c) Whether limitation period prescribed in Section 11B of Central Excise Act, 1944 is applicable in the present facts of the matter wherein service provider M/s GAIL (India) Ltd. Guna, M.P. has paid service tax finally to the Government of India?
(d) Whether the principle of undue enrichment is applicable to the present claim of refund of service tax by the respondent?
[20] We, however, observe that the CESTAT has cryptically decided the appeal which is apparent from paragraphs 6 and 7 of the impugned order. By observing that since tariff is managed by the statutory body 15 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] to be followed by the gas companies and the service tax payment is provisional and therefore with the determination of final rate, a right accrues in the assessee; therefore, the limitation is to be construed accordingly. Apparently, the Tribunal glossed over the fact that the M/s GAIL had not sought a provisional assessment and it was not its case that on final assessment that there is a determination that the service tax paid is on the higher side and therefore it should revert to the receiver of service.
[21] Dwelling on the issue as to "whether a claim for refund after final assessment is governed by Section 11B of the Central Excise Act, 1944?, their Lordships in Commissioner of Central Excise, Mumbai-II v. Allied Photographics India Ltd. [(2004) 4 SCC 34], held:-
"8. On 20.9.1991, the above Section 11-B underwent a drastic change vide Central Excises and Customs Laws (Amendment) Act 40 of 1991 (hereinafter referred to as "the Amendment Act"). By the Amendment Act, the concept of unjust enrichment as undeserved profit was introduced. We reproduce herein below amended Section 11-B:
"11-B. Claim for refund of duty.- (1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months 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 (including the documents referred to in Section 12-A) as the applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was 16 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] collected from, or paid by, him and the incidence of such duty had not been passed on by him to any other person:
Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act:
Provided further that the limitation of six months shall not apply where any duty has been paid under protest.
(2) If, on receipt of any such application, the Assistant Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund:
Provided that the amount of duty of excise as determined by the Assistant Commissioner of Central Excise under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to
(a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
(b) unspent advance deposits lying in balance in the applicant's account current maintained with the Commissioner of Central Excise;
(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act;
(d) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person;
(e) the duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other person;
(f) the duty of excise borne by any other such 17 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] class of applicants as the Central Government may, by notification in the Official Gazette specify:
Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of duty has not been passed on by the persons concerned to any other person.
(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2).
Explanation. For the purposes of this section,-
* * *
(B) "relevant date" means
* * *
(f) in any other case, the date of payment of
duty."
9. According to Statement of Objects and Reasons for enacting the Amendment Act, the Public Accounts Committee recommended introduction of suitable legislation to amend the said Act to deny refunds in cases of unjust enrichment. Under the amended Section 11- B(3) of the said Act, notwithstanding anything to the contrary in any judgment, decree, order or direction of the appellate Tribunal or any Court, no refund was to be made except in accordance with Section 11-B(2) of the said Act. Further, there was substitution of sub-clause (e) to explanation B to section 11B(1) by which the original sub- clause (e) was deleted and substituted by new sub- clause (e) under which in cases where duty has been passed on by the manufacturer to the buyer, the relevant date for computing the period of limitation would commence from the date of purchase of goods by the buyer. At this stage, it is important to note that although sub-clause (e) as it stood prior to 20.9.1991 dealt with the period of limitation in cases of refund of duty paid under provisional assessment, the substantive provision for provisional assessment of duty was Rule 9-B. Therefore, even with the deletion of old sub-clause (e), Rule 9-B 18 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] continued during the relevant period. The deletion of sub- clause (e) and continuation of Rule 9-B shows that the Section 11-B (as amended) applied to claiming of refunds where the burden was on the applicant to apply within time and prove that the incidence of duty has not been passed on whereas Rule 9-B covered cases of ordering of refund/making of refund, where on satisfaction of the conditions, the concerned officer was duty bound to make the order of refund and in which case question of limitation did not arise and, therefore, there was no requirement on the part of the assessee to apply under Section 11-B. Lastly, Rule 9-B referred to payment of duty on provisional basis by the assessee on his own account and, therefore, in cases where the manufacturer has been allowed to invoke this rule and refund accrues on adjustment under Rule 9-B(5) that refund is on the account of the manufacturer and not on the account of the buyer. If one reads Section 11 on one hand and Rule 9-B on the other hand, both indicate payment by the assessee on his own account and refund becomes due on that account alone.
10. In the light of what is stated above, we now quote hereinbelow para 104 of the judgment of this Court in the case of Mafatlal Industries Ltd. (supra):
"104. Rule 9-B provides for provisional assessment in situations specified in clauses (a),
(b) and (c) of sub-rule (1). The goods provisionally assessed under sub-rule (1) may be cleared for home consumption or export in the same manner as the goods which are finally assessed. Sub-rule (5) provides that "when the duty leviable on the goods is assessed finally in accordance with the provisions of these Rules, the duty provisionally assessed shall be adjusted against the duty finally assessed, and if the duty provisionally assessed falls short of or is in excess of the duty finally assessed, the assessee shall pay the deficiency or be entitled to a refund, as the case may be". Any recoveries or refunds consequent upon the adjustment under sub-rule (5) of Rule 9-B will not be governed by Section 11-A or Section 11-B, as the case may be. However, if the final orders passed under sub-rule (5) are appealed against or questioned in a writ petition or suit, as the case may be, 19 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] assuming that such a writ or suit is entertained and is allowed/decreed - then any refund claim arising as a consequence of the decision in such appeal or such other proceedings, as the case may be, would be governed by Section 11-B. It is also made clear that if an independent refund claim is filed after the final decision under Rule 9-B(5) reagitating the issues already decided under Rule 9-B- assuming that such a refund claim lies and is allowed, it would obviously be governed by Section 11-B. It follows logically that position would be the same in the converse situation."
11. At the outset it may be pointed out that in para 104 there is nothing to suggest that payment of duty under protest does not attract bar of unjust enrichment. Para 104 only states that if refund arises upon finalization of provisional assessment, Section 11-B will not apply.
12. In the present case, reliance was placed by the respondent M/s APIL on the above para in support of its contention that payment of duty under protest and payment of duty under provisional assessment are both "on account" payments under the Act. We do not find any merit in this argument. As discussed, there is a basic difference between duty paid under protest and duty paid under Rule 9-B. The duty paid under protest falls under Section 11-B whereas duty paid under provisional assessment falls under Rule 9-B. That Section 11-B deals with claim for refund whereas Rule 9-B deals with making of refund, in which case the assessee has not to comply with Section 11-B. Therefore, Section 11-B and Rule 9-B operate in different spheres and, consequently, in para 104 of the said judgment, it has been held that in cases where duty is paid under Rule 9-B and refund arises on adjustment under Rule 9-B, then such refund will not be governed by Section 11-B. In the said para, it has been clarified that if an independent refund claim is made after adjustment on final assessment under Rule 9- B(5), agitating the same issues, then such claim would attract Section 11-B. This is because when the assessee makes an independent refund claim after final orders under Rule 9-B(5), such application represents a claim for refund and, it would not come in the category of making of refund and therefore, the bar of unjust enrichment would apply. Hence, there is no merit in the 20 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] contention of the respondent M/s APIL that although in this case duty was paid under protest, there was no difference between such payment and duty paid under provisional assessment under the said Act. This argument was obviously advanced because unless the two payments are equated as contended, the respondent M/s APIL was required to comply with Section 11-B. In this matter, duty has been paid under protest. It is the case of the respondent M/s APIL that since such payment was similar to payment under Rule 9-B, the respondent M/s APIL was not required to comply with Section 11-B. In the light of the discussion hereinabove, we hold that the respondent was bound to comply with Section 11-B. Lastly, in any event, the application dated 11.2.1997 fell in the category of refund claim being made after finalization of assessment of NIIL and, therefore, Section 11-B had to be complied with in terms of para 104 of the above judgment in the case of Mafatlal Industries Ltd. (supra). For abovestated reasons, since there was failure to comply with Section 11-B, the respondent was not entitled to refund.
13. The point which still remains to be decided is whether the respondent herein was entitled to refund without complying with Section 11-B of the Act on the ground that it had stepped into the shoes of NIIL (manufacturer) which had paid the duty under protest. It was argued on behalf of the respondent that NIIL had paid the excise duty under protest pending final assessment, which was ultimately decided in favour of NIIL and since NIIL had sold the product to the respondent herein, the respondent was entitled to the benefit of the second proviso to Section 11-B(1) which inter alia stated that limitation of six months shall not apply where duty had been paid under protest. We do not find any merit in this argument. In the case of Bombay Tyre International Ltd. (supra), it has been held by this Court that Section 3 of the said Act is a charging section whereas Section 4 is a computation section which covers assessment and collection of excise duty. That the basis of assessment under Section 4 was the real value of excisable goods which included manufacturing cost and manufacturing profit but excluded selling cost and selling profit. That the price charged by the manufacturer for sale of the goods represented the real value of the goods for assessment of excise duty. In the case of Atic 21 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] Industries Ltd. v. H. H. Dewa, Asstt. Collector of Central Excise [AIR 1975 SC 960], this Court has held that the resale price charged by a wholesale dealer who buys goods from the manufacturer cannot be included in the real value of excisable goods in terms of Section 4 of the said Act. Therefore, it is clear that the basis on which a manufacturer claims refund is different from the basis on which a buyer claims refund. The cost of purchase to the buyer consists of purchase price including taxes and duties payable on the date of purchase (other than the refund which is subsequently recoverable by the buyer from the Department). Consequently, it is not open to the buyer to include the refund amount in the cost of purchase on the date when he buys the goods as the right to refund accrues to him at a date after completion of the purchase depending upon his success in the assessment. Lastly, as stated above, Section 11-B dealt with claim for refund of duty. It did not deal with making of refund. Therefore, Section 11-B(3) stated that no refund shall be made except in terms of Section 11-B(2). Section 11-B(2)
(e) conferred a right on the buyer to claim refund in cases where he proved that he had not passed on the duty to any other person. The entire scheme of Section 11-B showed the difference between the rights of a manufacturer to claim refund and the right of the buyer to claim refund as separate and distinct. Moreover, under Section 4 of the said Act, every payment by the manufacturer whether under protest or under provisional assessment was on his own account. The accounts of the manufacturer are different from the accounts of a buyer (distributor). Consequently, there is no merit in the argument advanced on behalf of the respondent that the distributor was entitled to claim refund of "on account"
payment made under protest by the manufacturer without complying with Section 11-B of the Act."
[22] Recently, in Steel Authority of India vs. Commissioner of Central Excise, Raipur; Civil Appeal Nos.2150, 2562/2012, 600, 1522-23 and 599/2013 decided on 08/05/2019, it is held:
"9. At this juncture we think it apposite to refer to the facts in MRF case (MRF Limited v. Collector of Central 22 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] Excise, Madras). MRF Case was decided on 12.3.1997 and it is reported in 1997 (5) SCC 104. The appeal was filed in this Court against the order passed by the Tribunal dated 24.9.1986. By the impugned order the assessee's claim for refund of excess duty paid on differential price on the date of removal and the reduced price was rejected. The case set up by the assessee was that the price list was approved on 14.5.1983. Subsequently, there was resistance by the consumers. The Ministry of Commerce, Government of India, thereupon directed the manufacturer- assessee pursuant to a decision taken in a meeting of Manufacturers to bring down the prices to the pre 14.5.1983 level. On the basis of the same a difference in the prices arose. This led to a claim for refund. The Tribunal was of the view that the prices at the time of removal alone mattered. The subsequent reduction in the prices for whatever reason was totally irrelevant. Thereafter, the court proceeded to hold as follows:
"2. We have heard the learned counsel for the assessee. 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 insofar as the liability to payment of excise duty was concerned. This is the view which was taken by the Tribunal in the case of Indo Hacks Ltd. V. CCE (1986) 25 ELT 69 (Trib) and it seems to us that the Tribunal's view that the duty is chargeable at the rate and price when the commodity is cleared at the factory gate and not on the price reduced at a subsequent date is unexceptionable. Besides as rightly observed by the Tribunal the subsequent fluctuation in the prices of the commodity can have no relevance whatsoever so far as the liability to pay excise duty is concerned. That being so, even if we assume that the roll back in the price of tyres manufactured by the appellant Company was occasioned on account of the 23 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] directive issued by the Central Government, that by itself, without anything more, would not entitle the appellant to claim a refund on the price differential 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. That being so, we see no merit in this appeal brought by the assessee and dismiss the same with no order as to costs."
36. We have noticed that in this case admittedly that at the time goods were removed the price was not fixed. The Assessee was fully conscious of the fact that it was subject to variation. Assessee must be imputed with knowledge that the value it was declaring was amenable to upward revision. The circumstances were indeed clearly both apposite and appropriate for the Assessee to invoke the provisions of Rule 7 and seek an order for provisional assessment. In fact, take the example of manufacturer A and manufacturer B. Both remove goods under contracts which contain escalation clauses. Manufacturer A invokes Rule 7. It seeks permission for removal of goods on provisional assessment. Though an order of final assessment has to be passed within a period of time it is capable of being extended without any time limit. Manufacturer-A on the basis of upward revision of the price with retrospective effect and acknowledging the value to be the value as provisionally assessed and as enhanced by the escalation arrived at under the escalation clause pays the duty when the escalation comes into effect on the difference in the value under Rule 7. Apart from payment of the differential excise duty manufacturer A becomes also liable to pay interest from the date when the escalation would come into play on the arrival at the higher price having retrospective operation. Manufacturer B in identical facts clears the goods on the basis of self-assessment even though he is fully aware that the value of the goods which is paid is not fixed and is amenable to upward revision. He deliberately chooses not to go in for provisional assessment. Thereafter, he pleads that though he was aware that the value is not fixed and the prices on removal was tentative and was amenable to change since he has paid duty on the tentative value he is not liable to pay interest on the value of the goods on the differential duty which he is 24 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] admittedly liable to pay. Is it contemplated ?"
[23] Their Lordships further observed:-
"63. We are of the view that the reasoning of this Court in the order referring the cases to us (to this Bench) that for the purpose of Section 11AB, the expression "ought to have been paid" would mean the time when the price was agreed upon by the seller and the buyer does not square with our understanding of the clear words used in Section 11AB and as the rules proclaim otherwise and it provides for the duty to be paid for every removal of goods on or before the 6th day of the succeeding month. Interpreting the words in the manner contemplated by the Bench which referred the matter would result in doing violence to the provisions of the Act and the Rules which we have interpreted. We have already noted that when an assessee in similar circumstances resorts to provisional assessment upon a final determination of the value consequently, the duty and interest dates back to the month "for which" the duty is determined. Duty and interest is not paid with reference to the month in which final assessment is made. In fact, any other interpretation placed on Rule 8 would not only be opposed to the plain meaning of the words used but also defeat the clear object underlining the provisions. It may be true that the differential duty becomes crystalised only after the escalation is finalized under the escalation clause but it is not a case where escalation is to have only prospective operation. It is to have retrospective operation admittedly. This means the value of the goods which was only admittedly provisional at the time of clearing the goods is finally determined and it is on the said differential value that admittedly that differential duty is paid. We would think that while the principle that the value of the goods at the time of removal is to reign supreme, in a case where the price is provisional and subject to variation and when it is varied retrospectively it will be the price even at the time of removal. The fact that it is known, later cannot detract from the fact, that the later discovered price would not be value at the time of removal. Most significantly, Section 11A and Section 11AB as it stood at the relevant time did not provide read with the rules any other point of time when the amount of duty could be said to be payable and so equally the interest. We would concur with the views 25 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] expressed in SKF case (supra) and International Auto (supra). We find no merit in the appeals. The appeals will stand dismissed."
[24] In another recent judgment in Western Coalfields Ltd. Vs. Commissioner of Central Excise Trichy, Madurai [AIR 2019 SC 1069], it is held:
"12. Section 11B deals with the claim of refund of duty as paid on his own accord by any person for refund of such duty to the competent authority before the expiry of six months from the relevant date as prescribed but where the duty was paid under protest in terms of the 2nd proviso to Section 11B(1), the period of limitation may not apply. Although the buyer can also apply for refund provided the duty of excise is borne by the buyer and he had not passed on the incidence of such duty to any other person as referred to under Section 11B(2)(e) and the application has been moved within the period of six months from the relevant date of purchase of the goods by such person in terms of Section11B(5)(B)(e) of the Act. The scheme of Section 11B makes a distinction between right of the manufacturer to claim refund from right of the buyer to claim refund treating them separate and distinct for making an application for refund exercising their right under Section 11B of the Act and it has been examined by the three-Judge Bench of this Court in Commissioner of Central Excise, Mumbai-II v. Allied Photographics India Ltd. case (supra) as under:--
"Therefore, Section 11-B(3) stated that no refund shall be made except in terms of Section 11-B(2). Section 11-B(2)(e) conferred a right on the buyer to claim refund in cases where he proved that he had not passed on the duty to any other person. The entire scheme of Section 11-B showed the difference between the rights of a manufacturer to claim refund and the right of the buyer to claim refund as separate and distinct. Moreover, under Section 4 of the said Act, every payment by the manufacturer whether under protest or under provisional assessment was on his own 26 C.E.A. No. 96/2018 [The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited] account. The accounts of the manufacturer are different from the accounts of a buyer(distributor). Consequently, there is no merit in the argument advanced on behalf of the respondent that the distributor was entitled to claim refund of "on-account" payment made under protest by the manufacturer without complying with Section 11-Bof the Act."
It was further held as under:--
"Having come to the conclusion that the respondent was bound to comply with Section11B of the Act and having come to the conclusion that the refund application dated 11-2-1997 was time-barred in terms of Section 11B of the Act, we are not required to go into the merits of the claim for refund by the respondent who has alleged that it has not passed on the burden of duty to its dealers."
[25] When the findings, rather conclusions only, in paragraph 6 of the impugned judgment are tested on the anvil of above analysis, it leaves no iota of doubt that the Tribunal has grossly erred in law in holding that the claim for refund rejected for the reason being time barred, should be treated as within time and the "claims are to be processed", which deserves to be and is hereby set aside. [26] Even shifting the burden on the department to find out as to whether the assessee has not passed the burden of tax on the final consumer cannot be countenanced in the given facts of present case. [27] Consequently, the substantial questions of law :-
(a) Can the assessee make a 'claim for refund' without documentary evidence for payment of the amount of refund claim stating that they are not obliged to pay service tax to the Central Government?27 C.E.A. No. 96/2018
[The Commissioner, CGST & Central Excise Vs. M/s National Fertilizers Limited]
(b) Whether there is any relevancy in making adjustments (refund claim of service tax) by issue of credit note or any other means subsequent to clearance of goods when the burden of Service tax payment is passed on?
(c) Whether limitation period prescribed in Section 11B of Central Excise Act, 1944 is applicable in the present facts of the matter wherein service provider M/s GAIL (India) Ltd. Guna, M.P. has paid service tax finally to the Government of India?
(d) Whether the principle of undue enrichment is applicable to the present claim of refund of service tax by the respondent?
are answered against the assessee. The impugned order passed by the CESTAT is set aside. The order passed by the Assistant Commissioner and its affirmation are upheld.
[28] Appeal is allowed to the extent above. No costs.
(Sanjay Yadav) (Vivek Agarwal)
Judge Judge
28/08/2019 28/08/2019
Shubhankar*
SHUBHANKAR
MISHRA
2019.08.29
10:36:44 +05'30'