Custom, Excise & Service Tax Tribunal
M/S Hindustan Petroleum Corporation ... vs Commissioner Of Central Excise, ... on 27 February, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. E/1049 & 1454/10 (Arising out of Order-in-Appeal No. YDB/239/2010/M-II/2010 dated 5.5.2010 passed by the Commissioner of Central Excise (Appeals), Mumbai-II). For approval and signature: Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== M/s Hindustan Petroleum Corporation Ltd. Commissioner of Central Excise, Mumbai-II Appellant Vs.
Commissioner of Central Excise, Mumbai-II M/s Hindustan Petroleum Corporation Ltd.
Respondent Appearance:
Shri M.H. Patil, Advocate for Appellant Shri Shobha Ram, Commissioner (AR) for Respondent CORAM:
SHRI P.R. CHANDRASEKHARAN, MEMBER (TECHNICAL) SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 27.02.2014 Date of Decision: 27.02.2014 ORDER NO.
Per: P.R. Chandrasekharan There are two appeals, one filed by M/s HPCL and the other filed by the Revenue against Order-in-Appeal No. YDB/239/M-II/2010 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone II. Vide the impugned order the ld. Commissioner (Appeals) rejected the refund claim of M/s HPCL for an amount of Rs.7,50,44,129/-, towards the duty wrongly paid on HSD/Naphtha consumed in the generation of electricity which was used within the refinery, on account of unjust enrichment. As both the appeals arise from the same order, they are taken up together for consideration and disposal.
2. The facts relating to the case are as follows. There was a dispute between the department and HPCL regarding the dutiability of HSD/Naptha captively used in the generation of electricity which was consumed within the refinery. The department was of the view that the appellant was not eligible for the duty exemption as electricity was not excisable and hence benefit of Notification No. 67/95-CE dated 16-3-95 would not be available. While a sum of Rs.2.33 Crore (approx.) was paid after clearance of the goods by the appellant, the majority of the duty amounting to Rs.5,17,40,712/- was paid on monthly basis. These duty payments pertained to the period December, 1998 to June 2001. These duty demands were confirmed vide O-I-O No. 3/2002 dated 30-1-2002. M/s HPCL challenged the said order before this Tribunal and vide order dated 15-7-2005, the Tribunal allowed the appeal of HPCL. The said decision was challenged by the Revenue before the honble High Court of Bombay vide Central Excise Appeal No.40/2006 which was dismissed by the honble Court vide order dated 28-2-2008. Thereafter, M/s HPCL filed the refund claim on 19-5-2008. On 24-12-2008, the jurisdictional Asst. Commissioner of Central Excise wrote to M/s HPCL to furnish evidence that the incidence of duty was not passed on and was borne by the claimant himself. The appellant replied that the principle of unjust enrichment would not apply as the goods were under the Administered Price Mechanism and the price had no nexus to the cost of production. Thereafter on 4-2-2009, a show cause notice was issued to the appellant proposing to reject the refund claim on account of time bar in as much as the refund claim was filed much after the period of one year from the date of CESTAT order dated 15-7-2005 and vide order dated 9-4-2009, the refund claim was rejected on account of time bar. M/s HPCL challenged the said decision before the lower appellate authority and the lower appellate authority held that the payment of duty during the period of dispute should be held as under protest and therefore, the question of time bar would not apply. However, he rejected the refund claim on account of unjust enrichment in as much as the claimant did not submit any evidence to show that the incidence of duty was not passed on. Accordingly he ordered that the amount of refund be credited to the consumer welfate fund. Both M/s HPCL and the Revenue are aggrieved of the said order and are before us.
3. The ld. Counsel for M/s HPCL made the following submissions.
(1) The ld. Lower Appellate authority has rejected the refund claim on account of unjust enrichment which was not the ground proposed in the show cause notice dated 4-2-2009. Further the adjudicating authority had rejected the refund claim on account of time bar. While the appellate authority accepted the claim of the appellant that the duty payment ought to be considered as under protest, rejection of the refund claim on a ground not alleged in the show cause notice is bad in law. He relies on the decisions of the decision of the Apex Court in the case of Mafatlal Industies Ltd. [1997(89) ELT 247 (SC)], Ballarpur Industries Ltd. [2007 (215) ELT 489 (SC)] and of the Bombay High Court in the case of Beekalene Fabrics [2006 (229) ELT 659 (Bom)] .
(2) The bar of unjust enrichment would not apply when goods are sold at a price fixed by Govt./Statutory Authority and relies on the decisions of this Tribunal in a few cases such as Karnataka Antibiotics [1996 (83) ELT 114 (T)], SPIC Ltd. [2009 (237) ELT 94] and Indian Oil Corporation [2011 (263) ELT 698 (T)] in this regard. Hence rejection of refund claim on this ground is not sustainable in law.
(3) The amount paid at the instance of the department and the amount paid during investigation should be considered as pre-deposit and hence refund/return of deposit should have been made by the Revenue without insistence on a refund application and relies on the CBEC circulars 275/37/2K dated 2-1-2002, 802/35/04-CX dated 8-12-2004 and decisions in the case of Gujarat Insecticides Ltd. [2005 (183) ELT 3 (Guj)] and a few other decisions.
(4) In this case the matter was finally settled by the decision of the honble High Court when the Revenue appeal was dismissed and the order of the High Court is dated 28-2-2008. Therefore, the period of limitation, if at all, should be computed from this date and in as much as the claim was filed on 19-5-2008, the refund claim is not hit by time bar.
Accordingly he prays for the refund of the amount to M/s HPCL by setting aside the impugned order.
4. The ld. Commissioner (AR) appearing for the Revenue made the following submissions: -
(i) The ld. Lower appellate authority erred in concluding that the payment of duty was under protest and hence the time bar would not apply. A protest can said to remain/exist only upto the point of time when the original authority decides the issue. Once the original adjudicating authority decides the matter, there cannot be any protest thereafter. In the present case the duty demand was confirmed vide order No. 3/2002 dated 30-1-2002. Therefore, there cannot be any protest after that date. He relies on the decision of this Tribunal in the case of Evershine Marbles & Exporters P. Ltd. [2009 (240) ELT 239] in this regard.
(ii) The cause of action for grant of refund arose with the decision of the Tribunal dated 15-7-2005. Therefore, the time limit should be computed from this date. In the present case, the refund claim was filed by HPCL only on 19-5-2008, almost 3 years after the cause of action arose and hence the claim is grossly time-barred. He relies on the decision of the Apex Court in the case of Dena Snuff (P) Ltd. [2003 (157) ELT 500 (SC)] in this regard.
(iii) He further points out that section 11B of the Central Excise Act, 1944 was amended vide section 117 of the Finance Act, 2007, with effect from 11-5-2007, which provided that the time limitation of one year would start from the date of the judgment, decree, order or direction, in a case where duty becomes refundable as a consequence of judgment, decree, order or direction of the appellate authority, Appellate Tribunal or any court. In the present case, even after this amendment made in the law, the appellant did not file the refund application even within one year from the date of amendment made in the law.
(iv) In this case, the appellant did not follow the procedure for payment of duty under protest. Therefore, the payments made by them can not be deemed as made under protest and the time bar prescribed under section 11B would certainly apply.
(v) The principle of unjust enrichment would certainly apply in the present case and as held by the Apex Court in the Solar Pesticides case, the said principle applies even in the case of captively consumed goods. In as much as the appellant has not led any evidence showing that they have not passed on the duty incidence to any other person, the appellant is not entitled for the refund.
In view of the above factual and legal position, he pleads that the impugned order be set aside and the refund claim held as time barred.
5. During the appellate proceedings, when the case was heard on 7-11-2013, a query was raised by this Tribunal about the treatment given to the refund amount of Rs.7,50,44,129/- in the books of account of the appellant M/s HPCL. In reply thereto, the M/s HPCL, vide letter dated 28-1-2014, has submitted that the above amount was not shown as receivables in their books of account.
6. We have carefully considered the rival submissions.
6.1 There are two issues to be decided in this case. The first issue is whether the refund claim of the appellant HPCL is time barred or not. The second issue is whether the refund claim attracts the bar of unjust enrichment.
6.2 As regards the first issue, HPCLs contention is that since the matter relating to their eligibility to benefit of notification No.67/95 was pending before the adjudicating authority and subsequently before the appellate authority, the payment made by them should be considered as payment under protest and reliance has been placed on the decision of the Apex court in the Mafatlal Industries case. It will be useful to see what the Apex Court said in the said case with regard to this issue. Paragraphs 84 to 86 of the said decision is reproduced verbatim below:-
84. It was then submitted that Rule 233B which prescribes the procedure to be followed in cases where duty is paid under protest requires the assessee to state the grounds for payment of duty under protest and that it may well happen that the authority to whom the letter of protest is submitted may refuse to record it, if he is not satisfied with the grounds of protest. In our opinion, the said apprehension is not well-founded. Sub-rules (1), (2) and (3) of Rule 233B read as follows :
RULE 233B. Procedure to be followed in cases where duty is paid under protest. - (1) Where an assessee desires to pay duty under protest he shall deliver to the proper officer a letter to this effect and give grounds for payment of the duty under protest.
(2) On receipt of the said letter, the proper officer shall give an acknowledgement to it.
(3) The acknowledgement so given shall, subject to the provisions of the sub-rule (4), be the proof that the assessee has paid the duty under protest from the day on which the letter of protest was delivered to the proper officer."
85. The rule no doubt requires the assessee to mention the grounds for payment of the duty under protest but it does not empower the proper officer, to whom the letter of protest is given, to sit in judgment over the grounds. The assessee need not particularise the grounds of protest. It is open to him to say that according to him, the duty is not exigible according to law. All that the proper officer is empowered to do is to acknowledge the letter of protest when delivered to him - and that acknowledgement shall be the proof that the duty has been paid under protest. A reading of the rule shows that the procedure prescribed therein is evolved only with a view to keep a record of the payment of duty under protest. It is meant to obviate any dispute whether the payment is made under protest or not. Any person paying the duty under protest has to follow the procedure prescribed by the Rule and once he does so, it shall be taken that he has paid the duty under protest. The period of limitation of six months will then have no application to him.
86. We may clarify at this stage that when the duty is paid under the orders of Court (whether by way of an order granting stay, suspension, injunction or otherwise) pending an appeal/reference/writ petition, it will certainly be a payment under protest; in such a case, it is obvious, it would not be necessary to lodge the protest as provided by Rule 233B. A reading of the said decision makes it absolutely clear that to consider the payment of duty as payment under protest, the procedure prescribed under the statute must be followed. The only situation where this is not required is when the duty is paid under the orders of the Court or appellate authority during the interlocutory stage of stay, suspension, injunction or otherwise. In the present case before us, HPCL paid the duty on their own pending adjudication of the matter and they did not follow the procedure prescribed for payment of duty under protest. It was not on account of any directions from the court or appellate authority the payment of duty was made. If that be so, the payment of duty by HPCL can not be considered as payment under protest at all and we hold accordingly.
6.3 There is another reason to come to this conclusion. In The J.K.Cotton Spinning and Weaving Mills Co. Ltd. Vs. State of U.P. and Ors. [1961 AIR 1170], the honble Apex Court laid down the principle of statutory interpretation as follows:-
The rule is that whenever there is a particular enactment and a general enactment in the same statute and the latter taken in its most comprehensive sense, would overrule the former, the particular enactment must be operative, and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply. Applying this rule of construction, in case of a conflict between a specific provision and a general provision, the specific provision prevails over the general provision and the general provision applies only to such cases which are not covered by the specific provision. In the present case, it is an admitted position that the appellant HPCL did not follow the procedure for payment of duty under protest prescribed in rule 233B of the Central Excise Rules, 1944 or other provisions prescribed at the relevant time. Having failed to do that they cannot claim that merely because they had challenged the assessment order dated 30-01-2002, the payment made much earlier to the assessment order should be deemed as payment under protest. It is a well-settled statutory principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other. Honble Supreme Courts decision in Chandra Kishor Jha Vs. Mahabir Prasad & Ors. [(1999) 8 SCC 266] refers.
6.4 The next issue for consideration is whether the refund claim was filed within the time stipulated under section 11B of the Central Excise Act. The said section stipulates that refund claim shall be filed before the expiry of one year from the relevant date in such form and in such manner as may be prescribed. Relevant date is prescribed in Explanation B to section 11B. Clauses (ec) and (f) to the Explanation are relevant for our present purposes. Clause (ec) deals with a situation where the duty becomes payable as a consequence of the judgment, decree, order or direction of the appellate authority, Appellate Tribunal or any court of and the time limit has to be computed from the date of judgment, decree or order. This clause was inserted in the Statute with effect from 11-5-2007. Clause (f) stipulates that in any other case, the period of one year has to be computed from the date of payment of duty. In the present case, the refund arose consequent to the decision of the Tribunal dated 15-7-2005. The payments were made much before, that is during December 1998 to June 2001 and part of the payments were made in June and September 2002 and in July, 2003. The refund claim was filed only on 19-5-2008, that is about 3 years after the decision of the Tribunal and more than 5 years after the payment of duty. Thus the refund claim has been filed much after the stipulated period of one year under section 11B and hence they are clearly time-barred. It is in this context the decision of the Apex Court in the Dena Stuff (P) Ltd case (supra) becomes relevant. In the said case, the honble Apex Court held that the cause of action for claiming refund arises only when dispute is settled in the assessees case and the period of limitation would run from the date of such decision. Thus in the present case, the refund became due to HPCL consequent to the Tribunals decision dated 15-7-2005 and the one year period expired on 15-7-2006 whereas the refund claim was filed only on 19-5-2008. The appellants contention that the department had challenged the said decision of the Tribunal before the Bombay High Court and the high court dismissed the appeal of the department on 19-5-2008 is not acceptable as the refund claim first became due on account of the Tribunal decision and not on account of the Bombay High Court decision. Further the law itself was amended to provide that in a situation where the duty becomes payable as a consequence of the judgment, decree, order or direction of the appellate authority, Appellate Tribunal or any court of, the time limit has to be computed from the date of judgment, decree or order and this amendment came into force on 11-5-2007. Thus in respect of refunds which became payable, this time limit would apply. In the present case the claim was filed only on 19-5-2008 and the amended provisions would certainly apply in respect of such claims. Viewed from this angle also, the refund claim is clearly time-barred. Thus there is merit in the Revenues contention that the appellate authority erred in holding that the refund claim was not time barred.
6.5 As regards HPCLs contention that as per the CBEC circulars, the appellant was not required to file any refund claim as the refund arose on account of the decision of the Tribunal, this argument is bereft of any logic. The Tribunals decision pertained to eligibility to benefit of notification No. 67/95-CE. Consequent upon such decision, the refund has to be granted in accordance with the provisions of section 11B of the Central Excise Act which stipulates a time limit for allowing the claim and the issue of unjust enrichment. Therefore, even if refund becomes due, these two conditions relating to refund have to be satisfied and the onus of proving that these conditions are not violated lies on the claimant. Therefore, the claimant of refund has to lead evidence that the claim has been filed on time and they have crossed the bar of unjust enrichment. It thus becomes mandatory that the claimant files a refund claim along with the requisite evidences. Further the law itself provides for computation of time limit in cases of refund arising out of order of appellate authority, Appellate Tribunal or any court which also pre-supposes filing of a refund claim by the person concerned. In view of this legal position, CBEC circulars can not be of any relevance and accordingly, we reject this contention raised by the appellant.
6.6 The last issue for consideration is whether the refund is barred by the unjust enrichment clause in the present case. In the Mafatlal Industries case (supra), the honble Apex Court held that all refund claims under the Central Excise Act whether arising out of orders of the appellate authority, Appellate Tribunal or court will be governed by the unjust enrichment provisions stipulated in the section 11B and sub-section (3) of section 11B makes this position very clear. The relevant extracts from the said judgment are reproduced below:-
82. A good amount of debate took place before us on the question whether sub-section (3) makes Section 11B exhaustive of all kinds of refund claims including those which are refundable as a consequence of appellate/revisional order and/or as a consequence of orders made by the High Court/Supreme Court. Sri Nariman pointed out that in Rule 11 (as it was in force during the period August 6, 1977 to November 17, 1980), sub-rule (3) expressly provided that where as a result of any order passed in appeal or revision under the Act, refund of any duty becomes due to any person, the proper officer may refund the amount to such person without his having to make any claim in that behalf and that sub-section (3) of Section 11B, before its amendment in 1991, was also in identical terms. But, Sri Nariman says, sub-section (3) of Section 11B has now been dropped; there is no corresponding provision in Section 11B as it now stands, which means, says the counsel, that even a refund claim arising as a result of an appellate order or an order of a court has also got to be made under and in accordance with sub-sections (1) and (2) of Section 11B and will be disposed of in terms of sub-section (2) of the said section, as amended in 1991. This consequence, learned counsel says, is unjust, unreasonable and arbitrary. There is no reason why a person who becomes entitled to refund of duty as a result of appellate or court order should also be made to apply and satisfy all the requirements of sub-sections (1) and (2) of Section 11B (amended) when he is entitled to such refund as a matter of right. Sri Nariman submits that if a manufacturer/assessee, who succeeds in vindicating his claim after a long fight - may be, upto this Court - and applies for refund is asked to satisfy that he has not passed on the burden of tax to another, he would rather keep quiet than fighting the levy. There would be no incentive for him to file the appeal/appeals or approach the higher courts which also involves substantial expense. If after all this fight and expense, he is to be denied the refund on the ground that he has passed on the burden of duty to third parties, why should he fight and spend money for fighting the litigation, says the counsel. Sri Sorabjee and Sri Salve too emphasised this aspect and said that this situation would lead to many an undesirable consequence. The assessing/approving officer (original authority) would become the monarch; whatever he says would be the law since there would be nobody interested in challenging his order. Illegal levies would become the order of the day. Such a situation, the learned counsel point out, is neither in the interest of law nor in the interest of consumer or the larger public interest. It is accordingly submitted that it would be just and proper that the amended Section 11B is held not to take in refund claims arising as a consequence of appellate or a superior court order. We do not think it is possible to agree. Such a holding would run against the very grain of the entire philosophy underlying the 1991 Amendment. The idea underlying the said provisions is that no refund shall be ordered unless the claimant establishes that he has not passed on the burden to others. Sub-section (3) of the amended Section 11B is emphatic. It leaves no room for making any exception in the case of refund claims arising as a result of the decision in appeal/reference/writ petition. There is no reason why an exception should be made in favour of such claims which would nullify the provision to a substantial degree. So far as lack of incentive argument is concerned, it has no doubt given us a pause; it is certainly a substantial plea, but there are adequate answers to it. Firstly, the rule means that only the person who has actually suffered loss or prejudice would fight the levy and apply for refund in case of success.
Secondly, in a competitive market economy, as the one we have embarked upon since 1991-92, the manufacturers self interest lies in producing more and selling it at competitive prices - the urge to grow. A favourable decision does not merely mean refund; it has a beneficial effect for the subsequent period as well. It is incorrect to suggest that the disputes regarding classification, valuation and claims for exemptions are fought only for refund; it is for more substantial reasons, though the prospect of refund is certainly an added attraction. It may, therefore, be not entirely right to say that the prospect of not getting the refund would dissuade the manufacturers from agitating the questions of exigibility, classification, approval of price lists or the benefit of exemption notifications. The dis-incentive, if any, would not be significant. In this context, it would be relevant to point out that the position was no different under Rule 11, or for that matter Section 11B, prior to its amendment in 1991. Sub-rules (3) and (4) of Rule 11 (as it obtained between August 6, 1977 and November 17, 1980) read together indicate that even a claim for refund arising as a result of an appellate or other order of a superior court/authority was within the purview of the said rule though treated differently. The same position continued under Section 11B, prior to its amendment in 1991. Sub-sections (3) and (4) of this section are in the same terms as sub-rules (3) and (4) of Rule 11; if anything, sub-section (5) was more specific and emphatic. It made the provisions of Section 11B exhaustive on the question of refund and excluded the jurisdiction of the civil court in respect of all refund claims. Sub-rule (3) of Rule 11 or sub-section (3) of Section 11B (prior to 1991) did not say that refund claims arising out of or as a result of the orders of a superior authority or court are outside the purview of Rule 11/Section 11B. They only dispensed with the requirement of an application by the person concerned which consequentially meant non-application of the rule of limitation; otherwise, in all other respects, even such refund claims had to be dealt with under Rule 11/Section 11B alone. That is the plain meaning of sub-rule (3) of Rule 11 and sub-sections (3) and (4) of Section 11B (prior to 1991 Amendment). There is no departure from that position under the amended Section 11B. All claims for refund, arising in whatever situations (except where the provision under which the duty is levied is declared as unconstitutional), has necessarily to be filed, considered and disposed of only under and in accordance with the relevant provisions relating to refund, as they obtained from time to time. We see no unreasonableness in saying so. 6.7 In the present case, it is an admitted position that the refund amount due was not reflected in the books of account of HPCL as claims receivable. This implies that the duty paid was shown as current expenditure and formed part of the Profit and Loss account of the assessee. Thus if the claimant himself has treated the refund amount due as expenditure and not as claims receivable, the claimant can not said to have passed the test of unjust enrichment. This is the settled position in law. The appellant has also contended that the appellants goods are sold at prices determined by the Govt. and therefore, it should be presumed that in the absence of a change inn price, it should be presumed that the appellant has borne the incidence. Similar argument has been negated by the hon'ble Apex Court in Allied Photographic India Ltd. [2004 (166) ELT 3 (SC)], wherein it was held that uniformity in price before and after the assessment does not lead to the inevitable conclusion that incidence of duty has not been passed on to the buyer as such uniformity may be due to various factors. Therefore, in the present case, the appellant HPCL has failed to cross the bar of unjust enrichment also and hence they are not eligible to claim the refund.
7. In view of the above factual and legal position the appeal of M/s HPCL fails and that of the Revenue succeeds. Accordingly, the appeal of HPCL is rejected and that of the Revenue allowed.
(Operative part of the order pronounced in the Court)
(Anil Choudhary) (P.R. Chandrasekharan)
Member (Judicial) Member (Technical)
Sinha
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