Custom, Excise & Service Tax Tribunal
Hindustan Lever Ltd vs Commissioner Of Central Excise, Nagpur on 9 March, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.E/3391/03 (Arising out of Order-in-Appeal No.RK/146/Ngp-A/2003 dated 19/08/2003 passed by Commissioner of Central Excise (Appeals), Nagpur) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) ======================================================
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 :
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?
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Hindustan Lever Ltd., Appellant
Vs.
Commissioner of Central Excise, Nagpur Respondent
Appearance:
Shri.T.C. Nair, Consultant for appellant
Shri.V.K. Singh, SDR, for respondent
CORAM:
Honble Mr. Ashok Jindal, Member (Judicial)
Honble Mr. P.R.Chandrasekharan, Member (Technical)
Date of Hearing : 09/03/2011
Date of Decision : 09/03/2011
ORDER NO
Per: P. R. Chandrasekharan
1. This appeal is directed against the order-in-appeal No.RK/146/Ngp-A/2003 dated 19/08/2003 passed by the Commissioner of Central Excise (Appeals), Nagpur.
2. The facts of the case are that the assessee M/s.Hindustan Lever Ltd., had filed price lists for the years 1992-93 to 19996-97 for approval by the jurisdictional Assistant Commissioner, wherein they have claimed deduction under 15 accounts. The assessments were kept provisional at that time. The Assistant Commissioner vide order dated 30/04/97 allowed the claim of the assessee in respect of 10 accounts and disallowed the following balance 5 discounts in respect of (i) Special Secondary Packing, (ii) C & F Agent Remuneration (ii) Quantity discount (iv) Discount on damages (v) Handling charges.
3. The party went in appeal before the Commissioner (Appeals) who remanded the case for denovo adjudication vide order dated 27/05/2008 and the Assistant Commissioner vide his order dated 31/08/98 disallowed the quantity discount and discount on account of damages and confirmed a duty demand of Rs.1,91,98,212/- for the period from January 92 to December 97. The party once again went in appeal before the Commissioner (Appeals), who vide his order dated 04/03/2002 allowed the quantity discount and held that only discount on account of damages is not permissible. The duty impact on account of quantity discount was Rs.44,16,920/- while that on account of discount for damages Rs.5,49,157/-. The assessee had executed a bank guarantee at the time of opting for provisional assessment. When the appeal of the assessee was pending before the Commissioner (Appeals), the Assistant Commissioner encashed the bank guarantee executed by the assessee for a total amount of Rs.49,66,077/- during February to April, 98. Consequent upon the order-in-appeal allowing the quantity discount passed by the Commissioner (Appeals) on 04/03/2002, the assessee requested the Assistant Commissioner to return a sum of Rs.44,16,920/- being the amount of differential duty towards the quantity discount, which was allowed by the Commissioner (Appeals) but which was recovered by encashment of bank guarantee by the department. They also cited the CBEC Circular No.275/37/2K-CX.8A dated 02/01/2002 wherein the Board had held that in the case of refund of pre-deposit there is no need to file separate refund claim and the department should allow the refund suo motu. However, the Assistant Commissioner issued a show-cause notice dated 25/02/2003 for the rejection of the refund. Since the assessee took some time for replying to the show-cause notice and sought extension time for personal hearing, the Assistant Commissioner without hearing the assessee passed an order dated 22/04/2003 rejecting their claim only on the ground that the encashment of bank guarantee for disallowance of quantity discount cannot be equated or termed as pre-deposit under Section 35F of the Central Excise Act, 1944 and the assessee was required to file required refund claim in format R-1 prescribed under Rule 173S of the Central Excise Rules, 1944.
4. The assessee filed an appeal before the Commissioner (Appeals), who upheld the order of the Assistant Commissioner and rejected the appeal filed by the assessee. Hence, the assessee is before us against the said appellate order.
5. The assessees contention is that in the various judicial pronouncements, namely, Owal Agro Mills Vs. Asst. CCE, Ludhiana 1994 (70) ELT 48 (SC), Ispat Traders Vs. CC, Jamnagar 2011 (263) ELT 305 (Tri-Ahmed), it has been held that for refund of security deposit by way of bank guarantee encashed by the department, there is no requirement of filing a refund claim in the prescribed form and Section 11B of the Act is not applicable to such refunds. Further, in these judgements, it has been held that encashment of bank guarantee by the department during the pendency of appeal has been considered as pre-deposit and consequently, there is no requirement of filing a refund claim and a simple letter along with copy of the order would suffice. They also argued that doctrine of unjust enrichment is not applicable to refund arising out of encashment of bank guarantees. In the light of these judicial pronouncements they claim that they are entitled to refund without filing a refund claim as the encashment of bank guarantee amounts to pre-deposit of duty.
6. On the other hand, the Ld. DR reiterates the findings of the lower appellate authority and relies on the decision of the Tribunal in the case of Shree Gautam Ship Breaking Industries Pvt Ltd., Vs. CC Jamnagar, reported in 2009 (237) ELT 152 (Tri.) wherein it has been held that in the case of provisional assessment furnishing of security in the shape of bank guarantee or otherwise is to be treated as payment of duty in anticipation of finalization of duty liability, and the same cannot be regarded as pre-deposit within the meaning of Section 129E of the Customs Act, 1962.
7. We have considered the rival submissions.
8. In the instant case, the goods were assessed to duty provisionally and the assessee had executed a bond and bank guarantee for the provisional assessment in terms of 9 (B) of the Central Excise Rules, 1944. Rule 9 (B) (5) specifically provides when the provisional assessment is finalized, the duty provisionally paid is to be adjusted against the duty finally assessed and if the duty assessed finally is more than duty provisionally paid, differential duty has to be recovered from the assessee and if the duty is finally assessed is less than the duty provisionally paid, the assessee shall be entitled to refund. This was the relevant rule prevailing in the instant case. On finalization of provisional assessment, if the duty paid provisionally was found to be in excess than what is payable, the assessee was entitled to refund under Rule 9 (B) (5) itself and not under Section 11B and the department should have suo motu granted the refund without waiting for the assessee to make a refund claim under Section 11B of the Central Excise Act, 1944. Further, from the records we find that the department had encashed the bank guarantee during February to April 1998, when the matter was pending before the Commissioner (Appeals), which again is in contravention of the instruction of the CBEC, wherein it has been directed that during the first appellate stage no coercive action should be taken to recover differential duty. Therefore, the action of the Assistant Commissioner to encash the bank guarantee when the matter was pending before the Commissioner (Appeals) and the assessee finally succeeded in their plea cannot be said to be either in accordance with the law or in accordance with the circular/instructions issued by the Board.
9. In the Oswal Agro Mills case the apex Court held as follows:-
The bank guarantee is security for the Revenue, that in the event the Revenue succeeds its dues will be recoverable, being backed by the guarantee of a bank. In the event, however, unlikely, of the bank refusing to honour its guarantee it would be necessary for the Revenue or, where the bank guarantee is in favour of the principal administrative officer of the Court, that officer to file a suit against the bank for the amount due upon the bank guarantee. The amount of the disputed tax or duty that is secured by a bank guarantee cannot, therefore, be held to be paid to the Revenue. There is no question of its refund, and Section 11B is not attracted.
9.1 Further in the case of Ispat Traders, it has been held as follows:-
The decisions cited by the learned advocate before me and discussed above and the circulars issued by the Board show clearly that whether the amount was deposited during investigation or paid subsequent to the order confirming the demand or paid as a result of direction of the Tribunal/Court, is required to be refunded with interest at 12% to the appellant when the issue is decided in their favour. Further it is also clear from the precedent decisions that even when a case is remanded to the original adjudicating authority, the amount deposited is required to be refunded.
9.2. Again the case of Tollin Rubbers (P) Ltd., Vs. CC, Cochin, reported in 2007 (211) ELT 246 (Tri-Bang) the Tribunal held that encashment of bank guarantee by Revenue during the pendency of appellants appeal before the Supreme Court amounted to pre-deposit under Section 35F of Central Excise Act, 1994/129E of Customs Act, 1962 and the benefit of Boards Circular No.802/35/2004-CX dated 08/12/2004 should be given.
10. We find from the records that the period involved in this case is 1992-97 and the refund was due to the party under Rule 9 (B) (5) of the Central Excise Rules, 1944 and the provisions on unjust enrichment did not apply to the said rules at the relevant time. Therefore, the department should have suo motu refunded the amount paid in excess on the basis of a simple letter from the assessee. We also find that as held by the Honble apex Court in the case of in the Oswal Agro Mills, cited (supra), the provisions of Section 11B is not attracted when refund arises due to encashment of bank guarantee.
11. In the light of the Honble Supreme Courts judicial pronouncements, we are of the view that the assessee was entitled to refund on the basis of simple letter rather than following the detailed procedure prescribed under Section 11B of the Central Excise Act, 1944. Accordingly, we allow the appeal filed by the party with consequential relief, if any.
(Pronounced in Court) (Ashok Jindal) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) pj 1 2