2004 (97) ECC 69 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(A)

Hon'ble Justice Smt. K.K. Usha, President and Shri C.N.B. Nair, Member (T)

Oswal Chemicals & Fertilizers

Versus

CCE, Guwahati

Appeal No. E/390/2004-NB(A)

[Arising out of Order-in-Appeal No. 77/CE(A)/Ghy/2003 dated 29.9.2003 passed by the Commissioner of Central Excise (Appeals), Guwahati]

Final Order No. 480/04-NB(A), dt. 24.5.2004, Certified on 7.6.2004

Refund (C. Excise)

Unjust Enrichment -- Naphtha required for manufacturing Urea -- Price of Urea has been fixed by Ministry of Chemicals & Fertilizers without considering the excise duty paid on naphtha -- When the Sale Price of final goods has been fixed by some other authority and not by assessee, then excess excise duty paid by assessee is not hit by unjust enrichment -- Refund cannot be denied on ground of unjust enrichment.

[Para 6]

Refund (C. Excise)

Limitation -- Refund application of duty paid on Naphtha filed before, Asstt. Commissioner, Sitapur on 7.12.98 -- On the directions of department, application withdrawn from Asstt. Commissioner, Sitapur & filed before Asstt. Commissioner, Dhubri, having jurisdiction, on 17.5.99 -- It was under the bonafide belief that refund to be filed before Assistant Commr., Sitapur, and therefore, date of application, namely, 7.12.98, should be taken into consideration for computing period of Limitation -- Application for refund cannot be rejected.

[Para 9]

Appeal allowed

PRESENT :

Shri A.R.M. Rao and Shri V.N. Shukla, Advs., for the appellant.

Ms. K.A. Mishra, SDR for the respondent.

Cases Cited :

1. CCE v. Indian Aluminium Co. Ltd., 2002 (139) ELT 125 (T)................................ [Para 6]

2. CCE v. Saharia Wire Industries, 2002 (141) ELT 830 (T)................................... [Para 4]

3. Collector of Central Excise v. ITC Ltd., 1993 (67) ELT 529 (T)........................... [Para 9]

4. Collector v. Poulose & Matthen, 2000 (120) ELT A64 (SC)................................. [Para 9]

5. General Engineering Works v. CCE, 1999 (65) ECC 89 (T)................................ [Para 4]

6. Karnataka Antibiotics & Pharmaceuticals Ltd. v. CCE, 1996 (13) RLT 258 (T).... [Para 6]

7. Meghdev Enterprise v. CCE, 2002 (143) ELT 70 (T).......................................... [Para 4]

8. Poulose & Matthen v. Collector of Central Excise, 1989 (43) ELT 424 (T)............ [Para 9]

9. State of Rajasthan v. Hindustan Copper Ltd., 1999 (81) ECR 175 (SC)............... [Para 6]

10. Tamralipta Co-op. Spinning Mill Ltd. v. CCE, 1998 (29) RLT 894 (T).................. [Para 6]

Per : Justice K.K. Usha

Challenge in this appeal is against the order passed by the Commissioner of Central Excise (Appeals), Guwahati dated 29.9.2003 rejecting the claim for refund made by the appellant.

2. Ammonia manufactured by the appellant is captively consumed by it in the manufacture of urea. Naptha required for the purpose of manufacturing urea is procured by the appellant from Bharat Petroleum Corporation Ltd. (BPCL). Such procurement was under nil/concessional rate of duty in terms of Notification No. 75/84-CE dated 1.3.84 and its successor Notification No. 8/96-CE dated 23.7.96. The appellant had made application on 12.1.96 for registration under Rule 192 of erstwhile Central Excise Rules, 1944 for the purpose of obtaining Naphtha under concessional rate of duty. On 20.2.96 the Superintendent of Shahjahanpur was informed about the appellant receiving duty paid Naphtha w.e.f. 20.2.96 for manufacture of fertilizer. By order dated 8.7.97 the appellant's application was rejected by the Assistant Commissioner, Sitapur. On 30.10.98 Commissioner (Appeals), Allahabad allowed the appeal filed by the appellant holding that Naphtha procured by the appellant was used in the manufacture of urea and therefore, Naphtha procured by the appellant was eligible for the benefit of Notification No. 875/84 as amended by Notification No. 8/96. The appellant was held eligible for concessional rate of duty w.e.f. 12.1.96. CT-2 certificates issued to the appellant on 30.11.98 where then forwarded to BPCL who started clearing Naphtha on concessional rate of duty w.e.f. 17.12.98.

3. The appellant thereafter claimed refund of duty paid on Naphtha during the period 1996-97, 1997-98 and 1998-99. The refund application was filed on 7.12.98 before the Assistant Commissioner, Sitapur since the appellant BPCL Shahjahanpur are both registered with AC Sitapur. On 7.12.98 the Assistant Commissioner, Sitapur issued deficiency memo wherein it was inter alia stated that the refund application had to be filed before the jurisdictional excise authorities where the duty has been paid. On 16.3.99 the appellant withdrew the application made before the Assistant Commissioner, Sitapur and filed an application before the Assistant Commissioner, Dhubri on 17.5.99. It had filed refund claims at various jurisdiction where the Central Excise duty had been paid. On 7.7.99 a letter was received from the Assistant Commissioner Dhubri seeking certain information and documents. The appellant sent a reply on 9.8.99. Thereafter, appellant received a show cause notice date 30.1.2001 issued by Assistant Commissioner, Dhubri proposing to reject the refund on the ground that the application was beyond time limit specified under Section 11-B. This was followed by order dated 31.12.2002 passed by the Assistant Commissioner rejecting the refund claim on three grounds:-

(i) appellant did not procure naphtha from a manufacturing unit'

(ii) refund was hit by unjust enrichment, and

(iii) refund has been filed on 17.5.99 which is beyond the period of six months from 20.10.98 being the date of order of the Commissioner (Appeals) which has resulted in the present refund claim. Aggrieved by the above order, the appellant filed appeal before the Commissioner (Appeals), Guwahati. Commissioner (Appeals) by order dated 29.9.2003 rejected the claimed filed by the assessee.

The Commissioner took the view that the refund claim cannot be rejected on the ground that the goods were not procured from manufacturer. According to the Commissioner, the refund claim is still not maintainable for the following reasons:

(i) There is no specific provision of law under which the appellants as buyers of goods could have paid duty under protest, since the only provision under which duty can be paid under protest is Rule 233B and that rule is not applicable to the buyers of duty paid goods.

(ii) The refund application is consequent to Order-in-Appeal dated 30.10.98, which was received by the appellants on 5.11.98. The refund application should have been filed within six months from 5.11.98. Since the refund claim has been filed beyond the period of six months from the date of receipt of order of Commissioner (Appeals), it is barred by limitation.

(iii) The appellants have produced a certificate dated 20.5.99 from FICC, but the appellants have not produced cost sheet despite remainders from the department. Hence, the burden of proving unjust enrichment has not been discharged. Hence, the refund is hit by unjust enrichment. Aggrieved by the above order, the assessee has come up in appeal.

4. It is contended on behalf of the appellant that right granted under Section 11B to a buyer to claim refund cannot be defeated on the ground that there is no rule prescribing the mode of payment of duty under protest by the buyer. It is pointed out that even before introduction of Rule 233B Tribunal has taken the view that while considering the cases under Rule 11 of Central Excises Rules, 1944 that if a manufacturer pays duty under protest the period of limitation will not be applicable. It is submitted that the appellant was pursuing its remedy when the department denied its eligibility for concessional rate of duty. Ultimately by order dated 30.10.98, the Commissioner (Appeals) allowed its claim. The very filing of the appeal by the appellant should be taken as a protest against payment of duty. In the meantime the appellant had no option but to procure naphtha on payment of duty. They have been continuously writing letters to the department on the loss sustained by it due to non-issue of CT-2 certificates. Apart from the above, it is submitted that in this case refund is due consequent on the order dated 30.10.98 passed by the Commissioner (Appeals). Therefore, the period of limitation under Section 11-B has no application. Reliance was placed by the learned counsel on the following decisions of the Tribunal in support of the above contention:

(a) General Engineering Works v. CCE, 1999 (65) ECC 89 (T) : 1999 (111) ELT 86 (T)

(b) Meghdev Enterprise v. CCE, 2002 (143) ELT 70 (T)

(c) CCE v. Saharia Wire Industries, 2002 (141) ELT 830 (T)

5. Alternatively, it is submitted by the appellant that the refund claim was originally filed on 3.12.98 before the Assistant Commissioner, Sitapur which was within the period of six months from the date of the order of the Commissioner (Appeals). It was on the direction of the department the application was withdrawn from Assistant Commissioner, Sitapur and filed before Assistant Commissioner, Dhubri on 17.5.99. Under these circumstances period of limitation has to be computed with reference to the first application filed on 3.12.98.

6. On the issue of unjust enrichment the appellant would contend that the price fixed by the Government of India was exclusive of excise duty and therefore, the question of passing on excise duty burden does not arise at all. The appellant had submitted before the authorities below a certificate dated 25.9.99 issued by Fertilizer Industry Co-ordination Committee, Department of Fertilizer, Ministry of Chemicals & Fertilizers (FICC, for short). The above certificate clearly states that excise duty paid on naphtha used as fuel for manufacturing urea was not admitted while considering the retention price. This would clearly show that the price of urea has been fixed by Ministry of Chemicals & Fertilizers without considering the excise duty paid on naphtha. The appellant produced a certificate dated 12.7.2002 issued by the Chartered Accountant. This would also support the case of the appellant that the excise duty burden has not been passed on. The appellant relied on the following decisions wherein it has been held that when the sale price has been fixed by some other authority and not by the assessee, then the excess excise duty paid by the assessee is not hit by unjust enrichment:-

(a) State of Rajasthan v. Hindustan Copper Ltd., 1999 (81) ECR 175 (SC)

(b) Karnataka Antibiotics & Pharmaceuticals Ltd. v. CCE, 1996 (13) RLT 258 (T)

(c) Tamraplipta Co-op. Spinning Mill Ltd. v. CCE, 1998 (29) RLT 894 (T)

(d) CCE v. Indian Aluminium Co. Ltd., 2002 (139) ELT 125 (T)

7. The learned counsel for the appellant points out that the appellant's contention has been accepted in the Order-in-Original dated 29.9.2003 passed by Assistant Commissioner, Surat and granted refund of Rs. 1.73 crores out of the total refund claim made by the appellant. Revenue has accepted the above order.

8. The learned DR, on the other hand, contended that since the duty was not paid under protest, the appellant's claim for refund would be barred by limitation.

9. The application was made by the appellant consequent to the Commissioner (Appeals) allowing the claim that it was eligible for concessional rate of duty in respect of naphtha procured during the period 1996-97 to 1998-99. The period of limitation prescribed under Section 11B may not be as such applicable in the case of the appellant. It is also relevant to note that the authorities below were not computing the period of limitation from the date of payment by the appellant. Apart from the above, the appellant is only justified in contending that it was under the bonafide belief that the application for refund has to be filed before the Assistant Commissioner Sitapur and therefore, the date of the application, namely, 7.12.98 should be taken into consideration for the purpose of computing period of limitation even if the period of limitation prescribed under 11-B is applicable in this case. The ratio of the decision of this Tribunal in Poulose & Matthen v. Collector of Central Excise, 1989 (43) ELT 424 (T) would support the appellant. The view taken by the Tribunal on the above issue was affirmed by the Supreme Court in Collector v. Poulose & Matthen, 2000 (120) ELT A64 (SC). A similar view was taken by the Calcutta Bench of the Tribunal in Collector of Central Excise v. ITC Ltd., 1993 (67) ELT 529 (T). Therefore, we hold that the application for refund made by the appellant cannot be rejected.

10. Urea fertilizers prices are controlled by the Ministry of Chemicals & Fertilizers. While fixing the price Ministry takes into account only the concessional rate of duty on the naphtha. Since the prices are fixed by the Government, the appellant can sell the fertilizer only at the prices fixed by the Government. Therefore, it is not possible for the appellant to pass on the higher duty burden on the naphtha to its customers. This issue is covered by the ratio of the decision of the Supreme Court in State of Rajasthan v. Hindustan Copper Ltd. In the above case Rectified Spirit was imported for use in the manufacture of copper. Price of copper is fixed by MMTC on the basis of the prevailing price fixed by the London Metal Exchange. Only such price could be charged from the consumers and no part of the excise duty paid on rectified spirit captively consumed in the manufacture of copper could be added to the price of copper which was fixed on the basis of LME prices. Supreme Court held that there is, therefore, no question unjust of enrichment.

11. Certificate issued by the Fertilizer Industry Co-ordinary Committee would show that while fixing the price of fertilizer urea made from naphtha excise duty on naphtha is not taken into consideration. Under these circumstances, we hold that the appellant cannot be denied refund on the ground of unjust enrichment.

12. In the result, we set aside the order impugned and allow the appeal.

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