2005 (11) TMI 291 - AT - Central Excise

Issues Involved:
1. Rejection of claims for refund of duty paid on Tortoise brand Mosquito Coils.
2. Classification dispute regarding the product.
3. Bar of limitation concerning refund claims.
4. Unjust enrichment and its applicability.
5. Modvat credit and its impact on refund claims.
6. Procedural fairness and natural justice.

Issue-wise Detailed Analysis:

1. Rejection of Claims for Refund:
The appellants filed for a refund of Rs. 13,17,34,703.65 for the period from 27-9-1979 to 28-2-1994, which was rejected. The refund claims arose due to a classification dispute where the assessee classified the product as insecticides under Tariff Item 68, eligible for exemption under Notification No. 55/75, and later under Chapter sub-heading 3808.10 with NIL duty. The Tribunal and Supreme Court upheld the assessee's classification, but the consolidated refund claim was filed only after the Supreme Court judgment.

2. Classification Dispute:
The classification dispute was resolved in favor of the assessee by the Tribunal in order No. 260/90-C dated 19th March 1990, and upheld by the Supreme Court on 28-2-94. Despite this, the refund claims were scrutinized, and it was noted that the duty had been paid under protest and collected from customers, leading to a presumption of incidence passing to customers.

3. Bar of Limitation:
The Assistant Commissioner identified Rs. 4,50,00,604.31 as barred by limitation and Rs. 58,41,439.95 as inadmissible on merits due to Modvat credit availed. The remaining Rs. 8,06,92,659.39 was admissible on merits but directed to be credited to the Consumer Welfare Fund due to the inability of the assessee to show they had not passed on the duty burden to customers. The detailed breakdown of amounts hit by the time bar was provided, reducing the refund claim by over Rs. 4.50 crores.

4. Unjust Enrichment:
The principle of unjust enrichment was applied, as the assessee had collected the duty from customers. The Assistant Commissioner noted that the duty paid under protest did not protect against unjust enrichment post the Tribunal's favorable decision in March 1990. The doctrine was upheld by the Apex Court in Commissioner of Central Excise, Mumbai-III v. Allied Photographics India Limited, and Sahakahri Khand Udyog Mandal Limited v. Commissioner of Central Excise & Customs, emphasizing the necessity for the claimant to prove non-passing of the duty burden to customers.

5. Modvat Credit:
The rejection of Rs. 58,41,439.95 was due to the amount being availed as Modvat credit. The bar of unjust enrichment applied to this amount as well, leading to the direction to credit it to the Consumer Welfare Fund along with Rs. 8,06,92,659.39.

6. Procedural Fairness and Natural Justice:
The appellants' plea of violation of natural justice was dismissed as unsubstantiated. The claim that an amount of Rs. 67,79,284.95 was admissible based on an unsigned Note Sheet order from March 1995 was also rejected.

Conclusion:
The Tribunal held that the appellants were not entitled to any part of the refund claimed due to the bar of unjust enrichment and limitation. The appeal was rejected, and the amounts were directed to be credited to the Consumer Welfare Fund.

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