TMI Blog2009 (6) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... "Royal Challenge Whisky" since 1982. The manufacture of "Royal Challenge Whisky" requires the addition of undenatured Ethyl Alcohol (malt spirit) which is the essence. The essences added are procured locally from manufacturers and suppliers in India. Some of the essences required and purchased by the Appellants, in fact, are imported by various suppliers and subsequently sold to the Appellants. 2. On or about 07.10.1991, the Senior Superintendent of the Department visited the Appellants' factory in Aurangabad in respect of investigation regarding purchase of essences from M/s Finacord Chemicals Private Limited and M/s S. R. Nagpal and Company. According to the Appellants, they cooperated with the officers and furnished whatever documents which were available. The officers required the Appellants to furnish the copies of bills of entries and the purchase orders for the essences. The Appellants could not furnish the same as they were not the importers. Subsequent thereto, the officers made out the Panchanama and Supratnama for safe custody and handed over the same to the Factory Manager of the Appellants. The Appellants made a request for release of the essences against securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted and pending for final decision. 4. The Appellants herein had also preferred an appeal against the order dated 28.02.1995 passed by the Commissioner of Customs. By the order dated 15.09.2005, in view of the order passed in case of M/s Finacord Chemicals Private Limited and M/s S.R.Nagpal and Company, the learned CESTAT upheld the order of confiscation of goods. The Tribunal further observed that the duty demand has already been set aside and the redemption fine has also been reduced to Rs.10 Lac on M/s Finacord Chemicals Private Limited. The Appellants herein, therefore, were entitled to consequential relief of refund of an amount of Rs.01,05,02,087/appropriated towards the differential duty and refund of the amount appropriated towards the redemption fine in excess of Rs.10 Lakhs, in accordance with law. The order of refund was directed in favour of erstwhile Maharashtra Distilleries Limited (MDL), however, it was subsequently rectified in the name of the Appellants herein. 5. The Appellants, thereafter, made a request for the refund of Rs. 1,46,64,500/along with interest at the rate of 13% from the date of deposit i.e. 11.11.1991. Correspondence ensued between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that in view of the express language of Section 27 of the Customs Act, 1962 only the duty and interest can be subject to unjust enrichment and the refund of fine and penalty cannot be subject to unjust enrichment more so in view of the customs rules. In the instant case, an amount of Rs.51,62,413/has been adjusted towards the value of redemption fine, which is clearly illegal. (c) Placing reliance on the provisions of the Customs Act, 1962 and Rules and also on Rule 9(B) of the Central Excise Rules, 1944 and the provisions of the Central Excise Act, it has been additionally contended that the doctrine of unjust enrichment is not applicable in a case of provisional assessment and after finalization thereof. 10. On the other hand, on behalf of the Respondent, it has been submitted that the refund claim arising out of provisional assessment and finalization thereof has to stand the test laid down in Section 27 of the Customs Act, 1962. The provisions of the Customs Act, 1962 are different as compared to Rule 9(B) of the Central Excise Rules, 1944. Reliance is placed on the judgment of this Court in case of Bussa Overseas and Properties Pvt. Ltd. vs. Union of India, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... founded upon any contract or tort but upon a third category of law, namely, quasicontract or the doctrine of restitution." Reference was made to Fibrosa vs. Fairbairn, (1942) 2 All ER 122 to the judgment of Lord Wright and in case of Nelson vs. Larholt, (1947) 2 All ER 751 to the judgment of Lord Denning. Lord Denning had observed "The right here is not peculiar to equity or contract or tort, but falls naturally within the important category of cases where the court orders restitution if the justice of the case so requires." Lord Wright observed "The remedy in case of unjust enrichment in English law is generically different from the remedies in contract or in tort, and is recognized to fall within a third category of the common law which has been called quasicontract or restitution." Summing up, the Supreme Court observed "From the above discussion, it is clear that the doctrine of 'unjust enrichment' is based on equity and has been accepted and applied in several cases. In our opinion, therefore, irrespective of applicability of Section 11B of the Act, the doctrine can be invoked to deny the benefit to which a person is not otherwise entitled. Section 11B of the Act or similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by Explanation II to Section 27 of the Customs Act. Therefore, there is no distinction between refund arising on finalisation of provisional assessment and refund arising after finalization of provisional assessment and both refunds are subject to the provisions of Section 27 of the Customs Act." A Special Leave Petition filed against the judgment was dismissed by the Supreme Court. See 2004 (164) ELT (A) 177 (SC). 15. On behalf of the Appellants, learned counsel submits that the judgment in Bussa Overseas (supra) was delivered on 15.09.2003. It is submitted that since then, the Supreme Court in case of Commissioner of Central Excise, Mumbai II vs. Allied Photographics India Limited, 2004(166) ELT 3 (SC), has taken a view that the doctrine of unjust enrichment would not apply in the case of provisional assessment and consequently Bussa Overseas (supra) stands impliedly overruled. The question is what is the law laid down in Allied Photographics India Limited (supra) and whether it would be applicable to the refund of duty or additional duty under the provisions of the Customs Act, 1962. 16. To understand the argument, we may first gainfully refer to some of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods is assessed finally in accordance with the provision 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." Rule 9B of the Central Excise Rules, 1944 was amended on 25.06.1999 by the Central Excise Rules (Thirteenth Amendment of 1999). The amended Rule 9B inserted a proviso in sub rule (5) which reads as follows: " Provided that, if an assessee is entitled to a refund, such refund shall not be made to him except in accordance with the procedure established under subsection (2) of Section 11B of the Act." It is thus clear that under sub Rule (5) under the Central Excise Act the amount in excess of the final assessment had to be refunded till the proviso was added. 17. Section 27(1) of the Customs Act, 1962 was substituted by the Central Excise and Customs Laws (Amendment) Act 40 of 1991 w.e.f. 20.09.1991 and with its subsequent amendments reads as under:10 "27. Claim for refund of duty. (1) Any person claiming refund of any [duty and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, if any, paid on such duty] paid by the importer [or the exporter, as the case may be], if he had not passed on the incidence of such [duty and interest, if any paid on such duty] to any other person; (b) ....... (c) ....... (d) ....... (e) ....... (f) ....... PROVIDED FURTHER........ (3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal [the National Tax Tribunal] or any Court or in any other provision of this Act or the regulations made thereunder or any other law for the time being in force, no refund shall be made except as provided in subsection (2). (4) ......... (5) ........" 18 "18. Provisional assessment of duty. (1) .......... (2) When the duty leviable on such goods is assessed finally in accordance with the provisions of this Act, then (a) in the case of goods cleared for home consumption or exportation, the amount paid shall be adjusted against the duty finally assessed and if the amount so paid falls short of, or is in excess of [the duty finally assessed] the importer or the exporter of the goods shall pay the deficiency or be entitled to a refund, as the case may be; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en finding inconsistencies in the case of Sinkhai Synthetics and Chemicals Pvt.Ltd. vs. Collector, 2002 (143) ELT 17 (SC), TVS Suzuki Limited (supra) and the decision of the nine judges Constitution Bench in Mafatlal Industries Limited (supra), referred the matter to a Larger Bench in Allied Photo Graphics India Ltd. (supra), on the question, whether, a claim for refund after final assessment is governed by Section 11B of the Central Excise Act, 1944? 20. In Allied Photo Graphics India Ltd. (supra) certain refund claims had been filed on behalf of M/s AGIL. These claims were rejected. Claims were made in 1986. Writ Petition came to be filed in the High Court. The learned Single Judge held that the action of the Department collecting the duty not on the sale price of NIIL to M/s AGIL was illegal and, therefore, NIIL was entitled to refund. As the question of 'unjust enrichment' was debatable, the question was referred to the Full Bench. After the decision of the Full Bench, the petition was reposted, and Union of India was directed to prove that the tax burden has in fact been shifted to consumers. Pending further examination, the Department was directed to deposit the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of NIIL in view of the judgment of this Court in the case of Union of India and others vs. Bombay Tyre International Limited , reported in 1983 (14) ELT 1896 (SC)= AIR 1984 SC 420?" To answer the issue, two points were framed for determination. Firstly, whether refund of duty paid under provisional assessment is similar to duty under protest as both are "on account" payments adjustable on vacation of protest. Secondly, if in the course of such adjustment or vacation of protest if any amount is payable by the Revenue to the manufacturer, is it open to the purchaser to contend that he has stepped into the shoes of the manufacturer seeking refund of "on account payments" and therefore, he was not bound to comply with section 11(B) of the said Act. The Court noted that there is nothing in para 95 of Mafatlal (supra) to suggest that payment of duty under protest does not attract the bar of unjust enrichment. Paragraph No.104 only states that if refund arises upon finalization of provisional assessment, section 11(B) will not apply. Relying on this paragraph, it was argued that payment under protest and payment of duty under provisional assessment are both "on account" payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of TVS Suzuki Ltd. (supra). In that case, application for refund was filed. This was on completion of final assessment. On 09.07.1996, the Department issued a show cause notice as to why the refund claim should not be rejected for noncompliance of Section 11B. By order dated 17.07.1996, the refund claim was rejected on the ground that it was beyond limitation. On appeal, the Commissioner (Appeals) observed that the bar of unjust enrichment was not applicable as the assessee claimed refund consequent upon final assessment. He allowed the refund claim. CEGAT agreed with the view of Commissioner (Appeals). Before this Court, the Department conceded rightly that in view of para 104 of the judgment of this Court in Mafatlal Industries Ltd. (supra), bar of unjust enrichment was not applicable in cases of refund consequent upon adjustment under Rule 9B(5). The judgment of this Court in the case of TVS Suzuki Ltd. (supra), therefore, supports the view which we have taken herein above that refund consequent upon finalisation of provisional assessment did not attract the bar of unjust enrichment." The Supreme Court, therefore, held that in order to get refund the Respondent was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of the Bank guarantee. The Supreme Court in all those judgments was pleased to hold that the Bank guarantee which was furnished by the assessee cannot be regarded as payment towards excise duty, therefore, there is no question of its refund and Section 11B is not attracted. These judgments on the Bank guarantee are clearly distinguishable as no amount has been appropriated and consequently, the question of refund would not arise. In the judgment of Commissioner of Central Excise, Shillong vs. Woodcraft Products Limited , 2002(143) ELT 247 (SC), the issue was 'unjust enrichment' was not the issue. In that case, in pursuance to the direction given by the Tribunal, the Revenue made an order of refund. That order was reversed by the Supreme Court. In these circumstances, the Supreme Court held that the assessee was bound to make restitution. 25. We are, therefore, clearly of the opinion that insofar as the additional duty is concerned, the provisions of Section 28 of the Customs Act, 1962 would squarely apply and on this count the order of the Tribunal cannot be faulted. We are also unable to accept the proposition that the judgment of the Court in Bussa (supra) stands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fiscation such fine as the said officer thinks fit: PROVIDED that, without prejudice to the provisions of the proviso to subsection (2) of section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon. (2) Where any fine in lieu of confiscation of goods is imposed under subsection (1), the owner of such goods or the person referred to in subsection (1) shall, in addition, be liable to any duty and charges payable in respect of such goods." 27. The Act itself, therefore, provides that instead of goods being confiscated on a fine being imposed and passed, the goods can be released. The fine, therefore, is in the nature of recompensation to the State for the assessee having committed a wrong. That section further provides under subsection (2) that the fine in lieu of confiscation is in addition to the duty and charges payable in respect of such goods. Under section 126, if confiscation was ordered the goods would vest in the Government. Therefore, the fine basically is for a wrong done. It is, therefore, not a duty, tax, cess, fees or the like which can be passed on to a consumer. 28. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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