Holding

Since the assessee did not file any application under Section 11‑B, the principle of unjust enrichment does not apply and the previously granted refund cannot be recovered.

Summary

Hindustan Metal Pressing Works removed excisable goods at the prevailing duty rate while awaiting classification list approval to claim exemption under Notification No.175/86-CE. After the classification list was approved in June 1988, the Revenue granted a refund of excise duty for April‑August 1988. The Assistant Collector later issued a show‑cause notice and demanded recovery of the refunded amount on the ground of unjust enrichment, a decision upheld by the Collector (Appeals) and the Central Excise Tribunal. The appellant argued that it had never filed an application under Section 11‑B for a refund, so the provisions on unjust enrichment could not apply. The Court held that without a Section 11‑B application the principle of unjust enrichment is inapplicable, and that a refund already granted under the Rules cannot be reopened under Sections 11‑A or 11‑D. Consequently, the Tribunal's order was set aside and the appeal was allowed.

Issues considered

Whether the principle of unjust enrichment under Section 11‑B of the Central Excise and Salt Act applies when the assessee has not filed a refund application.
Whether Section 11‑D can be invoked to recover an amount that has already been refunded.
Whether a finalized refund order can be reopened on the ground of alleged erroneous refund.

Legislation cited

Central Excise and Salt Act, 1944s. 11-A, s. 11-B, s. 11-D
Central Excise Ruless. Rule 173-1, s. Rule 173-F, s. Rule 9-B

Subjects

central exciserefundunjust enrichmentSection 11-BSection 11-Dclassification listshow-cause noticeappellate tribunal

Judgment

).

A M/S. HINDUSTAN METAL PRESSING WORKS
v.
COMMISSIONER OF CENTRAL EXCISE, PUNE

FEBRUARY 27, 2003

B _(M.B. SHAH AND D.M. DHARMADHIKARI, JJ.]

Central Excise and Salt Act, 1944; Sections II-A & JJ-D:

Exemption Notification No.2188-Refund of excise duty .to assessee for
C a certain period after approval of classification list-Assistant Collector __,
ordering recovery of the amount refunded on the principle of unjust
enrichment-Affirmed by the Appellate Authorities/Tribunal-On appeal, held,
since assessee had neither filed any application for refand of excise duty nor
collected from buyer any amount in excess ofduty determined on such excisable
D goods, principle of unjust enrichment not attracted-Central Excise Rules-
Rule 173-1.

Appellant-assessee had removed certain excisable goods at the
existing rate of duty awaiting approval of such goods under classification
list for claiming benefit of exemption notification thereon. Revenue
E authorities granted refund of excise duty for certain period after approval
of such classification list. However, Assistant collector, after issuing a show
cause notice, confirme_d the demand for recovery of the refunded amount
of duty for the same pi:riod applying the principle.of unjust enrichment.
Appellate authorities as well as Tribunal rejected the appeals of the
F assessee. Hence the present appeal.

It was contended for the assessee that since refund order was based
on assessment and there was no error in the assessment, the principle of
unjust enrichment would not be applicable.

On behalf of the Revenue, it was submitted that assessee had
G continuously collected excise duty at enhanced rate in spite of exemption
on such goods and paid the same to Revenue with the intention to get the
same by way of refund and thereby enriched itself with the public money,
thus, Revenue authorities rightly recovered the same amount of excise duty
from the assessee.
H 404
).\

HINDUSTAN METAL PRESSING WORKS r. COMMR. OF CENTRAL EXCISE [SHAH, J.] 405
Allowing the appeal, the Court A
HELD: I. The assessee has not filed any application under Section
11-B of the Central Excise and Salt Act for refund of the excise duty paid
by him. Thus, there is no question of application of principles of unjust
enrichment as incorporated in Section 11-8 of the Act. Other relevant
provision, viz., Section 11-D of the Act inter alia provides that every person B
who is liable to pay duty under the Act or the Rules made thereunder,
and has collected any amount in excess of the duty assessed or determined
and paid on any excisable goods under the Act or the rules made
thereunder from the buyer of such goods i~ any manner as representing
duty of excise is required to forthwith pay the amount so collected to the C
credit of the Central Government. If such amount is not paid to the credit
of the Central Government, the Central Excise Officer can serve a notice
requiring him to show cause why the said amount should not be paid by
him to the credit of the Central Government. In the instant case the
amount was refunded to the assessee, hence this provision is also not
attracted. Past finalized transaction could not be reopened by holding that D
refund was erroneously granted as there was unjust enrichment.
[407-B-EJ

Serai Keila Glass Works Pvt. ltd. v. Collector ofCentral Excise, Patna,
[1997] 4 SCC 641J; Ma/at/a/ Industries Ltd and Ors. v. Union of India and
Ors., [1997] 5 sec 536 and Sinkhai Synthetics & Chemicals (P) ltd. v. E
Collector of Central Excise, Aurangabad, (2002) 9 SCC 416, relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2050 of 2000.

From the Judgment and Order dated 20.10.1999 of the Central Excise,
Customs and Gold (Control) Appellate Tribunal, New Delhi in A. Nos. El F
7791191-B I in F.O. No. 606-607 of 1999-B.

- Vikram Nankani, Ramesh Singh, Ms. Divya Roy. Ms. Vanita Bhargava
and Ms. Bina Gupta for the Appellant.

N.K. Bajpai, Hemant Sharma and 8. Krishna Prasad for the Respondent. G
The Judgment of the Court was delivered

SHAH, J. Mis Hindustan Metal Pressing Works removed the excisable
goods at the effective rate of duty awaiting approval of their classification list
H
406 SUPREME COURT REPORTS (2003] 2 S.C.R.

A No. 2/88 in which they claimed benefit of exemption Notification No.175/
86-CE dated 1.3.1986. In pursuance of the approval of the classification list
on 21.6.1988. The Range Superintendent granted the refund of excise duty
for the months of April 1988 to August 1988.

Thereafter, a show-cause notice dated 22.2.1989 was issued for
B recovering the said amount on the ground that it was erroneously refunded.
By order dated 8.2.1990, the Assistant Collector, Central Excise confirmed
the demand for a sum of Rs. 2,36,515.55 on the basis of principles of unjust
enrichment by the assessee. The appeal against the said order was dismissed
by the Collector (Appeals) by judgment and order dated 20.11.1990. The
C Customs, Excise & Gold (Control) Appellate Tribunal New Delhi (hereinafter
referred to as 'the Tribunal') also dismissed the appeal by impugned judgment
and order dated 20.10.1999. That order is challenged by filing this appeal.

Learned counsel appearing on behalf of the appellant submitted that the
orders passed by the authorities below are, on the face of it, illegal and de
D hors the statutory provision. He contended that the foundation for initiating
the proceedings under Section 11-A of the Central Excise Act, 1944
(hereinafter referred to as 'the Act') in the present case is so-called erroneous
refund of the excise duty paid by the app~llant. At the time when the refund
order was passed on the basis of Rule -1.73-1 of the Central Excise Rules
(hereinafter referred to as 'the Rules), there was no question of erroneous
E refund. It was based on assessment of RT-12. Admittedly, there is no mistake
or error in such assessment or refund. Hence, it is his submission that principles
of unjust enrichment would not be applicable in the present case.

As against this, it has been poi:;ted out that though classification list
F was approved in June 1988, the appellant continued to collect duty of excise
on enhanced rate from the beginning of financial year 1988-89 even though
they were availing benefit of exemption Notification No. 175/86 in the
preceding financial year and, therefore, Assistant Commissioner was justified
in coming to the conclusion that the appellant had intentionally paid excise
duty with an intent to get the same by way pf refund and to become enriched
G with the public money.

In the present case, it is admitted that duty was paid in excess of ...
effective rate of duty and the excess duty paid was refunded while assessing
the RT-12 Returns. The question, therefor!!·, is-whether the principles of
'unjust enrichment' as incorporated in amenq~d provisions would be applicable
H to the facts of the present case? · ·' ·
'

.1,

' HINDUSTAN METAL PRESSING WORKS'" COMMR. OF CENTRAL EXCISE [SHAH, J ] 407
Admittedly, refund of the excise duty paid in excess was granted in A
1989. Thereafter, sub-section (2) of Section 11-B which incorporates the
principle of 'unjust enrichment' had come into force w.e.f. 20.9.1991, which
inter alia provides that duty of excise paid in excess would be refunded if the
manufacturer had not passed on the incidence of such duty to any other
person. This provision is not at all attracted. There is basic error in approach B
by the Authorities below as the assessee has not filed any application under
Section 1IB of the Act for refund of the excise duty paid by him. There is
no question of application of principles of unjust enrichment as incorporated
in Section I IB. Other relevant provision would be Section 11 D which also
came into force from 20.9.1991. It inter alia provides that every person who
is liable to pay duty under the Act or the Rules made thereunder, and has C
collected any amount in excess of the duty assessed or determined and paid
on any excisable goods under the Act or the rules made thereunder from the
buyer of such goods in any manner as representing duty of excise is required
to forthwith pay the amount so collected to the credit of the Central
Government. If such amount is not paid to the credit of the Central
Government, the Central Excise Officer can serve a notice requiring him to D
show cause why the said amount should not be paid by him to the credit of
the Central Government. As stated above, the amount was refunded to the
assessee in 1989, hence there is no question of application of this provision.

Further, it would be difficult to hold that past finalized transaction E
could be reopened by holding that refund was erroneously granted as there
was unjust enrichment. Considering Rule 173-1 of the Rules and Section 11-
A of the Act, this Court in Serai Keila Glass Works Pvt. Ltd. v. Collector of
Central Excise, Patna, (1997] 4 SCC 641, held thus:-

"Rule 173-1. Assessment by proper officer - (I) The proper officer F
shall on the basis of the information contained in the return filed by
the assessee under sub-rule (3) of Rule 173-G and after such further
inquiry as he may consider necessary, assess the duty due on the
goods removed and complete the assessment memorandum on the
return. A copy of the return so completed shall be sent to the assessee.
G
(2) The duty determined and paid by the assessee under Rule
173-F shall be adjusted against the duty assessed by the proper officer
under sub-rule ( 1) and where the duty so assessed is more than the
duty determined and paid by the assessee, the assessee shall pay the
deficiency by making a debit in the account-current within ten days
of receipt of copy of the return from the proper officer and where H
408 SUPREME COURT REPORTS [2003] 2 S.C.R.

A such duty is less, the assessee shall take credit in the account-current
for the excess on receipt of the assessment order in the copy of the
return. duly countersigned by a Superintendent of Central Excise.

16. The assessee is entitled under Rule 173-F to determine his liability
for duty on the excisable goods manufactured by him and to remove
B such goods on payment of duty on self-assessment in accordance
with the provisions laid down in the Rules. But this is only the first
step in making of the assessment. The proper officer is empowered
to assess the duty on the goods so removed by the assessee and
complete the assessment on the return filed by the assessee. A copy
of the return so computed by the proper officer has to be sent to the
c assessee. The duty assessed and paid by the assessee on self-assessment
will be set off against the duty assessed by the proper officer. If the
duty paid by the proper officer on final assessment is more than the
duty determined and paid by the assessee, the assessee has to pay the
deficiency by making a debit in the account current within ten days
D of the receipt of the copy of the return from the proper officer. If the
duty on final assessment payable by the assessee is less than what he
has actually paid, the assessee is entitled to take credit in the account-
current for the excess payment. No question of any show-cause notice
under Section 11-A arises at this stage. The duty has to be paid by
making adjustment in the account-current which has to be maintained
E by the assessee within ten day's time."

Further, similar contention was specifically dealt with in Ma/at/al
Industries Ltd and Ors. v. Union of India and Ors., [1997) 5 SCC 536 and
it has been held that provisions of Section 11 B do not apply where refund has
F been finally and unconditionally made. The relevant discussion (in paragraph)
I 04 is as under:-

"104. Rule 9-B provides for provisional assessment in situations
specified in clause (a), (b) and (c) of sub-rule (I). The goods
provisionally assessed under sub-rule (I) may be cleared for home
consumption or export in the same manner as the goods which are
G
finally assessed. Sub-rule (5) provides that "when the duty leviable
on the goods is assessed finally in accordance with the provisions of
these Rules, the duty provisionally assessed shall be adjusted against ~
'I
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
H pay the deficiency or be entitled to a refund, as the case may be."
HINDUSTAN METAL PRESSING WORKS v. COMMR OF CENTRAL EXCISE [SHAH, J.) 409

Any recoveries or refunds consequent upon the adjustment under A
sub-rule (5) of Rule 9-B will not be governed by Section 11-A or
Section 11-B, as the case may be ......... "

Relying upon the aforesaid judgment, in a similar matter, the Court in
Sinkhai Synthetics & Chemicals (P) Ltd v. Collector of Central Excise,
Aurangabad, [2002} 9-SCC 416 allowed the appeal and rejected the contention B
of the Revenue that the excise duty paid under protest also would be covered
by the provisions of Section I IB.

In the result, the appeal is allowed. The impugned order passed by the
Tribunal confirming the orders passed by the Assistant Collector and the
Collector (Appeals) is set aside. There shall be no order as to costs. C
S.K.S. Appeal allowed.