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REFUND OF DUTY: SOME BASIC CONCEPTS

some times less duty is paid and some times more duty is paid by the assessee or more duty is ‘taken' by the Department. In Central Excise Act, both situations are fairly dealt with. The Department is entitled recovery of duties short levied and short paid along with interest and penalty, (Sec 11A of ACT).

Similarly the assessee is entitled for the claim of refund, if the Duty is paid more or if the assessee is entitled to get the refund under some Promotional Scheme of the government for example Under Rule 18 and 19 of the Central Excise Rule 2002.This paper is just an humble attempt to highlight the basic requirements of refund available to the assessee under Sec 11B of Central Excise Act., (Parallel provision Sec 27 of Custom Act), which read as follow:-

SECTION 11B, Claim for refund of [duty and interest, if any, paid on such duty]-

(1) Any person claiming refund of any duty of excise and interest, if any duty of excise and interest, if any paid on such paid to the may make an application for refund of such duty to the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise] before the expiry of [one year] [from the relevant date] [[in such form and manner] as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty [duty and interest, if any, paid on such duty] had not been passed on by him to any other person :

Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act :]

[Provided further that] the limitation of [one year] shall not apply where any duty has been paid under protest.……………………… …………………………………………………………………………………….………………………………………………………………………………………………………………

 If the above said Sec 11B of the Central Excise Act analyzed we find that, any person can claim the refund of duty of Excise before expiry of one year from the relevant date when the incidence of duty had not been passed by him to any other person. For the sake of convenience we will discuss the present topic under the following heading:-

 A)  Who is entitled to claim the refund:- the language used in Sec 11B is "any person" and so any person can claim the refund of duty and may make application for the same. The word any person is not defined in the Act, but through the judicial pronouncement it is settled that refund can be filed by assessee who has paid the duty or by the buyer on whom burden of duty has been passed. [McNally Bharat Engineering V. CCE 2006(194) ELT 318 (CESTAT), VST Precision Components V. CCE 2003(157) ELT 493(CESTAT).

 B)    Relevant date for filling the Refund: - Sec 11B of the Central Excise Act says that the application for refund is to be filled before the concerned authority within one year from the relevant date. Now the question is when will be relevant date and it has be defined in clause (B) of the Explanation of the section 11B of the Central Excise Act. And it explain the starting point of relevant date under different circumstances, clause (B) of Explanation read as follow:-

 B)     "Relevant date" means, -

(a)      in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods, -

(i)  if  the  goods  are  exported  by  sea  or  air,  the  date  on  which the ship or the aircraft in which such goods are loaded, leaves India, or

(ii) If the goods are exported by land, the date on which such goods pass the frontier, or

(iii) if the goods are exported by post, the date of dispatch of goods  by  the  Post  Office  concerned  to  a  place  outside India;

(b)  In the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory, the date of entry into the factory for the purposes aforesaid;

(c)  In the case of goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside  India,  if  returned  to  a  factory  after  having  been  removed from such factory for export out of India, the date of entry into the factory;

(d)  In a case where a manufacturer is required to pay a sum, for a certain period, on the basis of the rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction;

[(e) In the case of a person, other than the manufacturer, the date of purchase of the goods by such person;]

[(ea) In the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of Sec 5A, the date of issue of such order]

 (eb) In case where duty of excise paid provisionally under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof;

 (ec) In case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court, the date of such judgment, decree, order or direction;]

(f)  In any other case, the date of payment of duty.]

 C)    Limitation: - The time limit prescribed under Sec 11A is one year from the relevant Date. So, the application for refund has to be filled within on year and this provision is mandatory. Any refund filled beyond the due date cannot be granted.[escorts limited V. UOI 1998 (97) ELT 211(SC), Porcelain Electrical Mfg. Co V. CCE 1998(98) ELT 583(SC)].,

 However the limitation of one year will not be applicable in the cases where duty has been paid under protest, (proviso of the section 11B of CEA). Although time limit prescribed under law must be strictly adhere but in some of the cases as held in judicial pronouncement time will not be applicable, they are as follow:-

 a)    Duty paid under protest... The proviso is inserted in the act with effect from 10.05.08 but even before it was held that time limit is not applicable when duty was  paid under protest [ CCE V. Flotech power 2005(187) ELT 399(CESTAT)., CCE V. Allied Photographic 2004 (166) ELT 3 ( CESTAT)]

Infact when matter is under litigation any payment made is deemed to be payment made under protest and will not be affected by the limitation of one year.[ CCE V. klasspak P ltd 2005 (179) ELT 365 (CESTAT)., Parle Biscuits V. CC 2006(199) ELT 146 (CESTAT)].,

 b)    Refund on account of appellate order:- in case duty is refundable as consequence of judgment, decree, order, direction of appellate authority or appellate Tribunal and any court, the date of such judgment, Decree, Order or Direction will be relevant date for the purpose of refund application [ Explanation (B) sub clause (ec) of Sec 11A CEA. In the circumstance mentioned above the refund can be given on the basis of original refund claim and filling of fresh application is not necessary [spic ltd V. CC (2007) 209 ELT 91 (CESTAT)],

c)     Money deposited in PLA: - since the money available in PLA belongs to the assessee refund of the same can be filled at any time.[Navdeep Packaging Industries V. CCE 2007(210) ELT 417 (CESTAT)].,

 d)    Pre-deposit of duty: - since it is pre-condition of hearing an appeal, and hence no time limit is applicable.

 These are the some of the instances where time limit of claiming should not be insisted upon, however apart from above mention instances there are numerous occasions when it was held by the courts that limitation of one year is not applicable.

 D)   Condition for Refund:- Basically there are two conditions which are sin-qua-non for claiming the refund, firstly duty has to be deposited and secondly the incidence or burden of duty has not been passed to any other person except the person who claiming the refund.

 E)    When assessee/buyer is entitled to get the refund:- Sec 11B(2) of the CEA says that any amount of refund for which the applicant is entitled be determined and shall be credit to the consumer welfare fund. The provision of Sec 11B(2) however says that the refund will be paid to the applicant in following cases:-

 a)    For rebate of duty on the goods exported.

b)    Refund of Cenvat Credit which may accumulated in the process of manufacturing in relation of the goods which is exported out of India.

c)     Refund of duty under any rule or notification.

 For all the above cases, it is must for the person claiming the refund that he has borne the duty and has not passed the incidence of duty to another person. The burden to prove that the incidence of duty has not been passed always lies on the person claiming the refund because there is a presumption in law that the same has been passed on the buyer( sec 12 B of the CEA, parallel Sec 28 D of the custom Act).,

 F)     Doctrine of unjust enrichment: - The basic theme of the refund as provided Sec 11B of the Act is to help a genuine assessee in getting the excess duty paid or to exercise a right given to him under law. As rightly held in numerous judicial pronouncements that refund is applicable only when duty of incidence has not been passed. Infact it is statutory requirement of the Act that if the duty of excise collected from the buyer the same must be deposited government forthwith. ( Sec 11D of the CEA).

 So no one is entitled to earn the duty from the both end i.e. recovery of duty from the buyer and simultaneously claiming the refund from the government. But the application of the unjust enrichment is not applicable in some of cases as provided in proviso Under Sec 11B (2) of the Act.

 G) Time limit for disbursement of refund:- Sec 11BB prescribed that any duty order to be refunded within three months  from the date of received of application under Sec 11(1) and it is not done so the applicant will be entitled for the interest ( not below 5% and not Exceeding 30% per annum as fixed by the Central Government). The proviso of the Sec 11BB comes automatically in operation if refund is not sanctioned with in three months. Responsibility should be fixed by the commissioner for not disposing of refund claim within three months from the date of receipt of application [CBE&C circular no 670/61/2002-CX Dated 01.10.02]

 Refund of duty is not discretion of the department and infact it's a matter of right for the assessee or the applicant considering the fact that sec 11B of the CEA is a beneficial piece of legislation intended to help the genuine assessee.

About the Author

Advocate: Central Excise, Service Tax & Commercial Laws. I am practicing advocate in the above said areas for the last 12 years. I have wide experience in advicing clients in these areas, leading litigation and appellate proceeding before the adjudicating authority and before CESTAT, High Court & Supreme Court. I am based in Delhi. Presently I am a partner in a Law firm in the name of Rajesh Kumar & Asscoiates. E Mail: custom.excise @ gmail.com Web: www.rajeshkumar.co.in