Refund - Unjust enrichment - Issuance of credit note -

2008 (232) E.L.T. 832 (Tri. - Ahmd.) IN THE CESTAT, WEST ZONAL BENCH, AHMEDABAD [COURT NO. II] Shri B.S.V. Murthy, Member (T) JYOTI LIMITED Versus COMMISSIONER OF CENTRAL EXCISE, VADODARA-I Final Order Nos. A/1370-1371/2008-WZB/AHD, dated 14-7-2008 in Appeal Nos. E/246-247/2007 Refund - Unjust enrichment - Issuance of credit note - Wrong valuation due to clerical error noticed after issue of invoice - Credit notes issued and refund claimed - Submission that full payment of sales made not received - Credit note issued only to regularise transaction - HELD : Excess invoiced amount never received by appellant and subsequently paid back through credit notes - Duty claimed not passed to buyer - Department at liberty to re-open the issue if claim of appellant turns out to be false - Appeal allowed with consequential relief - Section 11B of Central Excise Act, 1944. [para 7] Appeal allowed CASES CITED Alstom Ltd. v. Commissioner — 2004 (168) E.L.T. 511 (Tribunal) — Referred.................... [Para 5] Commissioner v. Varinder Agro Chemical Ltd. — 2007 (219) E.L.T. 160 (P & H) — Referred [Para 5] Dutron Plastics v. Commissioner — 2006 (199) E.L.T. 289 (Tribunal) — Referred............... [Para 6] Grasim Ind. (Chemical Divn.) v. Commissioner — 2003 (153) E.L.T. 694 (Tribunal-LB) — Referred [Paras 5, 6] Peacock Industries Ltd. v. Commissioner — 2005 (191) E.L.T. 1075 (Tribunal) — Referred [Para 5] Rajashtan Electronics and Instruments Ltd. v. Commissioner — 2006 (200) E.L.T. 324 (Tribunal) — Referred [Para 5] Universal Cylinders Ltd. v. Commissioner — 2004 (178) E.L.T. 898 (Tribunal) — Referred [Para 5] Varinder Agro Chemicals Ltd. v. Commissioner — 2006 (206) E.L.T. 392 (Tribunal) — Referred [Para 5] REPRESENTED BY : Shri J.C. Patel, Advocate, for the Appellant. Shri M.M. Mathkar, JDR, for the Respondent. [Order]. - The appellants are engaged in the manufacture of switch-gear and other products falling under Chapter 85 of CETA, 1985. There are two appeals on similar issue and therefore both are taken together for disposal. 2. In first case, the appellant had cleared the spares along with 11 KV switchgears of Rs. 6,70,675/-. In the second case, the appellants had cleared the insulation valued at Rs. 3,16,275.42. 3. In the first case, the appellants subsequently noticed after issue of invoice that the actual value of spares agreed to at the time of entering into contract was only Rs. 1 lakh whereas while preparing invoice, there was a clerical error and invoice came to be prepared of Rs. 6,70,675/- for spares resulting in excess payment of duty to the extent of Rs. 94,384/- which they claimed as refund. In second case also, the actual assessable value was Rs. 8,871.67 whereas they had charged Rs. 3,16,275.42 which resulted in excess payment of Central Excise duty of Rs. 49,184.61 which was claimed as refund. 4. The lower authorities have rejected the refund claims on the ground that the appellant had issued credit note for the differential value of the spares and insulation and in view of the Larger Bench decision of the Tribunal in Grasim Industries case 2003 (153) E.L.T. 694, once credit note is issued unjust enrichment is attracted and appellants are not entitled to refund. 5. Heard both sides. Shri J.C. Patel, learned Advocate on behalf of the appellant submits that the department has taken a restricted view in holding that just because the credit note has been issued, refund is not admissible. He relies on several decisions of the Tribunal as detailed below, the High Court and in one case by Supreme Court, wherein it was held that when the buyer had not at all paid the invoice amount, issue of credit note would not affect the refund claim and unjust enrichment would not apply. (a) Varinder Agro Chemicals Ltd. v. CCE, Ludhiana - 2006 (206) E.L.T. 392 (Tri-Del.) (b) CCE, Ludhiana v. Varinder Agro Chemical Ltd. - 2007 (219) E.L.T. 160 (P&H) (c) Universal Cylinders Ltd. v. CCE, Jaipur-I - 2004 (178) E.L.T. 898 (Tri-Del.) (d) Rajasthan Electronics & Industries Ltd. v. CCE, Jaipur - 2006 (200) E.L.T. 324 (Tri-Del). (e) Peacock Industries Ltd. v. CCE, Jaipur - 2005 (191) E.L.T. 1075 (Tri-Del.) (f) Alstom Ltd. v. CCE, Allahabad - 2004 (168) E.L.T. 511 (Tri-Del.). 6. He pointed out that the judgment in case of Grasim Industries was rendered wherein the full amount had been paid by the buyer and subsequently credit note was issued for the differential amount and refund claim was made. Since the full amount has been charged and received, and subsequently credit note was issued, it was held that unjust enrichment is attracted and refund claim is not admissible. He drew attention to the letter issued by the customer in the first case wherein a detailed work-sheet had been sent by them to showing actual amount payable after taking into account the advance paid, material supplied and interest payable on the advance. In this letter dt. 30-8-04, the cost of the spares is shown as Rs. 1 lakh only and even as on that date, there was a balance amount payable to the appellant which goes to show that full payment for the sales made had not been received and the credit note was only issued for regularization of the transaction. In the second case, the appellant have produced a Chartered Accountant’s certificate which certifies that the credit note was issued after receipt of reduced payment and duty from the buyer and therefore, the burden of duty claimed by company as refund has not been passed on. He also relies on the credit voucher of the bank in respect of the second claim which shows that the amount received by them from customer Chittaranjan Locomotive Works (C.L.W.), was only Rs. 10,000/- and not Rs. 3,16,275/- (Pages 73, 74). On being specifically asked as to why the credit note was issued when no payment has been received, the learned Advocate stated that as per the accounting requirement, a credit note has to be issued even though no payment was required to be made by the appellant to their customer as they have not received the amount. The learned DR submits that the fact remains that credit note was issued and therefore decision of this Tribunal in case of Dutron Plastics v. C.C.E., Vadodara I & II - 2006 (199) E.L.T. 289 (Tri-Mumbai) and in case of Grasim Industries (Chemical Divn.) v. C.C.E., Bhopal - 2003 (153) E.L.T. 694 (Tri-LB), are applicable. 7. I find that from the records of the case and the arguments advanced by the learned Advocate show clearly that there was a clerical error while preparing invoice and making payment of Central Excise duty to the department. It is also quite clear that the invoiced amount in excess was never received by the appellant and accordingly the duty amount claimed as refund had also not been passed on to the buyer at any stage of transaction. Lower authorities have simply rejected the refund claim only on the ground that credit note has been issued. Further, I also find that at no stage, there is an observation that the amount was originally received and subsequently paid back to the supplier by way of issue of credit note. Needless to say that department will be at liberty to re-open the issue in case the appellant claim that they had never received the excess amount invoice towards spares and insulation turns out to be false. 8. In view of the above discussion, both appeals are allowed with consequential relief.