Excess Duty Paid On PCMX For Manufacturing Of Dettol Products Refundable As Prices Were Government Controlled: CESTAT Chennai

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that excess duty paid on PCMX (Para-Chloro-Meta-Xylenol) used for manufacturing Dettol products is refundable, as the prices of products were controlled by the Government. The bench opined that under such circumstances, the doctrine of unjust enrichment does not apply. Vasa Seshagiri Rao (Technical Member) opined that when prices are controlled by the government, the manufacturers cannot charge any amount over the fixed price determined by the government. Consequently, any excess duty determined to be in excess consequent to finalisation of provisional assessment cannot be treated as having passed on the duty burden to another person, and the question of unjust enrichment does not arise. In the case at hand, the assessees/Appellants manufactured Para-Chloro-Meta-Xylenol (PCMX), which was cleared for home consumption, export, and stock transfer to its sister units for the manufacture of Dettol Antiseptic Liquid and Dettol Soap. For the period 2009-2010, the assessees resorted to provisional assessment under Rule 8 of the Central Excise Valuation Rules, 2000, due to fluctuations in the exchange rate of the imported raw material and upon finalisation, excess duty was paid. During this time, both PCMX manufactured by the assessees and the Dettol products manufactured by their sister units were subject to statutory price control under the Essential Commodities Act, 1955, read with the Drugs (Prices Control) Order, 1995, administered by the Department of Pharmaceuticals and Ministry of Chemicals & Fertilisers, Government of India. Upon finalisation of the provisional assessment for 2009-2010, it was determined that the assessees had paid excess duty on account of the difference between the provisionally adopted value and the value finalised. The Deputy Commissioner of Central Excise, Hosur, had observed that the assessees were entitled to a refund under Section 11B of the Central Excise Act, 1944. Accordingly, the assessees had filed two refund claims in Form-R, seeking a refund of the excess duty paid on PCMX. The Assistant Commissioner of Central Excise sanctioned a refund of the excess duty determined upon finalisation of the provisional assessment for the year 2009-2010. Aggrieved, the Department preferred appeals before the Commissioner of Central Excise (Appeals). The Commissioner (Appeals) set aside the refund orders and remanded the matter to the adjudicating authority for the limited purpose of examining whether the incidence of duty had been passed on to the assessee's sister units and thereafter to decide the refund claims in accordance with law. The counsel for the assessee argued that the price of PCMX manufactured by the assessees is subject to Government control. Accordingly, the doctrine of unjust enrichment has no application to the case. The bar of unjust enrichment is inapplicable where the price of the goods is fixed or regulated by the Government. The revenue argued that the assessee's sister units, to whom PCMX was stock-transferred, had not availed any credit on the said goods. In the absence of any credit availment by the receiving units, it was submitted that the incidence of duty has not been passed on, and therefore, the doctrine of unjust enrichment is inapplicable to the case. The issue before the bench was whether the refund sanctioned to the assessees is hit by the application of the principle of unjust enrichment. The bench noted that the PCMX manufactured by the assessees was transferred only to their own sister units. In such circumstances, the question of passing on the incidence of duty does not arise. The Tribunal observed that in cases of stock transfer, the question of passing on the duty burden does not arise. Further, the prices of the goods were not fixed by the assessees but were mandatorily determined by the Government under the Essential Commodities Act, 1955, read with the Drug (Prices Control) Order, 1995. The bench noted that the doctrine of unjust enrichment does not apply when the prices are fixed by the Government, since no excess amount can be collected beyond the controlled price. In view of the above, the Tribunal allowed the appeal. Case Title: M/s. Reckitt Benckiser (India) Private Ltd. v. Commissioner of GST and Central Excise Case Number: Excise Appeal Nos. 40785 and 40786 of 2016 Counsel for Appellant/ Assessee: Raghav Rajeev Counsel for Respondent/ Department: M. Selvakumar Click Here To Read/Download Order

Excess Duty Paid On PCMX For Manufacturing Of Dettol Products Refundable As Prices Were Government Controlled: CESTAT Chennai

Mehak Dhiman

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