CCE Vs. THE LAKSHMI MILLS CO. LTD.

JUDGEMENT

(1.) THIS is an appeal filed by the Revenue. In the impugned order the Commissioner (Appeals) vacated the order of the original authority and allowed refund of an amount of Rs. 1,82,192/ - to the respondents. According to the respondents, the amount represented excess duty paid by them on clearances of staple fibre yarn during the period November 1996 to January 1997.

(2.) THE facts of the case are that the assessee manufactures cotton yarn, staple fibre yarn etc. and clears to its sister unit for weaving into fabrics. For payment of duty on such removals of staple fibre yarn etc. the assessee adopts the price charged for sale of such goods to unrelated buyers. The assessee paid duty on removals of staple fibre yarn during the material period adopting a price of Rs. 137/ - per kg. Subsequently they discovered that they had adopted Rs. 137/ - erroneously and that Rs. 137/ - was a cum -duty unit price which had prevailed at an earlier point of time. They ascertained the assessable value adopted for sale of such yarn to independent buyers just before the material period. During the material period, clearances of such goods were made only to its sister unit for captive consumption. They claimed refund of the excess duty paid at the time of removal of the goods with reference to the sale price that prevailed near the material period. The original authority found that the assessee had not declared the applicable assessable value for clearances made to its sister unit in Annexure -II as prescribed. Moreover, price of yarn fluctuated daily and the assessee could not claim refund of any duty paid on the basis of a value it had adopted at the time of clearance. In any case the assessee's sister unit would have factored in the duty paid on the staple fibre yam in the cost of fabrics manufactured and sold. Therefore the impugned amount of duty would have already been passed on to buyers of final products of the assessee's sister unit. The refund claim would entail unjust enrichment of the assessee. In the impugned order the Commissioner (Appeals) found that the assessee had incorrectly adopted a unit price of Rs. 137/ - per kg. for payment of duty on clearances during the material period till it found out the error. The assessee had adopted a price of Rs. 114/ - per kg. with effect from 7.1.1997 on detecting the error. This was also the unit price realized on sale of staple fibre yarn immediately before the material period. The Commissioner (Appeals) found that the assessee had paid excess duty under a mistake of law. He relied on the judgment of the apex Court in Mahabir Kishore case reported in and judgment in New India Industries Ltd. case reported in, 1990 (46) ELT 23 (Bom.) wherein it was held that duty paid under mistake of law was liable to be refunded. In the second cited case it was held that the excess duty was liable to be refunded even if the same had been recovered from the customers by the manufacturer.

(3.) WE note that there is no dispute as to the price adopted by the assessee for the impugned clearances. As regards the sale price adopted by the assessee to work out the excess duty paid, the Commissioner (Appeals) found that the same represented the sale price when such goods had been sold last before the impugned clearances were made to its sister unit. He upheld the determination of value of staple fibre yarn followed for payment of duty as appropriate. As regards unjust enrichment, the impugned order had allowed refund to the assessee relying on a judgment of the apex Court and another judgment of the Bombay High Court. We find that the impugned clearances had been made during 14.11.1996 to 6.1.1997. During this period there were no sale of such goods to independent buyers. In the circumstances, the appropriate provision to determine the assessable value of yarn cleared for captive consumption by its sister unit was Rule 8 of Central Excise Valuation Rules, 2000. The lower appellate authority wrongly relied on case law which laid down that refund of duty paid by mistake of law was not governed by Section 11B of the Act and ordered refund of the impugned amount. We find that the case law do not apply to the facts of the case. Also, Commissioner (Appeals) has not examined if the value could be revised retrospectively and refund of excess duty paid could be validly claimed after the clearance of excisable goods. In the circumstances we set aside the impugned order and allow the appeal filed by the Revenue by way of remand. The Commissioner (Appeal) shall decide the dispute afresh. Needless to say that the assessee shall be afforded an effective opportunity of hearing before a fresh decision is taken. The appeal is disposed off.