ORDER
G.R. Sharma, Member (T)
1. M/s. Grasim Industries Ltd. have filed this appeal challenging the Order-in-appeal dated 16-12-1999 passed by the learned Commissioner (Appeals).
2. The facts of the case in brief are that the appellants filed a refund claim for Rs. 88 lakhs on the ground that the Hon’ble Supreme Court has finalised the classification of white cement under sub-heading 2502.20 chargeable to specific rate of duty and hence, the bank guarantee for Rs. 88 lakhs submitted by them for the amount equivalent to the differential duty between Tariff Heading 2502.20 and 2502.90 as per the direction of Rajasthan High Court and subsequently encashed by the Department is liable to be refunded to them. The Department alleged that the claim of the appellants for refund of duty attracts the doctrine of unjust enrichment in terms of provisions of Sections 12A and 12B of the Central Excise Act, 1944. Accordingly, a show cause notice was issued to the appellants asking them to explain as to why the refund claim should not be sanctioned and credited to Consumer Welfare Fund on the ground of unjust enrichment. In reply to the show cause notice, the appellants submitted that reimbursement of Rs. 88 lakhs is not subject to the provisions of Section 11B of the Central Excise Act, 1944 as was ruled by the Apex Court in the case of Oswal Agro Mills Ltd. v. Asstt. Collector of Central Excise, Ludhiana reported in 1994 (70) E.L.T. 48.
3. It was further contended that the Apex Court has clearly ruled in the case of Oswal Agro Mills Ltd. that the bank guarantee furnished by the as-sessee was in the nature of security for the Revenue; that in respect of the return of the bank guarantee, the provisions of Section 11B cannot come in play and that the provisions of Section 11B apply only when the appellant claims refund of excise duty. The appellants also submitted that the decision of the Apex Court in the case of Oswal Agro Mills Ltd. was followed by the Tribunal in the case of Jupiter Cement Industries Ltd. v. Collector of Central Excise, Rajkot reported in 1998 (102) E.L.T. 308. It was also contended that the assessments were provisional during the period and, therefore, the provisions of Section 11B were not attracted. The Commissioner (Appeals) decided the issue as indicated above.
4. Arguing the case for the appellants, Shri G. Shiv Das, learned counsel submits that bank guarantee furnished by the appellants pursuant to the order of the Hon’ble Rajasthan High Court was in the nature of security alone and that it is not payment of duty and, therefore, does not attract the provisions of Section 11B. He also argued that pursuant to the order of the Hon’ble Rajasthan High Court, the goods were provisionally assessed and, therefore, Section 11B is not applicable and that since Section 11B was not applicable to the facts of the present case, the question of unjust enrichment did not arise. The learned counsel also submitted that there was no unjust enrichment as the appellants had not passed on the burden of duty to the customer. He, therefore, prayed that the amount encashed by the Department in the form of bank guarantee may be refunded to the appellants. In support of his various contentions, he relied upon the decisions of the Apex Court in the cases of Oswal Agro Mills Ltd. and Jupiter Cement Industries Ltd. of this Tribunal.
5. Arguing the case for Revenue, Shri A.K. Jain, learned SDR submits that it is a case of encashment of bank guarantee. He submits that the Hon’ble Rajasthan High Court had issued an interim order directing the appellants to execute bank guarantee of differential duty payable between the difference of rates under Chapter sub-headings 2502.20 and 2502.90. He submits that when the Commissioner (Appeals) decided the issue in favour of Revenue, departmental authorities immediately encashed the amount of Rs. 88 lakhs in the form of bank guarantee. He submits that this amount, when it came back, was the duty of Central Excise payable on the goods manufactured by the appellants. He, therefore, submits that since the amount was encashed by the department on the issue being decided in favour of the department, therefore, it attracted the provisions of Sections 11A and 11B of the Central Excise Act, 1944. He submitted that in the case of Oswal Agro Mills Ltd., the Hon’ble Supreme Court, while commenting on the judgment in the case of Jain Spinners Ltd. 1992 (61) E.L.T. 321 (S.C.) held that this judgment applies to a case where excise duty has been deposited in Court pursuant to an interim order and has been withdrawn by the excise authorities. In such a case, clearly the assessee has to make an application for refund and to such a case, therefore, the provisions of Section 11B squarely apply. The learned D.R., therefore, submits that the ratio of the decision of that case squarely applies to the facts of the present case and, therefore, prays that the appeal may be rejected.
6. On careful consideration of the rival submissions made before us and the cases cited and relied upon by both the parties and also the evidence on record, we find that the short point for determination in this appeal is whether encashment of bank guarantee amounts to payment of Central Excise duty or is it only a security? On perusal of the decision in the case of Union of India v. Jain Spinners Ltd. we find that in that case the Hon’ble Supreme Court passed the following order :-
“Rule. Interim stay on condition that petitioners (respondents herein) deposit in this Court an amount of Rupees Twenty-eight lacs by 31st January, 1986 and a further amount of Rupees Twenty-eight lacs by 30-4-1986. For further clearance petitioners (respondents herein) to give bank guarantee of the disputed amount on future clearance and pay admitted duty as per 18 III (i) of Central Excise Tariff. Liberty to respondents (petitioners herein).”
The first direction was to deposit a sum of Rs. 56 lakhs and to execute a bank guarantee of differential duty. The Department was directed to withdraw the amount of Rs. 56 lakhs subject to the condition that the respondent in this writ petition should pay interest at bank rate and refund the amount along with interest within two months of the decision of the writ petition provided that the petitioner succeeds ultimately Thus, we find that amount of Rs. 56 lakhs in this case was actually a demand of Central Excise duty for the period up to the the date of issue of show cause notice. Thus, this amount was actually the amount of Central Excise duty already quantified ordered to be deposited in the Court which was withdrawn by the departmental authorities. We, therefore, find that the judgment in the case of Jain Spinners Ltd. applies to a case where excise duty has been deposited in Court pursuant to an interim order and has been withdrawn by the excise authorities. In such a case, clearly the assessee has to make an application for refund and to such a case, therefore, the provisions of Section 11B squarely apply. However, we find that the facts in this case are different and are covered by the observations of the Apex Court in para 10 of the judgment in the case of Oswal Agro Mills Ltd. The findings are:
“The question, therefore, is whether it can be said that the furnishing of a bank guarantee for all or part of the disputed excise duty pursuant to an order of the Court is equivalent to payment of the amount of excise duty. In our view, the answer is in the negative.”
We further note that this decision of the Apex Court is followed by the Tribunal in the case of Jupiter Cement Industries Ltd. reported in 1998 (102) E.L.T. 308. in para 7 of this order of the Tribunal, it has been observed :
“The Supreme Court had before them in M/s. Oswal Agro Mills Ltd. (supra) an identical issue where under the directions from the court, bank guarantees were furnished which were encashed by the Revenue and they came to the conclusion that the bank guarantees were the security for the Revenue that in the event the Revenue succeed its dues would be recoverable, being backed by the guarantee of the bank and that, therefore, the amount secured by the bank guarantees could not be held as payment of duty and as such there would be no question of is being treated as duty refund and Section 11B would not stand attracted. They, therefore, ordered refund of the amount without raising any issue of unjust enrichment.”
7. On perusal of the above decisions and the ruling of the Apex Court in the case of Oswal Agro Mills Lid. we hold the bank guarantee in the instant case cannot be held as payment of duty and, therefore, the refund does not attract provisions of Section 11B of the Central Excise Act, 1944. In this view of the matter, the appeal is allowed.