2026-VIL-1031-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Refund of excess excise duty on incorrect valuation – Appellant paid Oil Industry Development Cess at ad valorem rate on ex-duty price instead of cum-duty price during a specified period, resulting in excess payment, and subsequently claimed refund under Section 11B of the Central Excise Act, 1944 - Whether excess cess paid due to adoption of incorrect assessable value is refundable in principle in terms of valuation under Section 4 of the Central Excise Act, 1944 read with Section 15 of the Oil Industry (Development) Act, 1974 and the Notification dated 28.03.2016 - HELD - Where an ad valorem levy of cess is charged, the principles of valuation under Section 4 of the CEA, 1944 necessarily apply, requiring that transaction value be determined exclusive of duties and taxes. Where the sale price is charged inclusive of duty and governed by a pricing mechanism that does not separately recover duty, such price must be treated as cum-duty price, from which the duty element must be backed out to arrive at the correct assessable value - The excess payment arising from applying the duty rate on an inflated value that already includes the duty component constitutes payment of duty on duty, which is a direct mathematical consequence of incorrect valuation methodology. The Department cannot retain amounts collected without lawful authority as mandated by Article 265 of the Constitution. Since the Department has not disputed the computation or the corrected methodology adopted subsequently, rejection on merits is not sustainable. Excess duty paid due to incorrect valuation is refundable in principle, subject only to the doctrine of unjust enrichment - The appellant has successfully established that excess cess was paid due to incorrect valuation methodology. The appellant is entitled to refund of excess OID Cess paid, as the same has been paid on an incorrect assessable value and the incidence of such cess has not been passed on to the buyer - The impugned order is set aside and the appeal is allowedrnrn^Refund claim – Bar of unjust enrichment - Duty burden not passed on to buyer - Whether the refund claim is barred by the doctrine of unjust enrichment under Section 11B read with Section 12B of the Central Excise Act, 1944 – HELD - While Section 12B creates a statutory presumption that duty has been passed on, such presumption is rebuttable and the assessee can discharge the burden through cogent evidence. The crude oil sale agreement forms the primary evidence and establishes an exhaustive pricing mechanism wherein Oil Industry Development Cess is conspicuously absent despite specific mention of other levies like Sales Tax and VAT. The deliberate exclusion of cess from the pricing formula, when read in the context of detailed contractual provisions for other levies, demonstrates conscious allocation that cess is to be borne by the seller, not the buyer. The invoices, which constitute primary evidence of price charged in commercial transactions, do not reflect any cess component, indicating non-recovery from the buyer. The Chartered Accountant's certificate, based on examination of books of account and contractual terms, establishes that the duty burden was borne by the assessee - The Department has produced no contrary evidence to discredit these documents or establish actual recovery from the buyer. The principle that where contract price does not permit separate recovery of duty, unjust enrichment does not apply, is consistent across judicial precedents. Cum-duty valuation is a principle of assessment and cannot be extended to infer unjust enrichment beyond its statutory purpose - The appellant has successfully rebutted the presumption under Section 12B and the refund is not hit by unjust enrichment.
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