Customs, Excise and Gold Tribunal - Bangalore
The Commissioner Of Central Excise, ... vs Gokak Mills Ltd. on 1 December, 2006
Equivalent citations: 2007(212)ELT56(TRI-BANG)
ORDER S.L. Peeran, Member (J)
(i) Appeal No. E/395/2004 - CCE v. Gokak Mills Ltd.
1. This is a Revenue appeal arising from Order-in-Appeal No. 495/2003 CE dated 6.1.2004 by which the Commissioner (Appeals) has noted that the prices were provisional and were required to be revised at higher rate retrospectively or downward as the case may be. Both the seller and the buyer latter worked out the amounts due and therefore, the assessee filed an application for refund of the excess duty amount paid. It was explained to the Commissioner (A) that when the transactions are provisional, the assessee was issuing credit notes. At the end of the transactions, the amounts were adjusted and thereby leading to a conclusion that there was higher duty paid by the assessee. The Original Authority rejected the prayer on the ground that the credit notes had been issued and therefore, it was hit by the provisions of unjust enrichment but the Commissioner (A) set aside the order on the ground that the transaction clearly discloses that it was provisional and the account had been settled in the end resulting in assessee not receiving any excess amounts and therefore, he allowed refund by rendering a finding that there was no unjust enrichment. Revenue is aggrieved with this order and in terms of the Larger Bench judgment of S. Kumar's Ltd. v. CCE, Indore wherein it has been held that refund will be hit by unjust enrichment in cases where credit notes were issued by the assessee.
2. The learned JDR seeks for setting aside the impugned order.
3. The learned Counsel submits that the circumstances discussed in the Larger Bench judgment does not apply to the present case. In the case of S. Kumar's the facts were that the credit notes are issued simpliciter and there was no provisionality of assessment and hence, this judgment is distinguishable. He submits that the present issue was considered in the light of several judgments rendered by this bench in the case of CCE, Guntur v. Triveni Glass Ltd. 2006 (72) RLT 353 (CESTAT-Ban.) and the judgment of S. Kumar's Ltd. (supra) has been distinguished. He submits that the present case falls within the ambit of CCE v. Triveni Glass (supra) ratio and prays for dismissal of the appeal.
4. I have carefully considered the submissions. It is true that where there are credit notes issued simpliciter without establishing the aspect of the duty element not having been passed on to the consumer, then in that case, the S. Kumar's ratio would apply. However, where the transaction is on provisionality and the amounts are settled in the end and higher payment made by the assessee, then in that case, the assessee is eligible for refund as held in the citations cited by the learned Counsel noted supra. It is presumed to have been established that the higher duty has not been passed on to the consumer. The ratio of CCE, Guntur v. Triveni Glass Ltd. (supra) would apply to this present case. The findings rendered in Para 4 & 5 are noted herein below:
4. On a careful consideration and perusal of the impugned order and the judgment rendered by the Tribunal in the assessees' own case, we find that the issue is no longer res integra. The facts of Sangam Processors' case is clearly distinguishable. The matter is covered by the Tribunal ruling rendered in the appellants' own case and the findings are recorded in Para 5, which is reproduced below:
5. We have perused the records and have considered the submissions made by both sides. It is not in dispute that during the relevant period, every month, the appellant issued credit notes to their dealers in respect of the entire quantity sold to each dealer. The credit notes indicated the reason as "rates difference". Accounts between seller and buyer were settled based on the net amounts. Transactions on this basis for months together between the parties can be indicative only of the understanding that 'rate' was not agreed upon at the time of removal of the goods under invoices and that rates were being settled subsequently. When the seller and buyer are carrying on their business for a protracted period in such a manner, it has to be accepted that both parties understood and accepted the 'rate' indicated in the invoices prepared at the time of removal of goods as provisional in nature and was to be settled later. The credit notes issued on a monthly basis were the result of settling of rate. We are, therefore, of the opinion that lower authorities have not rightly understood the nature of transaction, that sale price was provisional at the time of original removal of the goods and was subsequently settled by issue of credit notes. They were in error in holding that price was known at the time of removal and issue of credit notes only indicated post-sale revision of prices. According to Section 4 of the Central Excise Act, in a case of sale of goods, the transaction value is to constitute the assessable value. The appellant's transactions with their dealers are clearly cases of sale and that transaction value is the value determined after issue of credit notes. The account of each dealer is settled every month at the rate discounted by the credit note amount. There was no further amount paid or payable over and above that net amount. Therefore, the discounted amount, net of the credit note, was required to be treated as assessable value. Since original payment of duty was based on amounts higher than the transaction value, the appellant was rightly eligible for refund of duty paid on the excess amounts. Since the credit notes indicated not only revised prices, but also Cenvat amounts, there could also be no question of the appellant passing on higher amount of excise duty to the buyers. Both price and duty were settled taking into account credit notes. All payments, both price and duty, were net of credit note amounts.
5. We further find that the Larger Bench, in the case of S. Kumar's Ltd. case, has distinguished the aspect pertaining to the unjust enrichment being hit by unjust enrichment are not where the duty has not been collected in such a case. The refund is not hit by unjust enrichment. The same finding was rendered in the case of ONGC v. CCE, Vadodara and in Chennai Petroleum Corporation Ltd. v. CCE, Chennai . We do not find merit in the Revenue's submission. The order passed by the Commissioner (Appeals) is just and proper. There is no merit in these appeals and the same are rejected.
4.1 Respectfully following the ratio of the above judgment, I do not find any merit in this appeal and the same is rejected.
(ii) Appeal No. E/479/2004 - Gokak Mills Ltd. v. CCE
5. In the assessee's Appeal No. E/479/2004, the Commissioner by Order-in-Appeal No. 60/2004 dated 27.2.2004 noted that cotton yarn was cleared under the strength of CT3 Certificate. On realizing the mistake, they issue credit notes to the customers to the extent of duty paid and latter they filed refund claim. The said claim was rejected. The Commissioner (A) noted that strictly speaking the appellant is bearing the burden of duty by issue of credit notes, however in view of S. Kumar's case, he rejected the refund claim.
6. The learned Counsel submits that in the present case, they were issued with CT3 Certificate, it appears that their customer was not bearing the burden of duty. The issue of CT3 certificate itself established the fact of customer not bearing the duty for account purpose. They had issued the credit notes and therefore, they have established that duty was not passed on to the customer. He refers to this Bench's order rendered in the case of CCE v. Audithiya Minerals Ltd. 2006 (74) RLT 818 (CESTAT-Ban.), wherein in similar circumstance, the payment made has been held to be not covered by the unjust enrichment as higher duty had been paid. The finding recorded in Para 6 is reproduced herein below:
6. We have gone through the records of the case carefully. When the rate of duty payable was only 9.6%, the respondents had paid 12.8% duty. In other words, during the period when duty at higher rate was paid, the duty actually payable was only at lower rate. In these circumstances, the correct presumption of the Revenue should be that the correct rate of duty payable is passed on to the buyer and not that the higher duty wrongly paid had been passed on. To put it differently, even when the respondent paid duty to the exchequer at the rate of 12.8%, what has been passed on to the buyer is only at 9.6%. Hence, only the lower rate of duty has been passed on to the buyer, whereas the respondent paid more duty to the Government. Hence, the respondent is rightly entitled for the excess duty paid to the Government and which has not been passed on to the buyer. When the respondent realized the mistake, the price remained the same. He started paying only at 9.6% and the duty passed on to the buyer is also the same. From the above discussion, it is clear that the Respondents are entitled for the refund. Hence, we reject the Revenue's appeal and uphold the orders of the lower authorities.
6.1 The learned Counsel also referred to the judgment rendered in the case of Alstom Ltd. v. CCE, Allahabad wherein also the Delhi Bench has held that provisions of unjust enrichment are not applicable in certain cases. The findings recorded in Para 2 to 3 are reproduced herein below:
2. I have heard both the sides and gone through the record. From the perusal of the record and facts and material placed by the appellants on the record, it is evident that the appellants supplied the transformers to M/s. TISCO under a purchase order which contained price variation clause, they calculated the price of the transformers by taking into account price escalation clause and issued the invoices accordingly at the time of clearance of the goods for delivery to their above said buyer. But the buyer refused to make the payment on that price. Rather paid the original price as contained in the purchase order, as is quite evident from their letter dated 1-12-92 also. The appellants accordingly being left with no option, issued credit notes for correcting the entries in their books of account wherein they categorically also mentioned that these notes were being issued towards the withdrawal of their partial PVC claim against the invoices in question under the cover of which the goods were supplied. Therefore, under these circumstances, it is difficult to conclude that the incidence of duty had been passed on by the appellants to their buyer. Rather they themselves had borne the duty which the buyer refused to pay. The ratio of law laid down in Grasim Industries (supra) by the Larger Bench of the Tribunal is not attracted to the case of the appellants. In that case, the credit notes were issued to the buyers after the buyer had paid the duty, by the assessee and it was observed that the subsequent issuance of the credit notes will not enable the assessee to claim refund of duty which he had already passed on to the buyers. But such is not the situation in the case in hand. As observed above, the buyer had never paid the duty as entered in the invoices issued by the appellants while clearing the goods on payment of duty, the credit notes had been issued by the appellants for correction of their record and withdrawal of their claim against the buyer as latter refused to pay the price including the duty, as recorded in the invoices.
3. In the light of the discussion made above, the impugned order is set aside. The appeal of the appellants is accepted with consequential relief, if any, permissible under the law.
7. The learned JDR relied on the ruling of S. Kumar's Ltd. (supra). He also relied on the ruling of Apex Court judgment rendered in the case of CCE, Khanpur v. Flock (India) Pvt. Ltd. . This judgment is distinguished by the learned Counsel on the ground that CCE v. Flock (India)'s (supra) case applies only to the cases where the assessment order has not been challenged. In the present case, it is the case of refund and not a case of assessment.
8. On a careful consideration, I notice that the ruling of S. Kumar's and CCE v. Flock (India) Pvt. Ltd. cited supra are not applicable to the facts of the present case. The ruling rendered in the case of Alstom Ltd. v. CCE; CCE v. Audithiya Minerals Ltd.; and CCE v. Triveni Glass Pvt. (supra) clearly apply to the facts of the present case. The customer had issued CT3 certificate, which clearly indicated that they are not going to bear the burden of duty. The duty burden had been borne by the assessee, therefore, they are eligible for refund in terms of the cited judgments. The assessee's appeal is allowed with consequential relief.
(iii) Appeal No. E/523/2004 - Jineshwar Malleable and Alloys v. CCE
9. This appeal arises from Order-in-Appeal No. 53/2004 CE dated 23.2.2004. The issue in this appeal also pertains to higher duty of 12.8% paid by the assessee as against 9.6%. The assessee had shown to the authorities that the excess duty paid by them has not been passed on to the consumers. However, the authorities have followed the ratio of S. Kumar's Ltd. case and rejected their plea for refund of the excess duty amount paid.
10. The learned Counsel submits that the citations referred to by the learned Counsel in all the above cases will apply to the facts of this case. As the situation is same as in the case of M/s. Gokak Mills Ltd. he prays for setting aside impugned order and allowing the appeal.
11. The learned JDR distinguishes the judgments and prays for dismissing the appeal.
12. On a careful consideration, we notice that the ratio of the judgments rendered in the case of M/s. Gokak Mills Ltd. as above in Appeal No. E/479/2004 would apply to the facts of this case also. Respectfully following the above ratio, the impugned order is set aside and appeal is allowed with consequential relief, if any.
(iv) E/769/2004 - Mysore Electrical Industries Ltd. v. CCE
13. This appeal arises from Order-in-Appeal No. 42/2004 CE dated 31.3.2004 in this case also the Commissioner (A) has rejected the refund by applying the Larger Bench judgment rendered in the case of S. Kumar's case (supra). The fact of this case is that the appellants by arithmetical mistake paid the higher amount of duty as per purchase order dated 5.2.2002 of M/s. Karnataka Power Transmission Corporation Ltd. (M/s. KPTCL). The price of the unit at Lot-3a is Rs. 23,23,240/- and whereas the price of the unit at Lot-3b-1 is Rs. 24,96,275/-. Thus, the differential value works out to Rs. 1,73,035/- per unit. The assessee had cleared three units and the total differential value is Rs. 5,19,105/-. The excess duty at 16% was paid which works out to Rs. 83,056.80 (rounded off to Rs. 83,057/-). They claim refund on the ground that due to arithmetic mistake, the excess duty had been paid and the consumer (M/s. KPTCL) refused to pay the amount and the same was borne by the appellant. They have produced all the evidence to show that they had not passed on the excess duty burden to the consumer. However, it was rejected by the Commissioner (A)'s solely on the basis of the S. Kumar's case.
14. I have heard both sides in the matter.
15. I am of the considered opinion that the ratio of the above noted judgments would apply to this case also. Furthermore, this Bench in the case of CC, Cochin v. Rajesh Chemicals 2006 (196) ELT 64 (Tri.-Bang.) held that where excess payment of duty has been made due to arithmetical error, it cannot be said to be considered as duty and the same is also not hit by the provisions of unjust enrichment. Similar view was expressed by a Divisional Bench of Delhi in the case of CCE, Bhopal v. Tesla Transformers Ltd. . In view of this judgment, the appellant's claim for refund is justified. The appeal is allowed with consequential relief.
(Pronounced and dictated in open Court)