Custom, Excise & Service Tax Tribunal
Indian Telephone Industries Ltd vs Bangalore-I on 4 March, 2024
C/25464, 26488/2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Customs Appeal No. 25464 of 2013
(Arising out of Order-in-Appeal No.186/2012-Cus. (B)
dated 13.12.2012 passed by the Commissioner of
Customs (Appeals), Bangalore.)
M/s. Indian Telephone
Industries Ltd Appellant(s)
Dooravaninagar,
Bangalore - 560 016.
Versus
The Commissioner of Customs
(Appeals) Respondent(s)
Queen's Road, Bangalore - 560 001.
AND Customs Appeal No. 26488 of 2013 (Arising out of Order-in-Appeal No. 06/2013 dated 28.02.2013 passed by the Commissioner of Customs (Appeals), Bangalore.) M/s. Indian Telephone Industries Ltd Appellant(s) Dooravaninagar, Bangalore - 560 016.
Versus
The Commissioner of Customs
(Appeals) Respondent(s)
Queen's Road,
Bangalore - 560 001.
Appearance:
For the Appellant
Mr. B. V. Kumar, Advocate
Mr. K. A. Jathin and
For the Respondent
Mr. K. Vishwanath (ARs)
CORAM:
HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) HON'BLE MRS. R. BHAGYA DEVI, MEMBER (TECHNICAL) Page 1 of 10 C/25464, 26488/2013 Final Order No. 20125 - 20126 /2024 Date of Hearing: 25/10/2023 03/11/2023 Date of Decision: 04/03/2024 Per : R. BHAGYA DEVI These appeals are filed by the appellant M/s. ITI Ltd. Bangalore against the impugned Order-in-Appeal No.186/2012- Cus. (B) dated 13.12.2012 and Order-in-Appeal No. 06/2013 dated 28.02.2013 passed by the Commissioner (Appeals), Bangalore. Since the issue involved in both these appeals are common, they are taken up together for disposal.
2. The appellant, M/s. ITI Ltd. Bangalore, imported 2 consignments of wireless telephone classifiable under Customs Tariff Heading 8517 8090 attracting duty at 10% Basic Customs Duty (BCD) and 16% Countervailing Duty (CVD). As the goods were rightly classifiable under Customs Tariff Heading 8525 2019 with 15% BCD and 16% CVD, the appellants were directed to pay differential duty of Rs.78,71,876/- and Rs.1,88,14,175/- which were paid under protest. The issue was further investigated by the Revenue vide Order-in-Original No. 8/2005 held that the goods are rightly classifiable under Chapter Heading 8525 2019 and the benefit of Notification No. 21/2002 Cus. dated 1.3.2002 was not available to the appellant. Against this order, the appellant filed an appeal before the Tribunal and the Tribunal vide Final Order No. 937/2006 dated 17.05.2006 held that the goods are classifiable under Customs Tariff Heading Page 2 of 10 C/25464, 26488/2013 8525 2017 and they are also eligible for the benefit of the Notification No.21/2002 dated 01.03.2002 and this order was accepted by the Department. (i) In respect of Appeal No. C/25464/2013, the appellant was eligible for a refund of Rs.3,67,55,675/-. On filing the refund claim, the original authority sanctioned the refund of Rs.25,00,000/- and Rs.3,22,55,665/- was ordered to be credited to the Consumer Welfare Fund under Section 27(2) on the ground that the claim was hit by the doctrine of unjust enrichment and rejected refund of Rs.20,00,000/- as time barred as they had not filed an appeal against Order-in-Original No.36/2004. (ii) In respect of Appeal No. C/26488/2013, appellant was eligible for a refund of Rs.2,60,94,940/- was ordered to be credited to the Consumer Welfare Fund under Section 27(2) on the ground that the claim was hit by the doctrine of unjust enrichment. Aggrieved by these orders, appeals were filed with the Commissioner (Appeals) upholding the orders of the original authority, who rejected the appeals of the appellant and now, the appellants are in appeal before us against these impugned orders.
3. The Learned Counsel on behalf of the appellant submits that they had floated a tender for supply of fixed wireless terminals and the Tender Document at Clause 9 "bid prices" reads as follows:
"The bidder shall give the total composite price inclusive of levies and taxes that is sales tax and excise, packing, forwarding freight and insurance etc; but excluding octroi/entry tax which will be paid extra as per actual wherever applicable".Page 3 of 10
C/25464, 26488/2013 At Para 9.3, it is mentioned that the prices quoted by the bidder shall remain fixed during the entire period of contract and will not be subject to variation on any account. A Bid submitted with an adjustable price quotation will be treated as non-response and rejected and at Para 9.5, it says that any change in this shall have no effect on price during the scheduled period of delivery. At Para 10.2 of the Tender Document, it is stated that any increase in taxes and other statutory duties/levies after the expiry of the delivery date shall be to the contractor's account. But benefit of any decrease in these taxes/duties shall be passed on to the purchaser by the supplier. Based on these standard documents, the learned counsel submits that the purchase orders clearly indicate that once the price is quoted against the bid document and on that basis purchase orders are placed by Bharat Sanchar Nigam Ltd (BSNL) on the appellants, the appellants have no choice but to bear any increase in the Excise/Customs duty or any other statutory levies payable on the impugned goods. It is further submitted that the Chartered Accountant certificate dated 15.3.2012 clearly mentioned that the additional duty along with interest and penalty paid has resulted in erosion of profit/increase in the loss. The price paid by the BSNL for the items supplied to them is a fixed price including duty and all other payments including taxes are to be borne by the appellant irrespective of the variations due to change in the tax structure and therefore, the question of denying the refund on the ground that they have passed on their Page 4 of 10 C/25464, 26488/2013 duties does not arise. The appellant also relies on the following decisions.
• Gopikrishna Processors Private Limited versus CCE Jalandhar 2007 210 ELT 529 (TRI-Delhi) • CCE Guntur versus Empee Sugar and Chemicals Limited 2007(211) ELT 293 (TRI-Bang) • CCE Bangalore versus Karnataka State Agro Corn Products Limited 2008(9) (STR) 597 (KAR)
4. The learned Authorised Representative on behalf of the Revenue reiterating the findings of the Commissioner (Appeals) submits that the refunds claimed by the appellant is not shown as receivables in the books of accounts and was charged to the profit and loss account as expenses and therefore, the claim is hit by the doctrine of unjust enrichment. It is further stated that in the case of Cement Corporation of India Limited vs. Commissioner of Central Excise: Rohtak 2007 (219) ELT 329 (Tri-Delhi), wherein it is held that, the submission that a state undertaking does not come within the scheme of unjust enrichment, cannot be accepted and this view of the Tribunal was upheld by the Supreme Court and therefore, the reliance placed on by the appellant on the decision of Karnataka State Agro Corn Products Limited (supra) is not applicable. In Similarly, in Appeal No. C/25464/2013, the refund claim of Rs.20,00,000/- was also rightly rejected as at the time of filling the refund claim, the Final Order of the Tribunal was not issued.
5. Heard both sides. The limited issue to be decided is whether the lower authorities were right in rejecting the refund claims on the question of unjust enrichment; and secondly, Page 5 of 10 C/25464, 26488/2013 whether the refund amount of the penalty was rightly rejected as time barred.
6. With regard to refund of the penalty amount, it is noticed that the Tribunal vide Final Order No. 261/2007 dated 2.11.2007 has observed as follows:
"In the facts and circumstances of this case we find that questionable methods have been adopted to split up the value of the equipment at 70% and 30% in order to escape from the customs duty. That is why, even the appellants did not want the show cause notice to be issued and also did not want even personal hearing before the educating authority adjudicating authority. Realising the improper method adopted by them much before the issue of the adjudication order even on 3.9.2004, they had written a letter to the commissioner for accepting the unit price without splitting up. It has also been brought out by the investigation that similar equipment were imported by reliance and Tata and they had paid duty on the entire value of the equipment and no split up was shown by them. In such circumstances we do not want to interfere with the Commissioner's order as regards the valuation of the impugned items. However, considering the fact that the appellants paid the duty even without the issue of show cause notice and also much before the adjudication order, we feel that the charging of interest and imposition of penalty are not justified, in view of the stand taken by this bench in the light of the case laws cited by the learned advocate. Therefore, we set aside the demand of interest and penalty and confirm only the demand of the differential duty. The appeal is disposed of in the above manner".
7. As seen from the above order, an appeal was filed by the appellant against the Order-in-Original No. 36/2004 and the penalty was set aside. Therefore, the observations of the Commissioner (Appeals) in the impugned order that the appellant has not preferred any appeal before the Tribunal against the Order-in-original 36/2004 is factually incorrect and accordingly, denial of refund of Rs.20,00,000/- cannot be sustained.
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C/25464, 26488/2013
8. With regard to the refund of the differential duty amount, the Commissioner (Appeals) in the impugned order had observed that:
"As contended by the appellants that in para 10.2(b) of the Purchase Order dated 5.11.2003 of M/s. BSNL to the appellants for the supply of WLL CDMA 200 IX integrated fixed wireless terminals stipulates that "any increase in taxes and other statutory duties/levies after the expiry of the delivery date shall be to the contractor's account. However, benefit of any decrease in these taxes/duties shall be passed on to the purchaser by the supplier" is factually correct. Further, it is on record that prior to and subsequent to issue of Order-in-Original No.8/2005 dated 9.6.2005, the unit price of the integrated fixed wireless terminal remained constant i.e. Rs. 6648.99. In view of the above, I am in agreement with the appellant's contention that they have not passed on the duty burden to their customers i.e. M/s. BSNL".
But based on the Certificate dated 15.3.2012 issued by the Chartered Accountant, wherein it was stated that the Customs Duty has been paid under 7 Bills of Entry for IFWT material and accounted in the consumption as part of material cost, hence rejected the claim on unjust enrichment since the refundable amount instead of being shown as receivables in the books of account is debited into their profit and loss account. From the above, it is clear that the tender documents clearly prove that the appellant was to bear the increase in duty burden and as submitted by the appellant's Chartered Accountant certificate dated 15.3.2012 had only stated that the additional duty along with interest and penalty paid had resulted in erosion of profit/increase in the loss.
9. Regarding the alternative plea of the appellant that unjust enrichment is not applicable to State Undertakings as has been held in the case of CCE, Bangalore vs. Karnataka State Agro Page 7 of 10 C/25464, 26488/2013 Corn Products Limited (supra) wherein the Hon'ble High Court observed as follows:
"5. The Tribunal has noticed material facts and circumstances and thereafter rejected the reason of 'unjust enrichment' in the case on hand. Tribunal was of the view that if refund is granted, it goes to the State's exchequer, and that the refund goes to the person who has borne it and hence there is no unjust enrichment at all. Let us see as to whether this finding is acceptable or not.
6. 'Unjust enrichment' has been considered by courts of law. Leading case is Mafatlal Industries Limited v. Union of India and Others - 1997 (89) E.L.T. 247 (S.C.) = (1998) 111 STC 467. This is what the apex court has to say at page 547 reading as follows:
"The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched."
The apex court has categorically ruled that there cannot be any unjust enrichment by the State Government.
7. The argument is that the State is different from State undertakings. It cannot be forgotten that the State Government controls the Government undertakings in the matter of management, finance, administration, etc. of those governmental undertakings. Policies or programmes are also, to a certain extent, evolved by the State Government. State Government has an effective control over these undertakings and there is pervasive control by the State over them. Unless the Department is able to show that the Government undertakings are totally different from all angles, it is not possible to accept the argument of 'unjust enrichment' on the part of the State undertakings. State and the State undertakings represent the people of the country. The judgment of the Supreme Court referred to above would definitely apply in the matter 'unjust enrichment' even to governmental undertakings as has been rightly ruled by the Tribunal.
8. We reject this appeal by answering the questions of law against the Department".
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10. We find force in the submissions of the appellant as the Hon'ble Apex Court in the case of Mafatlal Industries Ltd. Vs. Union of India: 1997 (89) ELT (247)-SC has held that:
"The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched."
11. In the case of Cement Corporation of India (supra) relied upon by the Revenue, it has been categorically held that the appellant's sale price of cement was inclusive of Excise duty and the gate passes had very clearly showed that Excise duty was being charged and in the absence of any contrary evidence, the question of not passing on the duty was not coming forth. On the contrary, in the instant case, no such evidence has been placed before us.
12. The Hon'ble High Court of Karnataka at Bengaluru in the case Commr. of Cus, Mangalore Versus Hindustan Organic Chemicals Ltd. 2021 (377) E.L.T. 605 (Kar.) dated 11-2- 2021 observed that:
"Admittedly, the claim for refund which was made by the assessee arises out of the order of provisional assessment for the period prior to 14-7-2006. The issue whether the public sector undertakings are outside the purview of unjust enrichment is concerned, the same is no more res integra and has already been adjudicated in Mafatlal Industries Limited v. Union of India, 1987 (89) E.L.T. 247 (S.C.), wherein the Supreme Court has held as under :
"The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The Page 9 of 10 C/25464, 26488/2013 power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched."
10. Therefore, in view of the aforesaid enunciation of law by the Supreme Court, it is evident that the doctrine of unjust enrichment is not applicable to the case of public sector undertakings. Therefore, the second substantial question of law is answered against the appellant and in favour of the respondent.
In view of the above there is no substance in the impugned order to deny the refund on the question of unjust enrichment. The appeals are allowed."
13. Following the above decisions of the jurisdictional High Court, we do not find any merit in the impugned orders to deny the refund on the ground of unjust enrichment. For the reasons discussed above, the impugned orders are set aside and allow the appeals with consequential relief, if any, as per law.
(Order pronounced in Open Court on 04.03.2024) (D.M. MISRA) MEMBER (JUDICIAL) (R. BHAGYA DEVI) MEMBER (TECHNICAL) rv Page 10 of 10