Customs, Excise and Gold Tribunal - Delhi
Commr. Of C. Ex. vs Shivalik Agro Poly Products Ltd. on 29 July, 2004
Equivalent citations: 2005(98)ECC482, 2004(173)ELT64(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. The issue involved in this Appeal filed by Revenue is whether principles of unjust enrichment as contained in Section 11B of the Central Excise Act is applicable to the refund of the Central Excise duty deposited by M/s. Shivalik Agro Poly Products Ltd.
2.1 Briefly stated the facts are that M/s. Shivalik Agro manufacture LDPE films and its fabricated products, that is, protective caps/covers which are used by the Food Procurement Agency, The case was made against them for suppression of manufacture and clearance of LDPE films involving the duty amounting to Rs. 30,34,806.50. LDPE film was cleared by them to the Food Supplies Department of Haryana, Warehousing Corporation and to HAFED. The demand of duty was confirmed against them vide Order-in-Original No. 36/CE/87, dated 20-11-87 and a penalty of Rs. 10 lakhs was also imposed. On Appeal the Tribunal vide Final order No. 291/94-C.E., dated 4-10-94 [1994 (74) E.L.T. 631 (Tribunal)] remanded the matter to the Adjudicating Authority with a direction to consider all the relevant aspects of the matter and pass an appropriate order. The Commissioner under Order-in-original No. 153/CE/95, dated 4-8-95 confirmed the demand of duty of Rs. 14,31,495/- only and also allowed the Modvat credit equivalent to the amount of demand confirmed against them. The Commissioner also imposed a penalty of Rs. One lakh.
2.2 During the period November, 1987 to February, 1988, the Revenue had sanctioned 5 refund claims in entirely different matters in favour of the respondents. However, instead of refund being paid to the respondents, the Department adjusted total demand of duty of Rs. 30,34,806/- confirmed against them and penalty of Rs. 10 lakhs imposed on them under Adjudication Order dated 20-11-87. However, when the appellants filed the appeal along with stay application against Adjudication order dated 20-11-87, the Tribunal directed them to deposit an amount of Rs. 15 lakhs.
2.3 After the Adjudication Order dated 4-8-95 passed by the Commissioner on remand the respondents filed a claim for refund of Rs. 40,34,806/- on 21-8-85. The Assistant Commissioner under Order-in-original No. 73/96, dated 1-8-96 rejected the refund claim on the ground of undue enrichment holding that the respondents had already recovered the entire amount of duty from Haryana Government and refund of the same will be taken for consideration as and when application for it is received from its rightful claimant. The Assistant Commissioner confirmed the refund of Rs. 10 lakhs but ordered the said amount to be credited under the Consumer Welfare Fund on the ground that the respondents had collected the said amount from their customers.
3.1 On Appeal Commissioner (Appeals) under the impugned Order allowed the appeal filed by the respondents holding that the doctrine of unjust enrichment is not applicable because it was not a case of deposit relying upon the decision in the case of Suvidhe Ltd. v. Union of India [1996 (82) E.L.T. 177 (Bom.), Union of India v. M/s. Suvidhe Ltd. [1997 (94) E.L.T. A159] and Parle International v. Union of India [2001 (127) E.L.T. 329 (Guj.)] 3.2 Order-in-original dated 4-8-95 was also set aside by the Tribunal's Final Order dated 24-7-97 with the direction to pass speaking order assigning specific reasons as to why the larger amount of credit has been adjusted against the smaller amount of demand. The Commissioner of Central Excise passed a fresh Order-in-Original No. 51/98, dated 27-2-98 and confirmed the entire amount of duty that is 30,34,806.50 and imposed a penalty of Rs. 10 lakhs. This Order-in-original was set aside by the Tribunal vide Final Order No. A/376/2000-NB, dated 25-4-2000 [2001 (130) E.L.T. 737 (T)].
4. Shri Kumar Santosh, learned Senior Departmental Representative, submitted that as per proviso to Sub-section (2) of Section 11B of the Central Excise Act, the amount of refund is payable to the manufacturer only if he had not passed on the incidence of such duty to any other person; that in the present matter it is not in dispute that the entire duty has been recovered by them from the State Government of Haryana and as such the incidence of entire duty has been passed on by them to their customers; that the fact of payment of entire duty is evident from the Arbitration Award awarded to them by the Arbitrator in the matter of Arbitration case between the Respondents and the Director Supplies and Disposal, Haryana; that thus principle of unjust enrichment will apply. He further, submitted that the entire amount of duty was realised by the Department by adjusting the same against the refund sanctioned to the respondents; that as such, no deposit has been made by the appellants under or in pursuance of the provisions of Section 35F of the Central Excise Act; that the amount adjusted towards confirmed demand under Section 11 of the Central Excise Act cannot be considered as a deposit; that accordingly the decision relied upon by the learned Advocate are not applicable to the facts of the present matter. He also mentioned that Haryana Government had also claimed the refund of duty in question; that the refund claim filed by them has been rejected as time-barred. Finally, he submitted that even if the duty realised by the Government by adjusting against the refund claim is regarded as deposit, the principle of unjust enrichment is applicable as held by the Supreme Court in the case of Union of India v. Jain Spinners Ltd. [1992 (61) E.L.T. 321 (S.C.)]; that the Supreme Court in the said judgment has held that doctrine of unjust enrichment is applicable to the deposit of adjusted amount with the Court as per the Court's order as it is treatable as deposit towards duty. The court has held as under :
"If the contention advanced by the learned Counsel is accepted, it would defeat the amended provisions of the Act. It would then be open to the assessee to obtain orders from the Court as in the present case, and instead of paying the assessed amount of duty to the authorities, deposit it in Court and raise a plea that what is deposited in Court is not duty and the assessees are entitled to get the refund either directly from the Court or if it is withdrawn by the authorities, from the authorities, notwithstanding that they have passed on the duty to others......The view canvassed by the learned Counsel will also open a new door for unjust enrichment by enabling the assessees to bypass the statutory provisions which have been specifically enacted to prevent the malpractice."
5. He also relied upon the decision in the case of Hindustan Metal Pressing Works v. CCE, Pune, 1999 (114) E.L.T. 991 (Tri).
6. Countering the arguments Shri L.P. Asthana, learned Advocate, submitted that the question of unjust enrichment in any case, is not applicable to the refund of penalty of Rs. 10 lakhs recovered by adjusting from the amount of refund sanctioned to them in 1987-88. He, further, submitted that the Revenue has adjusted the entire amount of duty which was at that time, nothing but a contingent liability as the period for filing the Appeal against the Order-in-original was not even over; that they had also not permitted the Revenue to adjust the amount of duty out of the amount of refund sanctioned to them; that it is also admitted fact that when their stay application came up for hearing before the Tribunal they were directed to deposit an amount of Rs. 15 lakhs only as a precondition for hearing of the Appeal; that the said amount was presumably adjusted out of the amount of Rs. 40,34, 806/-; that thus in any case, Rs. 15 lakhs is clearly in the nature of pre-deposit under Section 35F of the Central Excise Act for which also the principles of unjust enrichment is not applicable; that the remaining amount of Rs. 30,34,806/- was also in the nature of the deposit because they had not yet filed the Appeal before the Tribunal and since the stay order had not been obtained, this was recovered by the Department on their own by adjustment; that it was not the payment of duty and therefore, principles of unjust enrichment would not be applicable. He relied upon the decision of the Bombay High Court in the case of Suvidhe Ltd. (supra) wherein Bombay High Court has held that in respect of deposit made under Section 35F of the Act, doctrine of unjust enrichment will be inapplicable; that this judgment of Bombay High Court has been affirmed by the Supreme Court as reported in 1997 (94) E.L.T. A159. Reliance has also been placed on the following decisions :-
(1) Parle International v. Union of India, 2001 (127) E.L.T. 329
(2) Mahavir Aluminium ltd. v. CCE Jaipur, 1999 (114) E.L.T. 371 (Supreme Court)
(3) Nelco Ltd. v. Union of India, 2002 (144) E.L.T. 56 (Bom,)
7. We have considered the submissions of both the sides, The facts which are not in dispute are that the demand of Central Excise duty of Rs. 30,34,806/- was confirmed against the respondents and penalty of Rs. 10 lakhs was also imposed on them. Subsequently both the duty and penalties have been set aside. It is also admitted fact that entire amount of duty and penalty was realised by the Department out of five refund claims sanctioned to the Appellants during the period November, 1987 to February, 1988. It is also not in dispute that the entire amount of duty has been paid to them by the Director, Food Supplies Government of Haryana after an Arbitration Award was given in favour of the respondents. As per provisions of Section 11B of the Central Excise Act, any person claiming the refund of any duty of excise has to make an application for refund of duty within specified time-limit which shall be accompanied by such documentary or other evidence to establish that the amount of duty of excise in relation to which refund is claimed was collected from, or paid by him and the incidence of such duty had not been passed on by him to any other person. In the present matter from the material on record, we observe that the entire amount of duty was collected by the Revenue from the respondents. We also observe that the incidence of entire duty stands passed on to their customers as the entire amount of duty has been paid to them by their customers. This fact by itself, in our opinion, is sufficient to hold that the respondents are not eligible to get the amount of refund as the incidence of duty had been passed on by them to their customers. If the amount of duty is given to them, the respondents will be enriched unjustly as they have already passed on the incidence of entire duty to their customers. This is what is being prevented by the amendment which was carried out in Section 11B by Central Excises and Customs Laws (Amendment) Act, 1991. The Constitution Bench of the Supreme Court in the case of Mafatlal Industries Ltd, v. Union of India, 1997 (89) E.L.T. 247 (S.C.) has held, while upholding the 'constitutional validity of the amendment carried out in Section 11B, as under :-
"Where the petitioner-plaintiff has not himself suffered any loss or prejudice (having passed on the burden of the duty to others), there is no justice or equality in refunding the tax (collected without the authority of law) to him merely because he paid to the State. It would be a windfall to him. As against it, by refusing refund, the monies would continued to be with the State and available for public purposes."
7.1 It has also been observed by the Supreme Court that .....Refunding the duty paid by a manufacturer/assessee in situations where he himself has not suffered any loss or producing (that is, where he has passed on the burden to others) is no economic justice, it is the very negation of economic justice. By doing so, the State would be conferring an unearned and unjustifiable windfall upon the manufacturing community thereby contributing to concentration of wealth in a small class of persons which may not be consistent with the common good,
8. We also do not agree with the learned Advocate for the respondents that the amount of duty adjusted by the Revenue from the amount of refund is in the nature of deposit. The competent Adjudicating Authority has affirmed the demand of duty against the respondents under Section 11A of the Central Excise Act. Once the duty has been confirmed against the respondents, the same has became realisable from him unless and until its recovery is stayed or the demand of duty is set aside. Section 11 of the Central Excise Act provides for the recovery of sums due to Government. As per the provisions of this Section, fluty or other sums may be realised by deducting from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control. The amount of refund which was sanctioned to the respondents in different matters was available with the Department and out of which the duty and the penalty confirmed against the respondents were adjusted. Thus by no means it can be called a deposit made by the respondents. The deposit is only made under the provisions of Section 35F of the Central Excise Act. Recovery of the duty by the Revenue by its own action cannot be called a deposit made by the person. It is the realization of duty due to the Government. There is also no force in the submissions of the Respondents that at least Rs. 15 lakhs which was directed by the Tribunal to deposit under Section 35F of the Act is a deposit. The fact of realization of the entire amount of duty and penalty was not brought to the notice of the Tribunal. Had the said fact been brought to the notice of the Tribunal, the stay petition filed by them would have been treated as infructuous as entire duty and penalty had been realised by the Revenue. Thus, mere fact that the Tribunal directed them to deposit Rs. 15 lakhs at the time of hearing of the Stay Application would not make Rs. 15 lakhs, out of the total duty realised by the Government, as a pre-deposit. All the decisions relied upon by the learned Advocate are not applicable to the facts of the present matter. In Suvidhe Ltd., the amount involved was deposited by the petitioners under Section 35F for availing the remedy of an Appeal. In the present matter, the entire amount had been realised by the Department and not been deposited by them for availing remedy of an Appeal, In the case of Park International Ltd. the amount was deposited by the petitioner before the matter was adjudicated, i.e. when no liability to duty has been adjudged by the Department against them. Thus, the facts are different. Similarly in the case of Mahavir Aluminium Ltd, also the amount involved was the deposit made by the Appellants therein as per the Order of the Appellate Tribunal under Section 35F of the Central Excise Act. Same was the fact in the case of Nelco Ltd. 'as they were required to deposit a sum of Rs. 20 lakhs as pre-deposit under Section 35F of the Central Excise Act. We also observe that in all the decisions relied upon by the learned Advocate it was not the case of the Department that the duty deposited by them had been realised by them from their customers, i.e. the incidence of duty had been passed on to others whereas in the present matter there is no dispute on the fact that the incidence of duty had been passed on to the others by the respondents. Accordingly, we hold that bar of unjust enrichment is applicable to claim of the refund of duty by the respondents. We, however, agree with the learned Advocate that the bar of unjust enrichment would not apply to the refund of the amount of penalty. They are, therefore, eligible to get the refund of amount of penalty which had been recovered from them. The appeal indisposed of in. the above terms.