Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of C. Ex. vs Elgi Ultra Industries on 12 July, 2002
Equivalent citations: 2002ECR242(TRI.-CHENNAI), 2002(146)ELT396(TRI-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. This is Revenue's appeal challenging the grant of refund of an amount of duty of Rs. 41,58,566/- by the lower appellate authority to the respondents.
2. The Respondents are manufacturers of Drip Irrigation System falling under Central Excise Tariff Heading No. 84.24. The various components of this product include plastic (HDPE/LDPE) tubes. The respondents manufacture these plastic tubes and consume the same captively for the purpose of manufacture of Drip Irrigation Systems. A dispute had arisen in the past, as to whether the plastic tubes/pipes as parts of Drip Irrigation System could also be classified under CET Heading 84.24 as claimed by the assessee and whether the benefit of exemption under Notification No. 56/95-C.E., dated 16-3-95 was available to the plastic tubes cleared for captive consumption. That dispute ultimately came up before this Tribunal and, by Final Order No. 1885/99, dated 30-7-99, this Tribunal decided the issue in favour of the assessee. However, by that time, the assessee had already deposited 'under protest' a total amount of duty of Rs. 92,02,446/- on plastic tubes for the period October '95 to August '99 (period of dispute in this case). Out of that amount, an amount of Rs. 50,43,880/- was paid by way of availment and utilization of Modvat credit on the inputs used in the manufacture of the plastic tubes, and the balance amount of Rs. 41,58,566/- was paid from PLA. Pursuant to the Tribunal's Final Order ibid, the assessee filed a refund claim in respect of the latter amount of Rs. 41,58,566/-. Again, the question arose as to whether the refund claim was hit by the bar of unjust enrichment or not. The original authority applied the bar of unjust enrichment to the refund claim and ordered the amount to be credited to the Consumer Welfare Fund under Section 11B(2) of the Central Excise Act. The aggrieved assessee preferred appeal to the Commissioner (Appeals), who set aside the order of the lower authority and directed refund of the duty. Hence the present appeal of the Revenue.
3. Examined the records and heard both sides.
4. The lower appellate authority found that no extra money was collected other than the price of the goods by the assessee from their customers and that the price of the goods remained the same for all the customers. The authority held that, since the price had not increased on account of payment of duty, the incidence of duty could not be considered to have passed on to the customers. Reliance was placed, in this context, on this Tribunal's decision in CCE, Kanpur v. Carona Cosmetics & Chemicals (P) Ltd., 2000 (118) E.L.T. 356 (T). Appellant has challenged the above finding of the Commissioner (Appeals) on the ground that the price of a product was influenced by various factors, apart from the Excise Duty element, and that the price can be kept constant by reducing the profit margin. The lower appellate authority, further, found from the relevant invoices that the assessee had not collected any Excise Duty from their customers. It accepted the Chartered Account-
ant's certificates produced by the party, which certified that the Excise Duty paid to Govt. was being charged to the Profit and Loss Account of the company. The lower appellate authority relied also on the Tribunal's decision in the case of CCE v. Metro Tyres Ltd., 1995 (80) E.L.T. 410 (T). The appellant has sought to distinguish the ratio of the decision in Metro Tyres Ltd. (supra). A further ground raised by the appellant is that, when the assessee captively consumed their self-manufactured input (plastic tubes) during the material period, they would have included its price also in the price of their final product (drip irrigation system) and that the duty paid on the input should be considered to have passed on to the buyer of the final product. In this connection, appellant has relied on the Hon'ble Supreme Court's decision in the case of Solar Pesticides Ltd., 2000 (116) E.L.T. 401. Vis-a-vis the above grounds raised in the appeal memo and reiterated by the DR, Id. Counsel sought to defend the order of the Commissioner (Appeals) on the strength of the Chartered Accountant's certificates and the invoices produced by the respondents, as also on the following case law :-
(i) ' CCE, Chandigarh v. Metro Tyres Ltd. (supra) [Ld. Counsel has pointed out that this decision of the Tribunal stands upheld by the Supreme Court which dismissed the SLP filed by the department as reported in 2002 (143) E.L.T. A75]
(ii) CC, Chennai v. New Trade Links, 1999 (33) RLT 205 (CEGAT)
(iii) Modi Xerox Ltd. v. CCE, Meerut, 1999 (35) RLT 77 (CEGAT)
(iv) CCE, Kanpur v. Corona Cosmetics & Chemicals Pvt. Ltd. (supra)
5. We have carefully examined the grounds of appeal and the oral submissions made by both sides. We note that the lower appellate authority has heavily relied on the Chartered Accountant's certificates, one of which reads as under :-
"TO WHOMSOEVER IT MAY CONCERN This is to certify that M/s. Elgi Ultra Industries Limited, India House, Trichy Road, Coimbatore - 641 018 has not charged or collected Excise Duty on the sale of HOPE and LDPE Pipes sold under Drip Irrigation System. I further certify that the price of the HOPE and LDPE Pipes remain unaltered inspite of the order of the Commissioner of Central Excise to charge excise duty which is paid by the company out of its own sources under protest, (emphasis supplied)
--As per the Books and information furnished to me."
K. SELVAM CHARTERED ACCOUNTANT"
The other certificate is as under :-
"TO WHOMSOEVER IT MAY CONCERN This is to certify that an amount of Rs. 92,02,446/- (Rupees ninety-two lakhs two thousand four hundred and forty-six only) has been paid as Excise Duty on LDPE Tubes used for Drip Irrigation System for the period from October '95 to August '99. Out of this amount, Modvat credit has been availed to the extent of Rs. 50,43,880/- (Rupees fifty takhs forty three thou- sand eight hundred and eighty only) and the balance of Rs. 42,58,566/- (Rupees forty-one lakhs, fifty-eight thousand, five-hundred and sixty-six only) has been charged to Profit and Loss Account, (emphasis supplied) For HOHENDER & CO.
Chartered Accountants (R. JOHENDRAN) PROPRIETOR"
6. Ld. Counsel has submitted that the Excise Duty paid on the plastic tubes was, in fact, charged to the Profit and Loss Account of the company. He has, in this connection, drawn our attention to Note No. 7 of "NOTES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 1998" as also to Note No. 10 of "NOTES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 1999". These notes referred to by the Counsel read identically as under :-
"Excise Duty on Drip Irrigation System paid under protest has been charged to the Profit and Loss Account."
The Chartered Accountants certified that the Excise Duty was paid on the plastic pipes by the company out of its own sources and was charged to their profit and loss account. Ld. Counsel has submitted that this certification is based on the notes extracted above and similar notes for the financial years prior to 1997-98. The above notes do not seem to support, or form the basis of, the Chartered Accountant's certificates inasmuch as, according to the notes, it was the Excise Duty on Drip Irrigation System (final product) that was paid under protest and charged to Profit and Loss Account and not the Excise Duty on plastic tubes as certified by the C.As. It is significant to note that the respondents themselves have treated the plastic tubes as different from the Drip Irrigation System by classifying them in their invoices under different CET subheadings (8424.90 and 8424.10). No cogent evidence appears to have been placed on record to justify the Chartered Accountant's certification that the Excise Duty was paid on the plastic tubes by the company out of its own sources, or that the Excise Duty paid by the company on the plastic tubes was charged to their Profit and Loss Account. The oft-referred-to "Profit & Loss Accounts" for the period of dispute are nowhere on record before us. Therefore, we find irresistible force in the Revenue's challenge to the reliance placed by the Commissioner (Appeals) on the Chartered Accountant's certificates. We have also examined the copies of the invoices available on record. These are invoices covering clearances of the final product for November, 1995 onwards. None of the invoices for the period prior to the period of dispute is available on record to show that the price charged has been uniform throughout notwithstanding payment of duty on the plastic tubes captively consumed. In other words, the invoices do not bear testimony to the respondent's claim that the incidence of duty paid on the plastic tubes was not passed on to the customers. Therefore, the finding recorded by the Commissioner (Appeals) on the basis of invoices cannot be accepted as correct. The decisions cited by ld. Counsel are, by and large, to the effect that, where there is no change in the sale price on account of excise duty having been paid on any component of the goods cleared, the incidence of duty cannot be considered to have been passed on to the buyer. As the present respondents have not been able to show that there was no change in the price of their final product with reference to the date of commencement of the period of refund claim, they cannot successfully claim support from the cited case law.
7. The decision of the Hon'ble Supreme Court in the case of Solar Pesticides (supra) is that the principle of unjust enrichment is applicable to cases of captive consumption also. We note that the ratio of this decision referring to refund claims under Section 27(1) of the Customs Act is equally applicable to refund claims under Section 11B of the Central Excise Act. It was held by the Apex Court that the expression "incidence of duty being passed on to another person" would take within its ambit not only passing of the duty incidence directly to another person but also cases where it is passed on indirectly. The Court has cited a situation in which the incidence of duty is indirectly passed on, that is, where the duty paid on raw material is added to the price of the finished goods which are sold, in which case, the Court held, the burden or incidence of duty on the raw material would stand passed on to the purchaser of the finished product. The Court has, accordingly, held that, when the whole or part of the duty which is incurred on the import of raw material is passed on to another person, then an application for refund of such duty would not be allowed under Section 27(1). The Apex Court was applying the provision contained in Clause (a) of the proviso to Sub-section (2) of Section 27 of the Customs Act to the refund claim. We note that this provision is essentially pari materia with Clause (d) of the proviso to Sub-section (2) of Section 11B of the Central Excise Act, which is applicable to the instant case. We are, therefore, of the view that the principle laid down by the Apex Court in Solar Pesticides case is applicable with equal force to analogous case under Section 11B of the Central Excise Act. There is no dispute of the fact, in the instant case, that the plastic tubes were cleared on payment of duty for captive consumption in the manufacture of the Drip Irrigation System. The respondents have not been able to establish that the duty paid on the plastic tubes was not added to the price of Drip Irrigation Systems (final product) which were sold to their customers. In other words, the burden of proof against the bar of unjust enrichment has not been successfully discharged by the respondents in this case and the presumption of law {vide Section 12B of the Central Excise Act) remains unrebutted that the assessee has passed on the burden of duty on the plastic tubes indirectly to their customers. Consequently, their refund claim is hit by the bar of unjust enrichment. In the result, we have to set aside the order of the lower appellate authority and restore that of the original authority. We do so. The appeal of the Revenue is allowed.
Sd/-
(P.G. Chacko) Member (J) Order Jeet Ram Kait
8. I have carefully gone through the order recorded by my learned brother Shri P.G. Chacko, Member (J). While totally agreeing with the view taken by him that the refund claim of the respondents is hit by the bar of unjust enrichment and hence the appeal of the Revenue is to be allowed, I would like to add the following.
9. In this case, the Appellant-Commissioner has challenged the finding of the lower appellate authority that, since the price had not increased on account of payment of duty, the incidence of duty could not be considered to have been passed on to the customers. The Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. v. UOI - reported in 1997 (89) E.L.T. 247 (S.C.)/ in Para 91 has held that ordinarily no manufacturer will sell : his products at less than the cost price plus duty. He cannot survive in business if he does so. Only in distress sale, such thing is understandable, but disr tress sales are not a normal feature and cannot, therefore, constitute a basis for judging the validity or reasonableness of a provision. Similarly, no one will ordinarily pass on less excise duty than what is exigible and payable. A manufacturer may dip into his profits but would not further dip in the excise duty component..... A manufacturer who has not passed on the duty, can always prove that fact and if it is found that duty was not leviable on the transaction, he will get back the duty paid. Ordinarily speaking, no manufacturer would take the risk of not passing on the burden of duty. It would not be an exaggeration to say that whenever a manufacturer entertains a doubt, he would pass on the duty rather than not passing it on.
10. The appeal filed by the Revenue is allowed.
Sd/-
(Jeet Ram Kait) Member (T)