Customs, Excise and Gold Tribunal - Delhi
Ballarpur Industries Ltd. vs Commissioner Of C. Ex., Chandigarh on 1 January, 2002
Equivalent citations: 2002(141)ELT182(TRI-DEL)
ORDER K.K. Bhatia, Member (T)
1. The appellants manufacture Taper and Paper Boards'. They were using wrapping paper for wrapping different varieties of paper manufactured by them. Such wrapping paper was either procured from outside the factory or the same was manufactured in their own factory. During the period from 16-3-76 to 18-3-86, they claimed the benefit of proforma credit under Rule 56A of the Central Excise Rules, 1944 totally amounting to Rs. 83,45,027.21 on the wrapping paper brought from outside and used in wrapping the paper manufactured and cleared by them on payment of duty. This benefit was initially denied to them but however, relying on the decision of Hon'ble Supreme Court in the case of C.C.E. v. Eastend Paper Industries reported in 1989 (43) E.L.T. 201, their liability to the proforma credit in respect of the duty paid on the wrapping paper was accepted. Consequently, the appellants filed a refund claim of Rs. 83,45,027.21 on 6-2-97 being the duty paid on the wrapping paper purchased by them from outside during this period on which the appropriate excise duty had already been paid. This refund claim of the party is rejected by the Asstt. Collector of Central Excise, Ambala vide his order dated 19-4-89. The Asstt. Collector in his order has observed that the party itself had admitted that the wrapping paper which they had brought from outside on payment of Central Excise duty is an input/raw material for the writing and printing material. If so, it becomes integral part of the final product and cost and other elements viz., duty etc. paid must go towards the cost of the final product. The Asstt. Collector has recorded that even the Range Officer vide his letter dated 5-2-1977 had clearly directed the party that in case of duty paid wrapping paper received by them from outside and used for wrapping reams in their factory, the weight of the wrapping paper should be included in the total weight of the ream for the purpose of calculating and paying the duty. The Asstt. Collector in his order has further observed that since the party used the duty paid input/raw material viz., wrapping paper for the manufacture of final product i.e., writing paper, the cost of raw material invariably forms the cost of the final product. He has observed that the contention of the party that the cost as well as duty paid on input does not form part of the cost/assessable value of the final product, is not tenable. Therefore, the incidence of duty paid on the wrapping paper stands passed on to the customer and their case is covered by the principle of unjust enrichment. On these facts and with reference to the provisions of Clause (c) of Section 11B(2) of the Central Excise Act, 1944, the Asstt. Collector in his order has held that the appellants had already recovered the duty paid on inputs and any payment of refund in respect of such duty would simply be nothing else but unjust enrichment to them. He has further held that since the case pertains to refund of proforma credit under Rule 56A, it is not feasible to pass an order to credit the same to the fund in terms of the aforestated clause of the Act. Consequently, the Asstt. Collector has rejected the refund claim of the party.
2. The party filed an appeal and the same is disposed of by the impugned order dated 3-5-2001 of Commissioner (Appeals), New Delhi. The Commissioner (Appeals) in his order has observed that in terms of Para 17 of the judgment of the Hon'ble Supreme Court in Solar Pesticides v. CCE reported in 2000 (116) E.L.T. 401 (S.C), it is held as follows :
"17. The words 'incidence of such duty' means the burden of duty.....and .....the expression 'incidence of duty' in relation to its being passed on to another person would take it within its ambit not only the passing of the duty directly to another person but also cases where it is passed indirectly".
The appellate authority has further observed that the credit accrues on receipt of the goods and the benefits are required to be passed on to buyer of finished products. On these grounds, the Commissioner (Appeals) dismissed the appeal of the party upholding the order passed by the original authority.
3. This appeal is against the impugned Order of Commissioner (Appeals). We have heard Shri R. Sudhinder, Advocate for the appellants and Shri A. Saxena, JDR for the respondents. The ld. Counsel for the appellants during the course of hearing very fairly admitted that the burden to establish that the incidence of duty in respect of which the refund is claimed is not passed on to their buyers, is entirely on them. He however states that for the period from 5-2-1977 onwards the duty was being paid on the writing and printing paper and the same was being recovered from the customers. But however, the duty paid on the wrapping paper used as input was not being recovered from the customers. It is stated that prior to 16-3-1976, paper was attracting central excise duty at specific rates and the practice followed by the appellants for raising invoice and payment of duty was as follows :
4. In view or the above, it is contended that they were charging customers for the entire weight at the basic sale price applicable to printing and writing paper. Thus, even wrapping paper was charged on the same basic price from the customers as applicable to printing and writing paper. The excise duty paid at the specific rate of duty applicable to printing and writing paper was however separately collected from the customers. Similar submissions are made with reference to the paper sold with effect from 16-3-1976 and from 5-2-1977 and it is stated that excise duty paid on the printing and writing paper at the rate applicable to it on the full invoice value was collected from the customers. The excise duty paid on the wrapping paper at the rate applicable to it for captive consumption was not charged from the customers. The appellants have also filed the photocopy of an invoice relating to the relevant period, but in this invoice, no element of the duty charged from the buyers is reflected separately. The appellants have not filed any other document relating to the sale of the paper manufactured by them from which it could be discerned whether the element of excise duty is passed on to the buyers or not. In view of this fact, therefore, the appellants have not been able to establish that the element of the duty in respect of which they are claiming the refund is not passed on to the buyers. On this score, therefore, we find no force in the contention of the appellants and the same is accordingly rejected upholding the findings arrived at by the lower authority in his order.
5. The appellants are however making a further submission that the refund claim relates to the duty paid on the wrapping paper purchased from the market and used as an input in the manufacture of printing and writing paper. Thus it is contended that the refund is claimed in respect of the credit which was initially denied but subsequently held to be admissible to them. The appellants refer to Clause (c) of the proviso to Section 11B(2) of the Act which provides that the amount of duty of excise as determined shall, instead of being credited to the fund, be paid to the applicants, if such amount is relatable to the refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued under this Act. The appellants are contending that since the refund amount claimed by them relates to the credit of duty, the doctrine of unjust enrichment shall not be applicable to their case. In this, they are relying on the following decisions :
(i) C.C.E., Bhubaneswar v. Alwin Industries Ltd. - 1995 (SO) E.L.T. 283 (Tribunal)
(ii) C.C.E., Kanpur v. Brooke Bond Lipton (P) Ltd. - 1999 (107) E.LX 228 (Tribunal).
6. We find prima facie force in these submissions. In this aspect of the matter, it is observed from the record that this question has neither been raised before any of the lower authorities nor the same has been examined in this perspective. In this view, therefore, the matter calls for going back to the original authority for reconsideration and recording the findings on the eligibility of the appellants to the amount of refund in terms of the provisions of proviso (c) of Sub-section (2) of Section 11B in the light of the ratio of the aforestated decisions or any other decision which may be cited in this respect before the adjudicating authority. The appellants shall be afforded a reasonable opportunity of hearing before arriving at the final view in this case.
7. The appeal is thus allowed by remand in the above terms.