Custom, Excise & Service Tax Tribunal
M/S. Jonas Woodhead & Sons (I) Ltd vs Commissioner Of Central Excise, ... on 20 April, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/00642/2007
[Arising out of Order-in-Appeal No.58/2007 (M-IV), dated 31.05.2007 passed by the Commissioner of Central Excise (Appeals), Chennai]
E/00672/2007
[Arising out of Order-in-Appeal No.3/2006 (M-IV) (D), dated 28.02.2006 passed by the Commissioner of Central Excise (Appeals), Chennai]
E/41680 to 41682/2014
[Arising out of Orders-in-Appeal No.42, 43 & 44/2014 (M-IV), dated 15.04.2014 passed by the Commissioner of Central Excise (Appeals), Chennai]
M/s. JONAS WOODHEAD & SONS (I) LTD.
APPELLANT
Versus
COMMISSIONER OF CENTRAL EXCISE, CHENNAI-IV
RESPONDENT
Appearance:
For the Appellant Shri N. Viswanathan, Adv.
For the Respondent Shri K.P. Muralidharan, AC (AR) CORAM:
Honble Shri D.N. Panda, Judicial Member Honbe Shri R. Periasami, Technical Member Date of hearing/decision 20-04-2015 FINAL ORDER NOs. 40480-40484 / 2015 Per D.N. Panda:
Learned counsel arguing on all these appeals submits that the moot question involved in these appeals is whether duty paid in excess in respect of certain clearances made during a material period is adjustable against short payment of duty in respect of other clearances of that period on finalisation of provisional assessment and resultant excess if any arises upon such adjustment is refundable to the assessee without crossing bar of unjust enrichment being applicable.
1.2 Learned counsel submitted that it is rule of law that during a period when clearances are allowed provisionally for no appropriate duty liability being determinable for that period, at the time of clearance, provisional assessment is made under Rule 7 of the Central Excise Rules, 2002. Later all such provisional assessments are finalised and duty liability determined. Duty paid in excess of actual liability on certain clearances is adjusted against short payment of duty and upon such adjustment, excess duty paid is refundable without bar of unjust enrichment being applicable to such refund.
1.3 In finalization of assessment, an integral approach is made to determine ultimate duty liability in respect of all clearance for the relevant period. Since such situation is outcome of application of law and excess duty paid is refundable, bar of unjust enrichment is not applicable.
3. Revenues contention on the other hand is that the duty paid in respect of each clearances is decisive of short payment thereof or excess payment of the same. Excess duty paid if any not being paid by assessee from his pocket and duty short paid is collected by him, refund if any arises on finalization of provisional assessment has to meet the test of unjust enrichment.
2.1 Appellant explains further that allegation of Revenue that short payment and excess payment if any being independent of each other, that is of no sense to law in view of the Honble High Court of Karnataka in the case of Toyota Kirloskar Auto Parts Pvt. Ltd. Vs Commissioner of Central Excise, LTU, Bangalore reported in 2012 (276) E.L.T.332 (Kar.) 2.2 So far as appeal nos. E/41680 to 41682/2014, is concerned he submits that other than the issue of adjustment of short payment against excess payment involved in these appeals, additional three issues arise. One such issue is whether cost of freight incurred by the appellant post clearance shall be includible in the assessable value. He submits that such freight is not incurred for clearance of the goods. Therefore, that shall not form part of the assessable value. But the stand of Revenue is contrary.
2.3 The other second issue according to the appellant is that when sales returns are made by the buyers those clearances are not liable to excise duty and duty if any paid thereon is refundable. But Revenue opposes such submission on the ground that sales returns should not get consideration since those were goods cleared on payment of duty and not refundable.
2.5 The third issue raised by the learned counsel is that there are some mathematical errors in computation of assessable value. Such an error was created by misconception that the sale prices were cum-duty. But that it not so. Revenue says that there is finding to that effect in adjudication. Therefore, stand of Appellant should fail.
3.1 Heard both sides on the question of adjustment of excess payment of duty against short payment thereof and arise of refund if any in all the appeals. So also contentions of both sides on other three secondary issues considered.
3.2 So far as the moot question of adjustment of excess payment of duty against short payment thereof is concerned, the ratio laid down in the judgment of the Honble High Court of Karnataka (supra) read with mandate of Rule 7 of the Central Excise Rules, 2002, leads to the conclusion that there is no warrant in law to deal with the consequence of each clearance on case to case basis to determine shortage and excess of payment of duty and consequence thereof. The ultimate duty liability of a relevant period is to be determined in final assessment taking into consideration entire clearance of that period in aggregate and if there arises excess payment of duty upon such finalization of making due adjustment, that shall be refundable. Honble High Court examining the issue, in the case of Toyota Kirloskar case (supra) in para 9 of judgment held as under:-
9.?In the instant case, admittedly for certain items the Adjudicating Authority has held the short fall in payment of duty after the final assessment order as Rs. 10,63,417/-. In respect of other items, the assessee has paid Rs. 1,77,20,157/- in excess. But before imposing interest, the authority should have deducted the short fall in the excess payment made. If there is no short fall in payment of duty, payment of interest does not arise. They have treated the duty payable under two categories. It was found in respect of some items the duty payable after the final order is more than what was paid under provisional assessment. The approach of the authorities in this regard is erroneous, unwarranted and unsupported by any statutory provision. If we keep in mind the principle underlying the provisions, it is only when the duty is due and it is not paid within the stipulated time and the duty is paid thereafter, in order to compensate the revenue, interest is imposed. If that is to be kept in mind, in the instant case, when the assessee has paid a sum of Rs. 1,66,56,740/- excess duty which is entitled to claim refund, he cannot be taxed with payment of excess duty in the form of interest. The entire approach of the department is unreasonable, contrary to the scheme of the Act and negatives the principle underlying these provisions. Therefore, all the authorities were in error in levying and upholding the levy of interest. In view of the reasoning given by the Honble High Court of Karnataka as above, all the appeals on the point of adjustability of excess payment of duty against shortage of duty paid is allowed and excess duty paid is refundable without bar of unjust enrichment applicable.
4. So far as secondary freight issue is concerned, there is no material on record to suggest that such cost is attributable to clearance of goods. But that relates to the post clearance period. Accordingly, the appellant succeeds on this point and there shall be no levy of duty thereon.
5. Second claim of the appellant that sales return are not dutiable being goods returned back by buyers is justified. Appellant does not incur liability when cleared goods come back to his custody within the knowledge of excise authority. Revenue has no finding to show that the sales returns were made by the arrangement of the parties to cause prejudice to the interest of Revenue. In commercial parlance, sales return are common where the buyer do not approve quality of goods, objects to the price charged or conditions of purchase order violated varied and similar other reasons. Therefore, directing payment of duty on sales returns shall be contrary to Commercial Parlance theory.
6. Mathematical calculation issue raised by learned counsel calls for examination of the invoices by Adjudicating authority granting fair opportunity of defence to the of appellant to reach to a proper conclusion as to whether the prices were cum-duty. He shall deal the issue on the basis of his finding considering law and defence if any led by appellant. His conclusion shall be subject to adjustability of excess duty paid against short payment of duty and refund of excess amount if any arises upon ultimate adjustment as has been held herein before without bar of unjust enrichment being applicable.
7. In the result, all the appeals are allowed in the manner indicated above.
(Dictated and pronounced in open court) (R. PERIASAMI) (D.N. PANDA) TECHNICAL MEMBER JUDICIAL MEMBER ksr 01-05-2015 DRAFT Remarks I II III Date of dictation 20.04.2015 Draft Order - Date of typing 21.04.2015 23.04.2015 24.04.2015 27.04.2015 29.04.2015 Fair Order Typing 01.05.2015 Date of number and date of dispatch 06/05/2015 8 E/00642/2007, E/00672/2007 and E/41680 to 41682/2014