Customs, Excise and Gold Tribunal - Tamil Nadu
Grasim Industries vs Commissioner Of Central Excise on 17 June, 2003
Equivalent citations: 2003ECR82(TRI.-CHENNAI), 2003(157)ELT123(TRI-CHENNAI)
ORDER Jeet Ram Kait, Member (T)
1. This appeal is directed against the Order-in-Appeal No. 10/2000 (M-III)(D), dated 21-9-2000 passed by the Commissioner of Central Excise (Appeals), Chennai by which the Commissioner has allowed the appeal filed by the Department holding that the respondents have not substantiated their claim with evidence to prove that the duty paid has not been loaded on to their products and hence the order of the lower authority granting refund of Rs. 27,66,970/- is not sustainable in law.
2. The brief facts of the case are that the appellants herein purchased Electro Static Precipitators (ESPs for short) from M/s. BHEL, Ranipet. In terms of Notification No. 78/1990, dated 20-3-1990 the appellants are entitled to buy ESPs at concessional rate of duty i.e. at 5% ad valorem as against the normal rate of 15% ad valorem of duty provided that an officer not below the rank of Deputy Secretary in the Ministry of Environment and Forests Certifies that the goods manufactured are intended for pollution control purpose. Since the manufacturer of the goods viz. BHEL could not get such certificate at the time of removal of the goods to the appellants, BHEL collected full duty viz. 15% ad valorem from the appellant at the time of sale. Subsequent to the sale of the goods to the appellants, the Ministry of Environment and Forests issued the requisite certificate certifying that three numbers of ESPs purchased by the appellants herein vide their Contract Order No. ID/IBD-P1/254, dated 24-11-1989 are intended for Pollution control. The Madhya Pradesh Pollution Control Board vide their letter dated 14-10-1991 had also certified that the aforesaid ESPs were required to be installed on 25 MW power generation for the purpose of controlling air pollution. The ESPs purchased were installed at the Power Plant at Birlagram Nagda (MP) and the power generated at the plant was meant for captive consumption. In view of the certificate issued by the Ministry of Environment and Forest, BHEL claimed refund of the excess duty but their claim was rejected by the department on the ground of unjust enrichment. Thereupon, the appellants filed refund claim for a sum of Rs. 27,74,399/- vide their claim dated 19-8-1992 before the proper officer being the amount of duty paid in excess of the 5% and the said refund claim was rejected by the Assistant Commissioner on the ground that full ESPs had, not been supplied. Aggrieved by the said order the appellants filed appeal before the Commissioner (Appeals) who remanded the matter back to the Assistant Commissioner to reconsider the issue. The Assistant Commissioner in the de novo proceedings by his Order-in-Original No. 6/94, dated 10-6-94 rejected the claim of the appellants. Subsequently the Central Board vide Trade Notice No. 123/94, dated 14-9-94 clarified that ESPs can be supplied in parts in SKD or CKD condition. In view of the clarification issued by the Central Board, the" appellants again went in appeal before the Commissioner (Appeals) and the Commissioner (Appeals) allowed the appeal of the appellants vide Order-in-Appeal No. 226/94 (M), dated 14-10-94. Aggrieved by the said order in appeal, the department filed appeal before the Tribunal vide Appeal No. E/26/95. Since the refund was not granted to the appellants, they filed Writ petition before the Madras High Court and the learned Single Judge allowed the Writ petition against which the Department moved the Division Bench with a Writ appeal and the Division Bench set aside the order of the learned Single Judge and remanded the matter to the Tribunal in view of the pendency of the appeal filed by the department before the Tribunal. The Tribunal remanded the matter to the Assistant Collector for de novo consideration since the order of the Assistant Commissioner was not proper. Upon the remand order of the Tribunal, the Assistant Commissioner, in the de novo proceedings allowed the refund claim vide Order-in-Original No. 31-10-1999. Instead of refunding the amount, the Commissioner reviewed the order of the Assistant Commissioner and directed the Assistant Commissioner to file appeal before the Commissioner (Appeals) and the Commissioner (Appeals), set aside the order of the Assistant Commissioner allowing the refund and allowed the appeal of the department. This is how the appellants are now before the Tribunal assailing the order of the Commissioner (Appeals).
3. Shri Saravanan, learned Counsel for the appellants referring to the grounds taken in their appeal submitted that the doctrine of unjust enrichment is not applicable to the present case. He has pleaded that the ESPs were installed for the purpose of pollution control at the 25 MW power generation station at Nagda (MP) and the power generated is for captive consumption. He has further pleaded that the reliance of the Commissioner in the decision of the Hon'ble Apex Court in the case of UOI v. Solar Pesticides reported in 2000 (116) E.L.T. 401 (S.C.) cannot help the department as the case related to input used for production of final products and not capital goods. He has further pleaded that the present impugned order is beyond the scope of the show cause notice and also the remand order of the Tribunal. He has also submitted that the Section 11B of the CE Act, has no nexus with the provisions of the Income-tax Act and there was no necessity for the Commissioner (Appeals) to have imported the provisions of the IT Act into the present dispute as the dispute is whether the appellants are eligible for refund in the facts of the present case where they have paid duty in excess of what was required to have been paid by law. He, therefore, prayed for allowing the appeal.
4. Shri A. Jayachandran, learned JDR appearing for the Revenue, reiterated the view taken by the Commissioner (Appeals). He has also referred to the para-wise comments on the grounds of appeal, submitted to him by the Additional Commissioner (Judicial) of the Central Excise, Chennai-III, a copy of which is placed in the file. It is stated therein that the Commissioner (Appeals) has taken into consideration the facts on record and the grounds put forth by the department and the impugned order is correct in law. It is also stated therein that as per Section 11B while sanctioning refund, due care has to be taken whether the duty burden has not been passed on to the customers and in the instant case, the assessee has not produced any evidence to show that the duty incidence has hot been passed on to the customers and therefore, in terms of Section 12B, the burden cast on the assessee has not been discharged by him and hence the order passed by the Commissioner (Appeals) is in order. It is also stated that provisions of income-tax can also be applied as it is imperative to study if refund will result in undue/double benefit to the assessee and the said undue benefit need not be within the Central Excise Act and can be under other statutes as well. The learned JDR prayed for rejection of the appeal.
5. We have carefully considered the submissions made by both the sides. We observe that this case has a chequered history as could be seen from narration of facts in Para 2 above. The supply of the goods viz. ESPs was completed on 25-2-92 as noted by the original authority on page 7 of his order dated 31-1-99 and the refund claim was made within time i.e. on 18-9-92. We are constrained to note that a very simple issue as to whether the appellants are entitled to refund or not in respect of the excess duty paid by them, could not be settled so far without any valid reasons. Here is a case where the appellants had to pay full duty @ 15% on the ESPs purchased by them from BHEL, A Govt. of India Undertaking, for installation of 25 MW Power generation at Nagda, for the purpose of pollution control, because the manufacturer could not produce a certificate from the Ministry of Environment that the goods manufactured are intended for pollution control purpose in terms of Notification 78/90-C.E., dated 20-3-1990. The Notification was issued on 20-3-90 i.e. much before the item viz. ESPs were supplied and the Revenue was very much aware of the existence of the Notification that the buyer needs to pay only 5% of duty as against the full duty of 15% ad valorem. It is not in dispute that the appellants had to pay the full rate of duty in the absence of the certificate from the competent authority as envisaged in the Notification. It was after getting the requisite certificate from the competent authority, the supplier of the goods claimed refund of duty which was paid in excess and when their refund claim was rejected on grounds of unjust enrichment, the appellants herein claimed the refund. The fact that excess duty was paid and the further fact that the said excess duty paid was retained by the department knowingly, is not in dispute. We note that the Commissioner (Appeals) in the present case, instead of examining the eligibility of the appellants to the refund of the excess amount paid with reference to the goods supplied vis-a-vis the exemption Notification, has merely extracted and relied upon an order passed by his predecessor in the case of Onxy Marble India reported in 1996 (87) E.L.T. 770, wherein the Commissioner (Appeals) had discussed about the depreciation on capital goods and also the provisions of the Income-tax Act in the case of refund claim pertaining to capital goods, and following the ratio of that decision of the Commissioner (Appeals) has held that since the appellants herein have not substantiated their claim with evidence to prove that the duty has not been loaded on to their products, the order of the original authority granting refund of Rs. 27,66,970/-, was not in order. We are not able to share the view taken by the Commissioner (Appeals) whose order has been relied upon by the lower appellate authority in the present case. We are of the considered opinion that there was no necessity for the Commissioner (Appeals) to have injected the provisions of the income-tax into the present dispute where we are dealing with a dispute arising out of the Central Excise Act. The dispute before us pertains to eligibility to refund in respect of capital goods on which excess duty has admittedly been paid and what was required to be seen was whether the appellants have passed on the incidence of duty to the consumers. As noted above, ESPs were installed at the 25 MW power generation at Nagda, for the purpose of pollution control and hence the goods were meant for captive consumption and there was no sale of any finished products from the said ESPs to pass on any duty liability to the buyers. The Hon'ble Supreme Court in the case of Bhadrachalam Paperboards Ltd. v. Govt. of Andhra Pradesh reported in 1999 (106) E.L.T. 290 (S.C.) has held that the doctrine of unjust enrichment cannot be applied, in a case where the question of passing on the tax liability to the customer does not arise. Further, the Hon'ble Madras High Court in the case of Indo-Swiss Synthetic Gem Mfg. Co. Ltd. v. CC reported in 1992 (59) E.L.T. 345 (Mad.) has held that where there is no sale of goods or transfer of incidence of taxation directly, it cannot be said that, incidence of duty has been passed on to the customers. As rightly contended by the learned Counsel for the appellants, the ratio of the decision of the Hon'ble Supreme Court in the case of U.O.I. v. Solar Pesticides Pvt. Ltd. reported in 2000 (116) E.L.T. 401 (S.C.) is not applicable to the facts of the present case because that case related to the captive consumption of raw material imported for manufacture of a final product. We have perused the judgment of the Hon'ble Apex Court in the case of Solar Pesticides Pvt. Ltd. (supra) and we note that the issue that arose for consideration before the Apex Court was whether the doctrine of unjust enrichment is applicable in respect of raw material imported and consumed in the manufacture of a final product and the Hon'ble Apex Court has held that the principle of unjust enrichment incorporated in Section 27 of the Customs Act (corresponding Section 11B of the CE Act) would be applicable in respect of imported raw material and captively consumed in the manufacture a final product and duty is considered to have been passed on when the duty paid on raw material has been added to the price of the finished goods and the Hon'ble Apex Court has not said anything about captive consumption of capital goods. We also note that the Apex Court in the noted judgment has distinguished their judgment in the case of Bhadrachalam Paperboards Ltd. v. Govt. of Andhra Pradesh (supra). The learned JDR has invited our attention to the decision of the West Zonal Bench of the Tribunal in the case of CC (Import) v. Godrej & Boyce reported in 2001 (135) E.L.T. 878 wherein, in Para 7 it was held that the judgment of the Supreme Court in the case of U.O.I. v. Solar Pesticides (supra) makes it clear that the doctrine of unjust enrichment would apply to capital goods also. As noted above, the above noted judgment of the Hon'ble Apex Court in the cases of Solar Pesticides does not say anything about capital goods and it deals only with captive consumption of imported raw material. Be that as it may, in the instant case, the facts are entirely different as noted above as capital goods viz. ESPs have been only used captively for pollution control purpose and the same were not used for processing or manufacturing of any final product, hence there is no question of passing of the burden of duty to anyone.
6. In view of our discussion above, we are of the considered opinion that in the facts and circumstances of the case, the order-in-appeal passed by the Commissioner (Appeals), is not legal and proper and we set aside the same, restore the Order-in-Original No. 8/99, dated 31-1-99 passed by the original authority and allow the appeal with consequential relief, if any.