Custom, Excise & Service Tax Tribunal
Shree Krishna Nylon Pvt. Ltd vs Commissioner Of Central Excise, ... on 7 January, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. APPEAL No. E/341/10-Mum (Arising out of Order-in-Appeal No. YDB/219/M-III/2009 dated 1.12.2009 passed by Commissioner of Central Excise (Appeals), Mumbai-II) For approval and signature: Honble Mr. Ramesh Nair, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Shree Krishna Nylon Pvt. Ltd. Appellant Vs. Commissioner of Central Excise, Mumbai-III Respondent Appearance: Shri H.G. Dharmadhikari, Advocate, for appellant Shri N. Prabhu Desai, Superintendent (AR), for respondent CORAM: Honble Mr. Ramesh Nair, Member (Judicial) Date of Hearing: 7.1.2015 Date of Decision: 7.1.2015 ORDER NO
The appeal is directed against order-in-appeal No. YDB/219/M-III/2009 dated 1.12.2009 passed by Commissioner of Central Excise (Appeals), Mumbai-II, wherein the learned Commissioner (Appeals) set aside the order-in-original and allowed the appeal filed by the Revenue.
2. The fact of the case is that the appellant filed refund claim of Rs.2,17,007/- on 17.3.2004 with the Assistant Commissioner of Central Excise, Wagle-I Division, on account of excess duty confirmed on the ground that there was confusion about the duty rate of the product, i.e. whether it was leviable at effective rate of 12% ad valorem + additional duty @ 15% on BED or 16% ad valorem + additional duty @ 15% on BED. However, the appellant chose to pay duty @ 16% under protest and sought clarification from the Chief Commissioners office. Consequent to the clarification received from the Chief Commissioners office, they filed refund claim for excess duty paid of 4% under protest. The refund claim was rejected vide order-in-original No.27/04-05 dated 15.9.2004 by the then Assistant Commissioner holding that the claimant has not been able to prove that the burden of excise duty had not been passed on to the buyers. Aggrieved by the said order-in-original dated 15.9.2004, the appellant filed an appeal before the Commissioner (Appeals), which was rejected vide order-in-appeal No. AT/M-III/201/2005 dated 28.3.2005 holding that the incidence of duty has been passed on to the customers. Aggrieved by the said order dated 28.3.2005, the appellant preferred an appeal before the CESTAT. The CESTAT, vide order No. A/840/C-III/SMB/WZB/2006 dated 26.6.2006, remanded the matter to the original authority for deciding it afresh. In the second round of adjudication, the claim was once again rejected vide order-in-original No. 151(Refund)/06-07/AC dated 30.3.2007 by the Assistant Commissioner of Central Excise on the ground that there is no evidence on record regarding non-availment of cenvat credit by the customers, except the credit notes issued by the appellant to the buyer, which has no relevance. Aggrieved, the appellant filed appeal before the Commissioner (Appeals) who vide order-in-appeal No. SRK/62/M-III/2008 dated 5.2.2008, allowed the appeal by way of remand with the direction to verify whether the duty claimed as refundable has been collected from the customer and whether the credit notes issued by the appellant subsequently were pertaining to the excess duty paid/not paid by them in the light of the judgment of the Tribunal in the case of ONGC reported in 2003 (158) ELT 829 (Tri.). In de novo proceedings at third time, the original authority sanctioned the refund claim of Rs.2,17,007/- after finding that the facts and circumstances of the present case are similar to that of the ONGC case, under the original order No. 12/08-09./AC dated 29.4.2008. The Revenue filed appeal before the Commissioner (Appeals), which was allowed and the order dated 29.4.2008 was set aside. Aggrieved by the impugned order, the appellant is before me.
3. Shri H.G. Dharmadhikari, learned counsel for the appellant, submits that in the earlier proceedings, the Commissioner (Appeals), while remanding the case to the original authority, directed that the case has to be verified in the light of the judgment of the Tribunal in the case of ONGC reported in 2003 (158) ELT 829 (Tri.). The appellant was also directed to produce necessary documents to the adjudicating authority for verification. It is his submission that as per the Commissioner (Appeals)s remand order dated 5.2.2008, the original authority had no option except to decide the case within the four corners of the judgment in the case of ONGC (supra). He submits that the Revenue has not challenged this order by filing an appeal before the Tribunal. Therefore, the finding or the direction given by the Commissioner (Appeals) attained finality. Therefore, at this stage, the Revenue cannot challenge the particular finding of the Commissioner (Appeals) given in the earlier order-in-appeal dated 5.2.2008. Since the learned adjudicating authority passed the order strictly in compliance with the directions given by the Commissioner (Appeals), the order stands just and legal and does not bear any infirmity. He further submits that his case is identical to the case of ONGCs case wherein the common fact is that at initial stage, the excess duty was charged to the customer and subsequently credit note was issued and the customer had returned that amount back to the supplier. With this fact, though initially the amount of excess paid duty was recovered, but when the same was returned by the customer to the supplier, the status of non-passing of incidence of such duty was maintained. He submits that the amount of excess paid duty for which refund is sought for has been accounted for as receivable under the head of loan and advances in their balance sheet and on that basis only, the lower adjudicating authority has sanctioned the refund. Therefore, it is established that incidence of refund has not been passed on to any other person. In support of this submission, he placed reliance on various following judgments:-
(i) CCE, Bangalore-I vs. Om Pharmaceuticals Ltd. reported in 2011 (268) ELT 79 (Kar.);
(ii) Sudhir Papers Ltd. vs. CCE, Bangalore-I reported in 2012 (276) ELT 304 (Kar.);
(iii) CCE, Mangalore-3 vs. Solaris Chemtech Ltd. reported in 2011 (273) ELT 191 (Kar.);
(iv) CCE, Chandigarh vs. Vardhman Industries Ltd. reported in 2006 (205) ELT 241 (Tri.-Del.). This was upheld by the Honble Punjab & Haryana High Court in CEA No. 97 of 2006, which was subsequently upheld by the Honble Supreme Court as reported in 2011 (267) ELT A25 (SC); and
(v) CC, Tuticorin vs. Madura Coats Pvt. Ltd. reported in 2014 (307) ELT 87 (Mad.).
It is his submission that in view of the above judgments, one of which has been upheld by the Honble Supreme Court, the issue is settled that even if the duty is collected from the customer and subsequently returned by issuing credit notes, it is sufficient evidenced to establish that the incidence of such duty has not been passed on and accordingly the refund cannot be rejected on that ground and on the ground of unjust enrichment.
4. On the other hand, Shri Prabhu Desai, learned Superintendent (AR), reiterates the findings of the impugned order. He submits that once excise duty was collected against the sale invoices, it was the admitted fact that subsequently the credit note was issued, it has to be treated that the incidence of such duty has been passed on to the customer and the provision of unjust enrichment has become operative. He placed reliance on the following judgments:-
(i) S. Kumars Ltd. vs. CCE, Indore reported in 2003 (153) ELT 217 (Tri.-LB);
(ii) Grasim Ind. (Chemical Divn.) vs. CCE, Bhopal reported in 2003 (153) ELT 694 (Tri.-LB);
(iii) Sangam Processors (Bhilwara) Ltd. vs. CCE, Jaipur reported in 1994 (71) ELT 989 (Tri.), which was upheld by the Honble Supreme Court as reported in 1999 (112) ELT A115 (SC); and
(iv) Fenner India Ltd. vs. CESTAT, Chennai reported in 2014 (305) ELT 524 (Mad.).
He submits that in view of the above judgments, refund cannot be granted in case where the duty was collected and subsequently credit not was issued.
5. I have carefully considered the submissions made by both sides and perused the records. The fact of the case is not under dispute that the appellant, though initially charged duty in the sale invoice, who on clarification that they have paid the excess duty, issued credit notes and against the said credit notes, the buyer of the goods has returned the excess charged excise duty. The appellant accounted for the said amount in their balance sheet as receivable under the head loan and advances. The lower authority verifying these facts and following the direction of the Commissioner (Appeals) given in the earlier order dated 5.2.2008 applying the ratio of the ONGC case (supra), sanctioned the refund. The Commissioner (Appeals) in his order dated 5.2.2008 recorded the following findings:-
I have gone through the records of the case. The impugned order passed by the Assistant Commissioner, Wagle I Dn., Mumbai-III, rejecting the appellants claim for refund was passed pursuant to the CESTAT Order No. A/840/C-III/SMB/WZB/2006 dated 26.6.2006 remanding the matter to the adjudicating authority for a fresh decision. The lower authority has observed that there is no evidence on record that the cenvat credit of the duty claimed as refundable has not been availed by the customer except for the appellants contention and held that the appellants have not been able to establish that the duty burden has not been passed on to the buyers. He also observed that the burden to prove that the tax incidence has not been passed on to the buyers is on the claimant in view of the judgment of the Honble Supreme Court in CCEx. V. Allied Photographics India Ltd. reported in 2004 (166) ELT 3 SC.
The appellants had before the Honble Tribunal reiterated the case of ONGC reported in 2003 (158) ELT 829 (Tr.) wherein the Tribunal has allowed the refund and submitted that the matter may be remanded.
In the case of ONGC, the appellants had paid duty at a higher rate. Subsequently they issued credit notes and excess duty paid was adjusted by the buyer in the subsequent months and it could be established that ONGC had borne the incidence of duty. In the present case the adjudicating authority has to verify whether the duty claimed as refundable had been collected from the customer and whether the credit notes issued by the appellants subsequently were pertaining to the excess duty paid/not paid by them. Therefore, the case is remanded to the adjudicating authority for verifying the case in the light of the judgment of the Tribunal in the case of ONGC reported in 2003 (158) ELT 829 (Tri.). The appellant is also directed to produce necessary documents to the adjudicating authority for verification. From the above findings, it is observed that the learned Commissioner (Appeals) has given clear direction to the original authority to decide the case in the light of ONGCs case (supra). The matter was remanded to the original authority only for verification of the documents. It is admitted fact that the Revenue has not challenged this order by filing an appeal before the Tribunal. Hence the same attained finality. Therefore, the Revenue did not have liberty to file appeal before the Commissioner (Appeals) in second round challenging the finding of the first order-in-appeal dated 5.2.2008. In view of this, the learned Commissioner (Appeals) could not have taken a different view as against the view taken in the earlier order-in-appeal dated 5.2.2008.
6. In the case of Madura Coats Pvt. Ltd. (supra), the Honble Madras High Court has held as under:-
7.?As rightly pointed out by the learned counsel appearing for the respondent, the Authorities have passed the orders in question on the basis of remand order made in Final Order No. 100 of 2007. It is the bounden duty of the Department to challenge the same either by way of seeking amendment or by way of preferring an Appeal. But the Department has not done it. Under the said circumstances, the Department is totally precluded from challenging the present Final Order. From the above finding of the Honble High Court, it is settled that it is not open for the Revenue to challenge the finding of the Commissioner (Appeals)s order dated 5.2.2008 without filing any appeal against the same. Therefore, the impugned order of the Commissioner (Appeals) cannot be sustained.
7. On going through the judgments cited by the rivals, I find that there are contrary judgments on this issue. However, in the case of Solaris Chemtech Ltd. (supra), the Honble High Court of Karnataka held as under:-
5.?From the material on record as well as the finding recorded by the two appellate authorities, it is clear that the excise duty has not been passed on to the customer. It is a case of mere adjustment of accounts by issue of credit note. Section 11B provides for refund of excise duty paid under the Act. In the circumstances, it is set out in proviso to sub-section (2) of Section 11B that when the excise duty paid by the manufacturer, if he had not passed on the incidence of such duty to any other person i.e., his customer, the duty paid is refundable. In the instant case, when the duty at a higher rate was paid by the manufacturer to the Department is not collected from the customer, in other words, if the higher duty is not passed on to the customer and the customer has not paid the said amount, the assessee is entitled to refund of that excess amount paid at a higher rate. That is precisely what the two fact finding authorities have concurrently held. The said findings recorded by the authorities is based on legal evidence on record. Keeping in mind the aforesaid legal provisions, we hold that the said finding do not suffer from any legal infirmities which calls for interference. In. that view of the matter, we do not see any merit in this appeal. Accordingly, the appeal is dismissed. Hence, the substantial question of law is answered against the revenue and in favour of the assessee.
8. In the case of Vardhman Industries Ltd. (supra), which was upheld by the Honble Punjab & Haryana High Court and subsequently by the Honble Supreme Court, there is an identical fact that whether duty paid at the time of clearance of goods and collected from customers can be refunded if post clearance transaction is made through credit notes. This question was answered by the Honble High Court against the Revenue in the case of CCE, Chandigarh vs. Vardhman Industries Ltd. reported in 2007 (8) STR 429 (P&H) and on that basis the Honble Punjab & Haryana High Court dismissed CEA No. 97 of 2006 filed by the Commissioner of Central Excise, which was upheld by the Honble Supreme Court. The ratio of this judgment is squarely applicable in the present case.
9. In the case of Sudhir Papers Ltd. (supra), the Honble High Court of Karnataka held as under:-
7.?Therefore the law on the point is well settled. As is clear from Section 11-B of the Act when a claim for refund is made within the period stipulated, if the appropriate authority on consideration of such claim comes to the conclusion that the applicant has paid excess duty, after holding so, he should pass an order directing crediting of the said excise duty to the welfare fund. It is only if the assessee claims refund on the ground that he has not passed on the burden of duty to his customer by a specific plea and substantiating the same by producing acceptable evidence, then the appropriate authority shall direct payment of the refund amount to the assessee. The question whether the burden of duty has been passed onto the customer or not is purely a question of fact. The burden of proving the said fact is exclusively on assessee. It is only on discharge of the said burden the assessee would be entitled to the refund of the said amount. The finding of the CESTAT that the events subsequent to the clearance of the goods, raising of the invoice are relevant in deciding the question of refund of duty is not warranted from any of the statutory provisions. On the contrary, the basis for claim for refund is excess duty is to be paid at the time of clearance. As indicated in the invoice, it is only a subsequent event which makes that demand illegal, not warranted, not authorized and gives the assessee a right to seek for refund. In that context, if credit notes are raised and benefit is passed on to the customer, thus not passing on the burden of excise duty the assessee is entitled to refund of the same. Though the adjudicating authority or the appellate authority denied relief relying on the Judgment of the CESTAT in Addisons case, when that Judgment has been set aside by the Madras High Court, the Tribunal was in total error in following the Judgment and dismissing the appeal of the assessee. Merely because the matter is now pending before the Apex Court, that is not a reason to disregard the Judgment of the High Court. The High Court has set aside the Judgment rendered by the CESTAT and the said Judgment is not operating and therefore the Tribunal was wrong in ignoring the Judgment of the Madras High Court. In that view of the matter, the first question of law raised is answered in favour of the revenue and against the assessee and the second question of law is answered in favour of the assessee and against the revenue. Ordered accordingly. Therefore, the finding of the Tribunal as well as the lower authorities cannot be sustained and accordingly is hereby set aside. Hence, we pass the following :-
(1) The appeal is partly allowed.
(2) The rejection of the claim for the period from 1-11-2000 up-to 7-3-2001 is upheld as barred by time.
(3) The assessee would be entitled to refund of excess demand made from 8-3-2001 to 31-3-2001.
(4) In so far as the claim for the period from 1st April 2001 to December 2001 is concerned the entire claim is well within time and the claimant is entitled to refund. From the above judgment, it is settled that even if the excess duty for which refund is sought for is collected but subsequently returned by way of credit note, it cannot be said that the incidence of refund amount has been passed on. It is also observed that since the appellant admittedly accounted for the said amount as receivable in the balance sheet, it is a sufficient evidence to hold that incidence of duty has not been passed on, otherwise the amount cannot be accounted for as receivable.
10. As regards the judgments relied upon by the Revenue, I have observed that both the Larger Bench decisions were delivered much before the judgments of the Honble Karnataka High Court in the case of Om Pharmaceuticals Ltd. (supra) and Sudhir Papers Ltd. (supra). The judgment of the Honble Punjab & Haryana High Court in the case of Vardhman Industries which was upheld by the Honble Supreme Court, directly supports the case of the appellant.
11. In view of the above discussions and analysis on the judgments, I am of the considered view that the appellant is entitled for the refund and the learned lower adjudicating authority has rightly sanctioned the refund claim. Therefore, the impugned order passed by the learned Commissioner (Appeals) is not sustainable and the same is set aside. The appeal is allowed.
(Operative part pronounced in Court) (Ramesh Nair) Member (Judicial) tvu 1 13