Custom, Excise & Service Tax Tribunal
M/S Business Overseas Corporation vs Commissioner Of Customs on 18 September, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI PRINCIPAL BENCH, COURT NO. III Customs Appeal No. 705 of 2008-Cus (DB) [Arising out of Order-In-Appeal No 299/2008 dated 02.09.2008 passed by Commissioner of Customs (Import & General), New Delhi] For approval and signature: Honble Ms. Archana Wadhwa, Member (Judicial) Honble Mr. Manmohan Singh, Member (Technical) 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes M/s Business Overseas Corporation Appellants Vs. Commissioner of Customs, Respondent
(Import & General) New Delhi Appearance:
Shri Prabhat Kumar, Advocate for the Appellant Shri A.K. Jain, AR for the Respondents CORAM:
Hon'ble Ms. Archana Wadhwa, Member (Judicial) Honble Mr. Manmohan Singh, Member (Technical) Date of Hearing : 06.06.2013 Date of Decision : 03.10 .2013 ORDER NO .IO/ 495 /2013-Cus(BR) FO 53666/2014 Per Archana Wadhwa (for the Bench):
After hearing both sides duly represented by Shri Prabhat Kumar, learned advocate appearing for the appellant and Shri A.K. Jain, learned AR appearing for the Revenue, we find that appellant imported items declared as CD pick up lense Unit and a part of CD Deck apparatus picture be assembly in terms of provisions of Customs (Import of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1996 read with Notification No. 29/99-Cus dated 28.2.99. Revenue entertained a view that inasmuch as the goods imported by the appellant were not parts as claimed by them and the same were complete CD Deck mechanism & proposed to deny the benefit of notification in question. Accordingly, proceedings were initiated against them resulting in passing of an order passed by the adjudicating authority holding against them. However, it is seen that said order of the adjudicating authority was set aside by Commissioner (Appeals) who held that the respondents are eligible for benefit of notification.
2. On receipt of order of Commissioner (Appeals), appellant filed a refund claim of duty of Rs.35,91,820/- paid by them at the time of clearance of imported goods, under protest.
3. It is seen that said order of Commissioner (Appeals) was challenged by the Revenue before the Tribunal and Tribunal vide its final order No. C/310/08 rejected the appeal filed by the Revenue by holding that the assessee was entitled for exemption in terms of notification in question. It was also observed by the Tribunal that duty was paid by the assessee at the time of clearance of the goods, under protest. For better appreciation, we reproduce the relevant part of the said order.
3. When the matter was heard on earlier occasions, we directed the Departmental Representative to produce the original clearance documents to see whether the claim of the importer that they have claimed the benefit of Notification No. 25/99 and the payment of higher duty was under protest. The original documents produced by the DR indicated the following remarks:
Sir, Party has produce the Central Excise Certificate For the Benefit against Ntfn.No. 25/99. However the Benefit of ntfn Not given to Party. Therefore Party is paying Full duty under PROTEST.
Therefore, we are of the view that the duty has been paid by the importer under protest.
4. In view of the above, there is no dispute on merits of the case that importer was entitled to the benefit of notification and was entitled to duty free clearance. However, they paid the duty under protest for clearance of the goods. The claim for refund of duty paid by the appellant under protest stand rejected by the lower authorities on the ground of unjust enrichment. As such, the only issue required to be decided in the present appeal is as to whether the appellants have collected this extra duty from their customers and has to be hit by provisions of unjust enrichment or they themselves absolve said duty so as to hold that same does not stand recovered by them from their customers.
5. It is seen that the period involved in the present appeal is from September, 2003 onwards i.e. from October, 2003 to March, 2004. The appellants have taken a categorical stand before the lower authorities that the average sales price for two period i.e. from July to September, 2003 and from October, 2003 to March, 2004 are the same, and is further lower in the subsequent period. The final product was being sold by the appellant at Rs.123/- during the period prior to period involved in the present appeal. The sale value of the same came down to Rs.114.40 per piece during the relevant period, i.e. October, 2003 to March, 2004, when they paid the higher amount of duty on the imported parts. They have produced on record the detailed chart showing the cost factor of their final product in respect of two periods. They have also placed on record a certificate from their Chartered Accountant indicating that duty paid by the appellant was not recovered by them from their customers inasmuch as the selling price of the goods came down to Rs.114.40 which was less than the cost of manufacture. In such a scenario, the appellant contended that question of recovery of excess duty paid by them on the parts cannot arise.
6. As we have already observed the question required to be decided in the present appeal is as to whether the duty paid by the assessee at the time of import of goods stand collected by them from their buyers so as to make themselves unjustly enriched. The appellants have strongly relied upon the certificate of Chartered Accountant. We are reproducing the same for better appreciation.
TO WHOMSOEVER IT MAY CONCERN We have gone through the Purchase, Manufacturing and sales record of M/s. Overseas Business Corporation having its factory at A-30, Sector -16, NOIDA (UP) and after perusal of all above we hereby certify the following:
1. That during April, 2003 to Sep2003, the firm had been importing CD Pick Up Lense Unit at Concessional Rate of Duty of 5%+16%+4% and the cost of Manufacturing per unit of CD Deck Mechanism works out to be Rs.110.50 per piece as detailed in enclosed chart. The average basic selling price per piece of CD Deck Mechanism during this period was Rs.130.84 paisa. According the firm was earning a gross margin of 15.55% on its sales value.
2. That during Oct2003 to March2004, the firm had imported CD Pick up Lense Unit at full rate of duty of 25%+16%+4% under protest since Concessional rate of duty was denied to the firm vide B/E No. 366460 dated 30.09.2003, 367750, dated 29.10.2003, 368048 dated 04.11.2003, 368835 dated 18.11.2003, 369273 dated 25.11.2003, 369869 dated 05.12.2003 and 371187 dated 30.12.2003. The cost of pick up lense unit works out to be Rs.123/- per piece as detailed in enclosed chart. The average basic selling price per piece of CD Deck Mechanism during this period was Rs.114.40, which was less than the cost of manufacturing.
3. That as per above we conclude and certify that the impact of higher rate of duty paid by the party under protest on the above seven Bills of Entries have not been passed on to any other party and have been fully borne by the firm itself.
7. As is seen from the above, Chartered Accountant has gone to the cost of per piece of their final product which comes to around Rs.123/- per piece whereas the appellant was selling their CD mechanism during the relevant period at Rs.114.40 . The lower authorities have examined the above Chartered Accountant certificate and has not been able to give any valid reasons to reject the same. Commissioner (Appeals) has referred to charts placed on record by the assessee. In Chart No. 1, they have shown the landed cost of CD pick up lense unit as Rs.94.30 and total cost of CD deck mechanism comes to Rs. 110.50. In Chart No. 2 they have taken into consideration the higher landed cost of CD pick Up lense unit as Rs/109.49 i.e. after payment of higher Customs duty. Whereas the sale price of the same was lesser than the manufacturing cost. The difference in the landed cost of CD pick up lense unit has resulted in higher manufacturing cost. But the final product being cleared at lesser value, cannot be said to have included the higher duty paid by the appellant.
8. Commissioner (Appeals) while examining the above two charts has held that appellant was adding landed cost of lense unit, which is inclusive of customs duty paid by them. As such, he has further observed that where the appellant have sold the goods by including the higher duty paid, profit is no consideration inasmuch they have themselves admitted that the customs duty was integral component of their landed cost.
We are of the view that the above reasoning of the authority is not worth acceptance. Merely because the importers, in the table produced before the Commissioner (Appeals) has shown the landed cost of CD pick up lense unit as Rs.109.49 which is inclusive of higher duty paid by them, does not mean that customs duty paid by them at the time of clearance of said pick up lense unit makes an integral component of their final product, which stand sold at the price lower than the manufacturing cost which stands arrived at by then by including the higher landed cost of the imported goods. The appellants have only tried to establish that after the higher duty paid cost of CD pick up lense is added in the manufacturing cost, the same comes to Rs.123/- which is admittedly higher than the unit sale price of the goods in question. If that be so, the differential duty paid on the imported goods i.e. CD pick up lense unit cannot be said to have been collected by the assessee from their customers.
9. The Commissioner (Appeals) also rejected their claim on the ground that appellant have neither shown the extra amount of duty as recoverable from the department in their balance sheet nor they have brought any other documents to show that duty was not passed on to their customers. We note that an identical reason was advanced by the Revenue before the Tribunal, in the case of Infar India Ltd. vs. Commissioner of Customss, New Delhi [2002 (150) ELT 411 (Tri-Delhi) wherein it was held by the Tribunal as under:-
The appellants have filed the certificates from the Chartered Accountant certifying that the customs duty element is not passed on to the customers. None of the authorities below have found anything wanting in these certificates. The observation of the lower authorities that the company in their balance sheet for the years 1995-96 did not indicate Rs.94,86,522/- as outstanding recoverable from customs on account of excess duty as they were contesting the same with the department and therefore it can safely be concluded that they have included the said excess duty amount in their costing and passed on the burden of said duty to third party is subjective, arbitrary and unreasonable. At that time, the company was still contesting the levy of customs duty on the product imported by them in an appeal before the CEGAT. They therefore, would not have known whether they would succeed in their appeal and if successful, consequently how much amount they would get from the department as refund. It, therefore, would have been highly presumptuous on their part to reflect an amount in their books of account as due from the customs department, the receipt and the quantum of which was still in limbo.
10. As such, we find that observations made by the appellate authority that the appellant has not shown this amount as due from the Revenue in their balance sheet cannot be appreciated, in view of the Tribunals order.
11. At this stage, we may examine some of other precedent decisions as relied upon by the learned advocate. In the case of CCE vs. Manjunath Food and Packaging P. Ltd. reported in [2009 (239) ELT A 22] it was held that as the duty was paid under protest, the question of unjust enrichment does not arise. Honble Supreme Court in the case of Living Media India Ltd. reported as 1998 (104) E.L.T. 3 (S.C.) has held that when the cost of the raw materials for bringing out the news magazines exceeded its retail sale price, the principle of unjust enrichment becomes inapplicable. As already discussed by us, if the higher cost of goods imported by the applicant is taken into consideration, the manufacturing cost of their final product increased whereas retail sale price was decrease. This fact itself reflects upon only one situation that the extra cost of raw material has not been taken into consideration by the importer at the time of fixing its retail sale price.
12. The appellants have admittedly placed on record the Chartered Accountants certificate certifying that differential duty does not stand recovered by the appellant from their customers. Once the importer having discharged this burden, by placing on record Chartered Accountants certificate, the burden gets shifted to the Revenue to prove by production of positive evidence that such extra duty paid by them stand recovered from their customers. In the present case the Revenue has not advanced any evidence so as to effectively rebut the certificate on record. Such certificate having been given by the Chartered Accountant, based upon the books of accounts maintained by the appellant, in the regular course of the their business has to be given true credence and cannot be brushed aside merely on the basis of assumption and presumptions. For the same reasons, the argument of the learned DR that no businessman sells the goods at a price less than the cost price cannot be appreciated inasmuch as it is an general statement or impression. Such an information must come from records of the assessee to establish that the sale price was either equivalent to the cost price or was more than that so as to establish that duty difference stand recovered from the buyers. Revenue has not disputed the fact that during the relevant period the sale price of the goods was Rs.114/- per piece as per the certificate given by the Chartered Accountant. Whereas the cost price was Rs. 123. If that be so, the said certificate cannot be taken lightly and ignored on the basis of general business practice.
13. In the case of Collector of Central Excise, vs. Metro Tyres Ltd. [1995 (80) ELT 410 (Tri), it was held that even though the assessee issued composite invoices not showing the duty element separately but such sale price of the goods before as well as after the event remained the same and even when price increased, the same went up by an amount much less than the amount of duty /differential duty, it has to be concluded that the incidence of higher rate of duty was passed on to the customers. In the present case, we note that the sale price of the final product, instead of going up on account of higher duty paid by the appellant, has, in fact gone down. This stand explained by the ld. Advocate that on account of fast changing technology in electronic goods, the models become obsolete and have to be cleared at lower prices on account of changing market trends. In such a situation, it cannot be said that the higher duty paid by then at the time of imports, on an objections raised by the revenue, and when the importer has won the issue on merits till the Tribunal level, is not required to be refunded to them especially when we notice that the same does not stand recovered by them from their customers.
14. In view of the foregoing discussions, we are of the view that the appellant has not recovered said amount from their customers and as such, the refund is not hit by provisions of unjust enrichment. Accordingly impugned order is set aside and appeal is allowed with consequential relief to the appellant.
(Pronounced in the open court on )
( Archana Wadhwa ) Member(Judicial)
( Manmohan Singh )
Member (Technical)
ss
Appeal No. C/705/2008 in the case of M/s Business Overseas Corporation Vs. CC, New Delhi Per: MONMOHAN SINGH
15. I have gone through the decision and reasons thereof recorded by learned Member (Judicial). I do not agree with findings on the basis of material facts and evidence on record as well as law relating to unjust enrichment, I consider it necessary to record my separate decision in the following paragraphs.
16. Against claim of refund of Additional customs duty of Rs. 35,91,820/- paid on import of input made vide different Bill of Entries during September 2003 to December 2003, held to be exempt from duty in terms of a Notification, by Commissioner (Appeals) vide O-I-A No. CC(A)63/ICD/D-II/06 dated 28,12,2006, the appellant was allowed adjustment thereof towards cenvat credit (MODVAT) to the extent of Rs. 25,28,755/- and balance of Rs. 10,63,065/- was credited to welfare fund on account of bar of unjust enrichment.
17. Being unsuccessful in adjudication, when the appellant came in appeal to learned Commissioner (Appeals), he agreed with the adjudicating authority and found that when landed cost of the input included duty element according to own averment of the appellant and data submitted by the Chartered accountant, that formed part of the cost of the finished goods and such cost recovered by the appellant. Accordingly, it grant of refund is made it will unjustly enrich the appellant. Learned authority was also of the opinion that the plea of sale of finished goods at loss has no force because the landed cost of input including duty formed part of total cost of the finished gods. Further, the duty recoverable from the department did not appear in the Balance Sheet of the appellant as on 31.03.2004. No evidence was also produced before Commssioner(Appeals) to show that the duty paid on input was not passed on to buyers of the finished goods. Accordingly, the appellant failed to succeed in its appeal before Commissioner (Appeals).
18. It is an admitted fact that the impugned duty element of Rs. 10,63,065/- (which was denied to be refunded) became landing cost of the input imported in 2003-04 and detailed batch costing sheet was not produced before any of the authorities below to satisfy that the inputs imported in the month of September, October, November and December 2003 did not form part of total cost of the production of the finished goods manufactured during those months nor any costing record was produced before the authority below to satisfy use of the imported input without duty element in manufacture of finished goods. The copy of Chartered Accountants Certificate dated 04.05.2006 available in the paper book at page 148 is a bald statement without determination of the total cost Bill of entry wise use of the input during different months and sale price determined accordingly to demonstrate that the total cost did not include customs duty element.
19. The Balance Sheet copy available at page 161 to 165 of the paper book no where shows recoverable additional customs duty from the Government. The Certificate of Chartered Accountant does not disclose whether refund if any receivable from Govt. was disclosed in the Balance Sheet since Certificate was dated 04.05.2006 where as Balance sheet was prepared much before that date. The certificate without showing the list of records examined leaves doubt as to whether examination of facts and figures really done. A certificate of Chartered Accountant not being conclusive proof as has been held by Honble High Court of Madras in the case in the case of CC, Chennai V. BPL 2010 (259) ELT 526 (Mad), the appellant fails to prove that total cost of finished goods had not included duty element in absence of authentic records produced before authorities below has the appellant sold goods at a price lower than its cost was also not demonstrated before both authorities bellow. Therefore mere plea of sale at loss has no force without evidence well tested by adjudicating authority. The appellant makes pulpable plea without cogent evidence. Therefore there is no scope to disagree with the finding of Commissioner (Appeals).
20. Honble Madras High Court held that substantial evidence settles fact without a mere statement in Chartered Accountants Certificate in following terms:
7.?Section 27 of the Customs Act 1962 provides for the claim for refund of duty. A perusal of the said provision would show that the importer will have to satisfy the authorities while seeking such a claim. In other words, until and unless the importer satisfies the authorities with relevant documents, indicating the fact that it has paid the excess amount and the duty has not been passed on to the customers, such a claim cannot be accepted. Further Section 28C and D of the Act provide for price of goods to indicate the amount of duty paid thereon and presumption that incidence of duty has been passed on to the buyer. Therefore, until the contrary is proved, there is a presumption provided under the statute that the duty has been passed on to the buyer. The above said provisions would clearly establish the fact that it is for the importer to satisfy the authorities that the duty has not been passed on to the buyer and the excess payment had been made by him by absorbing the same.
8.?In the present case on hand, admittedly, the first respondent has not produced any document other than the certificate issued by the Chartered Accountant to substantiate its case. The certificate issued by the Chartered Accountant is merely a piece of evidence acknowledging certain facts. The authorities cannot merely act upon the certificate. If such an interpretation is given, then there is no need for authorities to decide the issue of refund. In other words, the certificate issued by the Chartered Accountant would prevail over the consideration of the issues before the authorities. Such a situation has not been contemplated under the Act. Further, Section 27 mandates on the importer to produce such documents or other evidence while seeking refund to establish that the amount of duty in relation to which such refund is claimed, has not been passed on by him to any other person.
9.?Therefore, considering the above said provisions and applying the same to the facts on hand, we are of the opinion that the Tribunal has committed an error in merely relying upon the certificate produced by the first respondent without taking into consideration of the fact that no evidence has been produced for considering the claim of refund. The Tribunal also relied upon the Judgment of Commissioner of C.Ex., Coimbatore v. Flow Tech Power reported in 2006 (202) E.L.T. 404 (Mad). The said Judgment is not applicable to the present case on hand and the Tribunal has wrongly relied upon the said Judgment. This Court in the said Judgment has clearly held that the certificate issued by the Chartered Accountant along with other evidence such as Profit and Loss Account are sufficient evidence to consider the claim for refund. The said Judgment cannot be construed to lay down the proposition of law that the certificate issued by the Chartered Account would automatically enable the person to get exemption in the absence of any other evidence to support that he is entitled to refund. Hence, on a consideration of the above said Judgment and also on the consideration of the facts involved, we are of the opinion that the appeal will have to be allowed and accordingly the same is allowed and the question of law framed is answered in favour of the revenue.
10.?Inasmuch as the Tribunal has merely relied upon the certificate of the Chartered Accountant and in order to give sufficient opportunity to first respondent while answering the question of law in favour of the revenue, the order passed by the Tribunal is hereby set aside and the matter is remitted back to the Tribunal for a fresh consideration of the appeal filed before it. The first respondent is permitted to furnish any other substantial evidence in support of his claim for refund. It is made clear that if the first respondent has failed to produce any other evidence, the Tribunal is directed to proceed with the case and decide the same on merits in accordance with law [Emphasis supplied].
21. When records of the case reveal that the appellant did not lay any evidence before the adjudicating or first appellate authority to come out of the rigor of unjust enrichment as laid down in Section 27 of Customs Act 1962, it does not deserve any consideration at this stage because allowing the refund of Rs. 10,63,065/- (which was denied to be refunded in adjudication)would unjustly enrich the appellant at the cost of revenue.
22. Explaining doctrine of unjust enrichment, Honble Supreme Court in the case of Sahakari Khand Udyog Mandal limited V. CCEC 2005 (81) ELT 328 (SC) has been held as under:
31.?Stated simply, Unjust enrichment means retention of a benefit by a person that is unjust or inequitable. Unjust enrichment occurs when a person retains money or benefits which in justice, equity and good conscience, belong to someone else.
32.?The doctrine of unjust enrichment, therefore, is that no person can be allowed to enrich inequitably at the expense of another. A right of recovery under the doctrine of unjust enrichment arises where retention of a benefit is considered contrary to justice or against equity.
33.?The juristic basis of the obligation is not founded upon any contract or tort but upon a third category of law, namely, quasi-contract or the doctrine of restitution.
34.?In the leading case of Fibrosa v. Fairbairn, (1942) 2 All ER 122, Lord Wright stated the principle thus :
...(A)ny civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognized to fall within a third category of the common law which has been called quasi-contract or restitution.
35.?Lord Denning also stated in Nelson v. Larholt, (1947) 2 All ER 751;
It is no longer appropriate, however, to draw a distinction between law and equity. Principles have now to be stated in the light of their combined effect. Nor is it necessary to convass the niceties of the old forms of action. Remedies now depend on the substance of the right, not on whether they can be fitted into a particular framework. The right here is not peculiar to equity or contract or tort, but falls naturally within the important category of cases where the court orders restitution if the justice of the case so requires.
36.?The above principle has been accepted in India. This Court in several cases has applied the doctrine of unjust enrichment.
39.?Applying the provision of Section 70 of the Contract Act, 1872 and referring to Fibrosa and Nelson, this Court said :
...It is well established that a person who seeks restitution has a duty to account to the defendant for what he has received in the accounting by the plaintiff is a condition of restitution from the defendant. [Emphasis supplied]
23. It is common sense that every business man realize entire cost of manufacture with profit from sale of the goods manufactured through its sale price and no sale price is below the cost. Observation of Apex court in case of Mafatlal Industries Ltd. Vs. Union of India in 1997 (89) ELT 247(SC) in this regard is as under:
'The levy under the Excise Act is an indirect tax (duty). A duty of excise is levied on the manufacture or production of goods. Ordinarily, it is levied on the manufacturer or producer of goods. (Since the levy is in relation to or in connection with the manufacture or production of goods, it may be levied even at a point later than manufacture or production of the goods.) The duty levied will from part of the total cost of manufacturer or producer. The levy being a component of the price for which the goods are sold, is ordinarily passed on to the customer. It is a matter of common knowledge that every prudent businessman will adjust his affairs in his best interests and pass on the duty levied or leviable on the commodity to the consumer. That is the presumption in law" [Emphasis supplied].
24. Law requires that no one can be enriched at the cost of the other for which refund claimed under Customs Act, 1962 has to undergo test of unjust enrichment. Such principle was followed by Honble Supreme Court in the case of Union of India vs. Solar Pesticide Pvt. Ltd. reported in 2000 (116) ELT 401 (SC) held as under:
"The use of the words 'incidence of such duty..." is significant. The words 'incidence of such duty' mean the burden of duty. Section 27(1) of the Act talks of the incidence of duty being passed on and not the duty as such being passed onto another person. To put it differently the expression 'incidence of such 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 case where it is passed on indirectly. This would be a case where the duty paid on raw material is added to he price of the finished goods which are sold in which case the burden or the incidence of the duty on the raw material would stand passed on to the purchaser of the finished product. It would follow from the above that when the whole or part of the duty which is incurred on the import of the raw material is passed on to another person then an application for refund of such duty would not be allowed under Section 27(1) of the Act"[Emphasis supplied].
25. When the appellant pleads that it had sold the goods at loss, it is unbelievable because its copy of profit and loss account at page 159 of the paper book for the year ending 31/03/2004 shows profit of Rs. 6,10,435.95 for the financial year 2003-04. Apex Court has rightly held that no prudent business man would prefer to suffer loss as has been recorded in para 91 of the judgment in case of Mafatlal Industries Ltd. (ibid) as follows:
"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 case of distress sales, such a thing is understandable but distress 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 eligible and payable. A manufacturer may dip into his profits but would not further dip into the excise duty component. He will do so only in the case of a distress sale again. Just because duty is not separately shown in the invoice price, it does not follow that the manufacturer is not passing on the duty. Nor does it follow therefrom that he manufacturer is obsorbing the duty himself. The manner of preparing the invoice is not conclusive. While we cannot visualize all situations, the fact remains that, generally speaking, every manufacturer will sell his goods at something above the cost-price plus duty. There may be a loss making concern but the loss occurs not because of the levy of the excise duty which is uniformly levied on all manufacturers of similar goods but for other reasons' [Emphasis supplied].
The original adjudicating authority deducted an amount of Rs.25,28,755.60/- from the refund claim of Rs.35,91,820 which had been availed as Cenvat by the appellant. The balance amount was credited by him to the welfare fund as according to him, appellant failed to prove that the same has not been passed onto any other person.
Following, Apex Court judgement in M/s Mafatlal Industries, I am of the view that the fluctuation in selling price can also be on account of increase or reduction of 'Profit margin' and fluctuation is sale price is not necessarily an indicative factor for deciding the question of unjust enrichment as laid down by Apex Court in UOI Vs. Solar Pesticides. The CA certificate alone cannot be a conclusive proof of the fact that duty incidence has not been passed.
Section 28C and 28D of Customs Act read as follows:
"28C. Price of goods to indicate the amount of duty paid thereon. Notwithstanding anything contained in this Act or any other law for the time being in force, every person who is liable to pay duty on any goods shall, at the time of clearance of the goods, prominently indicate in all the documents relating to assessment, sales invoice, and other like documents, the amount of such duty which will from part of the price at which such goods are to be sold.
28D. presumption that incidence of duty has been passed o to the buyer. Every person who has paid the duty on any goods under this a/Act shall, unless the contrary is proved by him, be demand to have passed on the full incidence of such duty to the buyer of such goods."
Further, Supreme Court in Solar Pesticides case has observed as follows:
"Sections 28C and D of the Act have been included in the new Chapter VA whose heading is "Indicating amount of duty in the price of goods etc. for the purpose of any goods to, at the time of clearance of goods, indicate in the documents relating to assessment, sales invoice and other like documents the amount of such duty which will form part of the price on which such goods are to be sold. Section 28D contains a presumption that incidence of duty has been passed onto the buyer, but this presumption is rebutable. In the absence of proof of such duty not having been passed on to the buyer, Section 28D provides that the passing of such duty by the seller to the buyer shall be deemed to have taken place"
Based on aforesaid analysis, I am of the view that the appellant has not been able to pass the rigor of section 27 and the law laid down by Apex Court in Union of India Vs. Solar Pesticides supra.
In view of above, I agree with the order of Commissioner (Appeals) Order-in-Appeal No. 299/2008 dated 02.9.2008 and uphold it. Consequently appeal filed by the appellant is rejected.
(Manmohan Singh) Member(Technical) K Gupta Diffenrence of Opinion
Whether the refund claimed is hit by unjust enrichment as per section 27 of Customs Act as held by Member (Technical) Or is not hit by unjust enrichment as held by Member (Judicial) (Manmohan Singh) (Archana Wadhawa) Member(Technical) Member(Judicial) K Gupta
26. The appellant during September, October, November & December, 2003 imported seven assignments cleared to be containing of CD pick up Lense Units and cleared the same under seven bills of entry dt. 30.09.03, 29.10.03, 4.09.03, 18.11.03, 25.11.03, 5.12.03 & 30.12.03. The goods imported were declared to be for use in manufacture of CD Deck mechanisms and accordingly the appellant claimed concessional rate of duty of 5% basic customs duty Plus 16% additional customs duty and 4% special additional customs duty (SAD) in terms of Notification No. 25/99-CUS dt. 28.02.99. Normal rate of basic customs duty on these goods is 25% adv. The Jurisdictional Assistant Commissioner of Customs did not accept the appellants claim for exemption under Notification No. 25/99-CUS as a result of which the Appellant higher paid duty under protest. The excess duty paid under protest was Rs.35,91,280/-. The appellant, thereafter, filed an application under section 27 of Customs Act, 1962 for refund of excess duty amounting to Rs.35,95,820/- paid by them under protest. The refund claim was filed on the ground that the CD pick up Lense Units imported by them under seven bills of entry as mentioned above were eligible for Notification No. 25/99-CUS dt. 25.02.99, as the items were part of CD deck mechanisms and had been used for this purpose. The refund claim was rejected by Assistant Commissioner vide Order-in-Original dt. 22.06.06 on the ground that the goods imported are not covered for exemption under Notification No. 25/99-CUS. The appellant filed an appeal to Commissioner (Appeals) against the Assistant Commissioners order 22.06.06 and the Commissioner (Appeals) vide Order-in-Appeal dt. 28.12.06 set aside the Assistant Commissioners order and directed the Assistant Commissioner to sanction the refund along with interest. The Commissioner (Appeals) held that the goods imported are covered by the exemption Notification No. 25/99-CUS dt. 28.02.99.
27. Subsequent to Commissioner (Appeals) order dt.28.12.06 the appellant again filed an refund claim on 08.01.07 for an amount of Rs.35,91,820/-. The appellant in response to the Department letter dt. 1206.06 & 21.06.06 requesting them to furnish the documents in support of refund claim and justify that the burden of excess duty had not been passed on to any other person, furnished the original duty paying documents, audited balance sheet for the year ending March 2004 and also C.A.s letter certifying that sale price of the CD Deck mechanisms during July to September period when the duty had been paid at the lower rate was Rs.130.84 per piece and during the period from Oct.03 to March04 when the duty on imported components CD Pick up Lense Units had been paid at higher rate, the price of CD Deck mechanisms was Rs. 114.40 per Units and accordingly on this basis, it was claimed that they have not passed on the burden of excess duty whose refund was claimed. The Jurisdictional Assistant Commissioner, however vide Order-in-Original dt.14.09.07 rejected refund claim on the ground that since out of the refund claim of Rs.35,91,820/- an amount of Rs.25,28,755/- represents the additional customs duty whose Cenvat Credit has been availed, they are eligible for refund of only the balance amount of Rs.10,63,065/- and since the appellant failed to furnish evidence that the incidence of this duty had been borne by them, the balance amount was ordered to be credited to the consumer welfare fund. On appeal being filed to Commissioner (Appeals) against this order of the Assistant Commissioner, the Commissioner (Appeals) vide Order-in-Appeal dt. 02.09.08 upheld the Assistant Commissioners Order holding that the appellant have failed to prove that they have not passed as the burden of excess duty to any other person and hence the Order-in-Original dt. 14.09.07 passed by the Assistant Commissioner of Customs, New Delhi is legal and is based on facts. Against this order of the Commissioner (Appeals) this appeal has been filed.
28. The appeal was heard on 06.06.2013. Honble M(J) in her order dt.13.06.13 held that refund claim is not hit by the bar of unjust enrichment in as much as the price of goods before as well as during the period in which duty was paid on higher rate, remained the same and even when the price increased, the same went up by amount much less than the amount of duty/differential duty and from this it has to be concluded that the Appellant has not passed on the incidence of duty paid by them whose refund is being claimed. However, Honble M(T) in a separate order dt.26.09.13 recorded by him, held that refund claim is hit by the bar of unjust enrichment and accordingly he rejected the appeal. Member (T) in his order observed that the Appellants claim that they had sold goods at loss is not believable as profit and loss account for the year ending 31.03.2004 shows profit of Rs.6,10,435.95 for the financial year 2003-2004 which would not be possible if the goods had been sold at a loss.
29. On account of difference of opinion between M(J) and M(T) the following point of difference has been referred to undersigned for decision:-
Whether the refund claim of credit for unjust enrichment from section 22 of Customs Act, 1962 is held by Member(Technical);
Or Is not hit by unjust enrichment as held by Member(Judicial).
30. Heard both the sides in respect of the point of difference.
31. Sh. Prabhat Kumar, Advocate, the learned counsel for the appellant, pleaded that the CD pickup Lense Units imported during period from 30th Sept.03 to 30th December, 2003 had been used for manufacture of CD Deck Mechanism., that as per the C.A. Certificate, the appellant from July03 to Sept.03 had manufactured and sold 66950 pieces of CD Deck Mechanism at basic sale price of Rs.87,59,500/- and the average sale price per piece was Rs.130.84 per piece, that these CD Deck Mechanism had been manufactured by using the CD Pick Up Lense Units imported at the concessional rate of duty of 5% basic customs dutyPlus16% additional customs duty Plus 4% SAD, that during the period from Oct.03 to March04, when duty on the CD Pick Up Lense Units was being paid at higher rate of 25% BCDPlus16% additional customs duty Plus4% SAD, the appellant had manufactured 1,78,940 pieces of CD Deck Mechanism and had sold the same for a total value of Rs.204,70,100/- i.e. at average basic sale value of Rs. 114.40 per piece, that this shows that during the period when higher duty had been paid on the main component, the price of CD Deck Mechanisms had decreased, that landed price of other components was the same and the exchange rate was also more or les the same, that from this data, it is clear that the incidence of extra duty paid whose refund has been claimed had not been passed on the customers and incidence of this excess duty paid had been borne by the appellant, that this data was produced before Commissioner (Appeals), but the same was summarily rejected, that Honble Delhi High Court in the case of Hero Motorcorp Ltd. Vs. Commissioner of Customs (Import & General) reported in 2014(302) ELT-501 (Del.) has held that when the importer has produced C.A. Certificate certifying the factual position with documents to prove that duty burden was not passed on to the customers, the same should be normally believed, unless there are grounds and reasons to reject or disbelieve the same, and that one has to be practical and adopt a realistic approach and not be oblivious as to the nature and character of proof which would be available, that Honble Gujarat High Court in the case of Dhariwal Industries Ltd. Vs. Commissioner of Central Excise & Customs reported in 2014(303) ELT-496 (Guj.) has after discussing the Apex Courts judgment in the case of Allied Photographics India Ltd. reported in 2004(166) ELT-3(SC) has held that as held by the Apex Court in this case, the fact that despite increase in excise duty and corresponding increase in additional duties, the goods were sold by assessee to the consumers exactly at same price as the price at which the same were being sold during prior to the payment of duty at higher rate, would not lead to conclusion that the additional burden of duty was not passed on to the consumers by the assessee, and that in such a case, it would be still open for the Department to apply the principle of unjust enrichment, if it is found that sale price of the goods remained the same before and after collection of duty at higher rate of duty due to some other reasons, such as reduction of price of raw-material or some factor completely un-related to the assessee absorbing the impact of higher rate of duty, and when there are no such factors like decrease in the price of raw-materials or other inputs required for manufacture for final products and still the price of the final product inspite of payment of higher duty has remained the same, it has to be concluded that the incidence of higher duty was absorbed by the assessee, that the ratio of Apex Courts judgment in the case of Allied Photographics India Ltd. (Supra) is that for deciding whether the incidence of higher duty paid by an assessee has been passed on by him to this customer or not, along with the fact as to whether the sale price of the goods remained the same inspite of payment of higher duty, the structure of the price is also to be seen to ascertain as to whether the price has remained the same on account of reduction of price of raw-material or other inputs or other factors un-related to assessee absorbing the impact of higher rate of duty, that when in this case inspite of the payment of duty at higher rate during Oct.03 to March04 the price of CD Deck Mechanism instead of increasing, decreased from the earlier price of Rs.130 per piece to Rs.114 per piece and when as per cost data given by the appellant, the price of other inputs had also not decreased, it has to be concluded that the appellant absorbed the incidence of higher duty whose refund is being claimed, instead of passing on the same to their customers, that just because the Appellant Company made some profit during 2003-04, it cannot be inferred that they did not absorbed the higher duty paid on its CD pick up Lense Unit, that the Tribunal in the case of Shakun Overseas Ltd. Vs. Commissioner of Customs, Chennai reported in 2002 (140) ELT-444 has held that when goods were sold at price less than the landed cost and the loss incurred is more or less similar to the duty paid, it has to be concluded that incidence of duty was not passed on to the customers, that Tribunal in the case of Collector of Central Excise, Chandigarh Vs. Metro Tyres Ltd. reported in 1995(80) ELT-410 (Trib.) has held that when sale price of the goods before as well as after the event (re-classification, revaluation etc.) remained the same and the price even when increased, went up by an amount much less than the amount of duty/differential involved, conclusion is obvious that incidence of duty/higher duty was not passed on to customers, that appeal filed by the Govt. against this order of the Tribunal was dismissed by the Apex Court by judgment reported in 2002(14) ELT-A75(SC) and therefore this judgment of the Tribunal, which has been affirmed by the Apex Court, becomes the binding precedent, that Apex Court in the case of Commissioner of Customs, New Delhi Vs. Organan (India) Ltd. reported in 2008(23) ELT-201 (SC) has upheld the Tribunals order holding that when the duty was paid under protest and the auditors certified that the incidence of duty whose refund is claimed was not passed on to the customers, the refund cannot be refused on the basis of unjust enrichment, and that in view of the above submissions, it is the order recorded by the Honble Member(Judicial) which is correct.
32. Mrs. Ranjana Jha, Ld. Jt. CDR, supporting the view recorded by the Honble Member(Technical), pleaded that from the fact that the average sale price of CD Deck Mechanism during Oct.03 to March04 was less than the average Units price of CD Deck Mechanism during the period from March03 to Sept.03, it cannot be concluded that incidence of higher duty during post Sept.03 period was not passed on to the customer. She, in this regard relied upon Apex Courts judgment in the case of Allied Photographics India Ltd. (Supra). She also pleaded that the C.A.s Certificate produced by the appellant does not give breakup of the cost price into the cost of component parts, cost of the inputs, labour cost etc. and therefore, the same has to be treated as a bald statement. She also cited the judgment of Honble Mumbai High Court in the case of Commissioner of Customs(Exports), Chennai Vs. BPL Ltd. reported in 2010 (259) ELT- 526 (Mad.) wherein it was held that the C.A.s Certificate is merely a piece of evidence acknowledging certain facts and in itself, it is not sufficient to show that the duty whose refund is claimed, was not passed on to other persons and that Tribunals reliance merely on the C.A.s Certificate is not correct. She also pleaded that the appellants claim that they had sold the CD Deck Mechanism during Oct.03 to March04 period at a loss, difficult to believe, as during 2003-2004, as a whole the Appellant Company had made a profit. She, therefore, pleaded that the order recorded by the Honble Member (Technical) is correct.
33. I have considered the submissions from both the sides and perused the records.
34. The refund claim for an amount of Rs.35,31,820/- has arisen in respect of import of seven consignments of CD Pick Up Lense Units during period from 30th Sept.03 to Dec.03. Prior to 30th Sept.03 to 30th Dec.03 the appellant had imported these goods at the concessional rate of duty of 5% basic customs duty plus 16% additional customs duty plus 4% special additional customs duty (SAD) under exemption Notification No. 25/99-CUS. which is available to an importer subject to condition that the importer used these goods for manufacture of CD Deck Mechanism. Since during period from 30th Sept.03 to 30th Dec.03, the Department denied the exemption, appellant paid basic customs duty @ 25% adv. Though the rate of additional customs duty and SAD remain the same, since the additional customs duty and SAD is calculated on the value which is sum of CIF price plus basic customs duty, increase in the rate of basic customs duty would also result in payment of higher quantum of additional customs duty and also the SAD. The Additional Customs Duty and SAD are cenvatable and it is not disputed that refund claim of Rs.25,28,755/- out of total claim of Rs.25,98,820/- represents the additional customs duty and special additional customs duty whose Cenvat Credit has been availed. The appellant, therefore, are eligible only for the refund of the balance amount of Rs.10,63,065/- as for refund of Additional Customs Duty & SAD of Rs.25,28,755/- the Cenvat Credit of this amount taken would have to be reversed which has not been reversed. The question thus is as to whether the balance amount of Rs.10,63,065/- is refundable and for this purpose the question to be decided as to whether it is hit by the bar of unjust enrichment. The appellant in this regard have produced cost data of cost price of CD Deck Mechanism being manufactured by them during July03 to Sept.03 period when they were importing the CD Pick Up Lense Units the main component of CD Deck Mechanism at the concessional rate of 5% basic customs duty plus 16% additional customs duty plus 4% special additional customs duty (SAD) and also the cost data, for the period from Oct.03 to March04 when the CD Pick Up Lense Units were being imported on the full rate of duty of 20% basic customs duty plus 16% additional customs duty plus 4% special additional customs duty (SAD) and accordingly to this data during period prior to Oct. 03, the manufacturing cost of CD Deck Mechanism was Rs.110.5 and during period from Oct.03 onwards, the manufacturing cost of CD Deck Mechanism was Rs.123. However, as certified by C.A. during period from July03 to Sept.03 their average selling price of CD Deck Mechanism was Rs.130.84 while the same during Oct.03 to March04 period, was Rs.114.40 per piece. Thus during the period when appellant were paying duty at the higher rate and their cost of production of CD Deck Mechanism was Rs. 123 per unit, their sale price was Rs.114.40 i.e. less than the cost price. The CIF price of CD Pick Up Lense Units and other component and also the exchange rates were more or less the same, and therefore when inspite of increase in the Customs Duty the selling price of CD Deck Mechanism actually decreased. From this data it is clear that the incidence of excess duty whose refund is sought not passed on to the customers. The Departments contention that from this date it cannot be concluded that the incidence of the extra duty paid was borne by the Appellant, is not acceptable, as, as held by Honble Gujarat High Court in the case of Commissioner of Central Excise & Customs Vs. Dhariwal Industries Ltd. (Supra) the sale price of the goods remaining constant inspite of increase in the duty cannot be looked at in isolation but has to be looked at from the angle as to whether sale price has remained constant on account of decrease in the price of raw-material and other inputs or other factors completely un-related to assessee absorbing the higher duty and if such factor are absent, the price remaining unchanged or decreasing inspite of the higher incidence of duty would lead the conclusion that higher incidence of duty had been absorbed by the assessee and not passed on to the customers. I also take note the judgment of Honble Delhi High Court in the case of Hero Motorcorp Ltd. Vs. Commissioner of Customs (Supra) wherein Honble High Court has held that Certificate of C.A. certifying the factual position based on the documents that the duty burden was not passed should normally be believed unless there are grounds and reasons to reject or disbelieve the same and that one has to be practical and adopt a realistic approach and not be oblivious as to the nature and character of proof which will be available and that denial of refund claim is not fair, just and equitable in absence of any negative factor or evidence to the contrary to disbelieve the appellants contention. The Apex Courts judgment in case of Allied Photographics India Ltd. (Supra) cited by the Department does not say that the fact that the goods were sold by the assessee to the consumers exactly at the same time as the price at which they were being sold during the period prior to the event of reclassification, revaluation etc. resulting in payment of higher quantum of duty, by itself, would not be conclusive that the additional burden of duty was not passed on to the consumers by the assessee. What its says is that in such a situation, the determinative factor would be whether the sale price of the goods remained the same inspite of payment of higher duty on raw material due to some other reasons, such as reduction in the price of raw materials or some other factors completely unrelated to the assessee absorbing the impact of higher rate of duty.
35. In this case, the Department does not dispute the cost data about the cost of manufacture of CD Deck Mechanism and average selling price of CD Deck Mechanism during July03 to Sept.03 period and Oct.03 to March04 period. From the fact that during 2003-04 the Appellant Company made the profit of about Rs.6 Lakh it cannot be concluded that they had not sold CD Deck Mechanism during Oct.03 to March04 period at a loss. Looking to the facts of this case I am of the view that there is no reason to disbelieve the appellants contention backed by C.A. Certificate and cost data that incidence of customs duty whose refund is being claimed was not passed on by them to the customers. I, therefore, agree with the decision of Honble Member (Judicial). However, I clarify that refund claim of only basic customs duty of Rs.10,63,065/- would be available to the appellant, as the balance amount of Rs.25,28,755/- represents additional customs duty/SAD whose Cenvat Credit has been taken by the appellant.
36. The point of difference which has been referred to me stand answered as above.
(Rakesh Kumar)
Member (Technical)
S.Kaur
Final Order No. /2014-Ex(DB)
In view of the majority decision, the refund of Rs.10,63,065/- (Rupees Ten lakh sixtythree thousand and sixtyfive only) is allowed to the appellant by holding the same as not hit by bar of unjust enrichment. However, as the appellant has already availed Cenvat credit to the extent of Rs.25,28,755/- (Rupees Twentyfive lakh twentyeight thousand seven hundred and fiftyfive only), they are not entitled to the cash refund of the same.
(Pronounced in the Court on 18.09.2014 )
( Archana Wadhwa) Member(Judicial)
( Manmohan Singh )
Member(Technical)
ss
??
??
??
??
2