Customs, Excise and Gold Tribunal - Delhi
Hindustan Fertilizer Corporation Ltd. vs Collector Of Central Excise on 20 November, 1985
Equivalent citations: 1986(7)ECC67, 1986(24)ELT32(TRI-DEL)
ORDER
S. Venkatesan, Sr. Vice-President
1. This appeal arising out of the rejection by the Assistant Collector of Central Excise, Burdwan, of two refund claims for a total amount of Rs. 14,68,257 filed by the appellants. Their appeal having been rejected by the Appellate Collector of Central Excise, Calcutta, they tiled a revision application to the Central Government, which now is before us as an appeal.
2. The two claims, one for the period J 0-6-76 to 30-3-79, and the other for the period 31-3-79 to 9-10-79, had reference to the exemption Notification No. 195/76-C.E., dated 10-6-1976. The operative part of the notification read as follows :-
"In exercise of the powers conferred by Sub-rule (i) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts Furnace Oil, falling under Item No. 10 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) and intended for use, otherwise than as feedstock in the manufacture of fertilizers, from so much of the duty of excise as is in excess of forty rupees per kilolitre :
Provided that-
(i) it is proved to the satisfaction of the Assistant Collector of Central Excise that such furnace oil is so used, and
(ii) the procedure set out in Chapter X of the Central Excise Rules, 1944 is followed."
3. The appellants purchased furnace oil from the refinery of the Indian Oil Corporation, during the period 10-6-1976 to 9-10-1979. The excise duty at the normal rate was paid by the manufacturers, namely I.O.C. It is not in dispute that the procedure in Chapter X of the Central Excise Rules was not followed. (The appellants have, however, argued that this should not stand in the way of their refund claims being entertained). The following dates are relevant :-
10-6-1976-Notification No. 195/76 issued.
11-2-1977-Application made by the appellants to the Excise authorities for an L-6 Licence (as required for licensees working under the Chapter X procedure), working under the Chapter X procedure.
26-9-1977-L-6 Licence issued (according to the Assistant Collector's order).
30-3-1979-L-6 Licence issued (according to appellants).
30-3-1979-B-8 Bond executed by appellants (according to the Assistant Collector). 2-5-1979-Form CT-2 issued in terms of Chapter X procedure. However, throughout this period from 10-6-1976 to 2-5-1979, and even thereafter, upto 9-10-1979, clearances were not made under Chapter procedure but after payment of duty by the I.O.C.
4. It is also not in dispute that the duty was paid to the excise authorities by IOC. It is however contended by the appellants that the duty amount was re-imbursed by them to I.O.C.
5. In his order in original dated 30-7-1981, the Assistant Collector observed that upto 2-5-1979 the CT-2 certificate, as required under the Chapter X procedure, had not been obtained, nor was the rest of the procedure followed. Hence up to this date furnace oil was received in total violation of the terms of Notification No. 195/76. After 2-5-1979 and up to 9-10-1979, even though the CT-2 certificate had been obtained, the other requirements of the Chapter X procedure were not followed and therefore the provisions of Notification No. J 95/76 continued to be contravened. He further observed that the appellants had not produced documents evidencing payment of duty, and that prima facie both the claims were time-barred. On these grounds he rejected the claims.
6. Before the Appellate Collector the facts were not denied but it was contended that the failure of the appellants to follow the Chapter X procedure was due to the delay by the Excise authorities in issuing L-6 Licence. The Appellate Collector did not find this argument to be acceptable. He observed that the delay in issuing licence might occur for many reasons, but until and unless the licence was held no rights accrued. He upheld the reasoning of the Assistant Collector and rejected the appeal.
7. In the appeal before us, basically the same arguments as were advanced before the lower authorities have been put forward.
8. The matter came up for hearing on 26-8-1985. At that time the representative of the Department, Shri V. Laxmi Kumaran, raised a preliminary objection that the present applicants, who were the buyers of the excisable goods from the manufacturers, namely I.O.C., had no locus standi to claim refund of the duty which had been paid by I.O.C. and that accordingly the present appeal was not maintainable. Shri Sil, the learned Advocate for the appellants, thereupon sought time to study the point. Accordingly, the matter was adjourned, and ultimately came up again on 20-11-1985.
9. We first heard Shri Sundar Rajan (now appearing for the Department) on the preliminary objection. He submitted that in this case the claim was for refund of duty paid by I.O.C. It was only the person who paid the duty had the locus standi to claim the refund thereof. Indian Oil Corporation had not made any claim in the matter. Whatever might have been the arrangements between the I.O.C. and the appellants, the latter were not entitled to claim refund of duty from the Department, and therefore they had no locus standi to make a claim or an appeal.
10. In support of his contention Shri Sundar Rajan relied on the following decisions :-
(1) 1977 E.L.T. 157 (Gauhati) - Union of India v. Silchar Electric Supply Company Ltd. ;
(2) 1977 E.L.T. (J 65) (Ca1.)=1977 TLR 1763 (Calcutta)-Akhil Bandhav Chemical Industries v. Union of India ; and (3) 1983 E.L.T. 974 (CEGAJ)-Mahindra and Mahindra Ltd. v. Collector of Central Excise, Bombay.
He submitted that the above decisions made it clear that only a person who paid the duty could claim the refund thereof. The decision of the Hon'ble Gauhati High Court had specifically laid down that an L-6 Licence holder could have a claim only against his supplier. The Tribunal in their decision cited above had held that the customer of the manufacturer had no locus standi to claim a refund. In the light of these authorities, Shri Sundar Rajan submitted that the present appeal should be rejected as not maintainable.
11. The advocate for the appellants, Shri Sil, strongly contended that they had locus standi to make the claim and to file the present appeal. He submitted that Notification No. 195/76 linked the exemption to the end-use of the furnace oil. Therefore, it was clear that the exemption was intended for the benefit of the buyers of the furnace oil. The obligations under the Chapter X procedure were placed on the buyer, who had to make an application to the Collector and obtain an L-6 licence under Rule 192. He submitted that Rule 11, relating to claims for refund of duty, applied to "any person" and not only to a manufacturer. He submitted that the form of L-6 Licence authorised the licensee to obtain excisable goods "without payment of the whole or part of the duty leviable thereon". This showed that the concession was meant to accrue to the L-6 licensee.
12. As regards the judgments cited by Shri Sundar Rajan, Shri Sil submitted that both the High Court judgments were of single Judges. As against those judgments, there were other judgments by Division Benches of the High Courts. He cited the following judgments :-
(1) 1984 (17) E.L.T. 246 (Gujarat) in the case of Union of India v. Ahmedabad Manufacturing and Calico Printing Co. Ltd. (This judgment was based on a decision of the Supreme Court in the case of M/s. Chottabhai Jethabhai Patel and Company v. Union of India) ;
(2) 1984 (18) E.L.T. 732 (Andhra Pradesh) in Godavari Plywoods Ltd. v. Union of India.
According to Shri Sil, these judgments laid down clearly that excise duty was a tax on consumption and the benefit of refund of the duty paid should accrue to the buyers of the goods.
13. As regards the order of the Tribunal in the case of Mahindra and Mahindra, Shri Sil submitted that he had not an opportunity to study that order, but in any event his case should succeed on the basis of the judgments on which he had relied.
14. In reply, Shri Sundar Rajan submitted that the judgments cited by Shri Sil had reference to the question of unjust enrichment and had no relevance to the present case. He again submitted that the appeal should be dismissed as not maintainable.
15. At this stage the hearing was closed, on the understanding that if the Bench ruled against Shri Sundar Rajan on his preliminary objection, a further hearing would be held on the merits of the appeal.
16. We had given our careful consideration to the submissions made from both sides. As regards the substantive question involved, namely the applicability of the exemption under Notification No. 195/76, we do not propose to comment in detail, since we are concerned with the preliminary issue of locus standi. We merely note the observations of the lower authorities that the condition of that notification, namely following Chapter X procedure, had not been fulfilled, and the contention of the appellants that this was due, in the first instance, to ignorance of the existence of the notification, and subsequently to the delay of the Department in issuing them the L-6 Licence.
17. A number of judicial decisions have been cited. The Hon'ble Gauhati High Court, in the case of the Silchar Electric Supply Company, had dealt with a similar case (though under an earlier notification) relating to the purchase of furnace oil to be used for industrial purposes. Refund was claimed of the "duty" paid by the purchaser (the industrial user), to the manufacturer. Subsequently, a claim was made against the Union of India for refund of the duty amount. It was held by the High Court that the plaintiff, who was not a manufacturer or a producer and was not required to pay excise duty to the Union of India directly, was in no position to claim refund from the Union of India because he had made no payment to the Union of India. It was observed that the plaintiff might perhaps enforce a claim, if all other conditions were satisfied against the seller, namely the oil company.
18. The judgment of the Calcutta High Court in the case of Akhil Bandhav Chemical Industries was with reference to a similar situation of purchase of certain mineral oils for industrial use from the manufacturers thereof. Refund was claimed from the Excise authorities but rejected on the ground that duty was paid to the Excise authorities not by the petitioners but by the two companies. On these facts the Hon'ble High Court held that an application for refund of duty could only be made by the person who had paid to the Excise authorities. It was further observed that though excise duty was an indirect tax, as between the petitioner and the two seller companies the excise duty formed part of the price of the goods and it was those two companies who were liable to pay excise duty to the Excise authorities at the point of removal of the goods, and who had in fact paid the duty. The High Court accordingly held against the petitioners in that case.
19. In the case of Mahindra and Mahindra Ltd., the Tribunal considered a revision application filed by M/s. Mahindra and Mahindra Ltd., who had purchased certain goods from the manufacturers. The appeal related to refund of duty paid by the manufacturers. The Tribunal held that M/s. Mahindra and Mahindra Ltd. could not be considered as an "aggrieved person" in terms of Section 36, Central Excises and Salt Act as in force at the material time. The Tribunal made the following observations :-
"As M/s. Mahindra and Mahindra Ltd. are only the purchasers of the metal name plates and not being the manufacturers of the said metal name plates and as the excise duty is leviable only on the manufacturer or the producer, the aggrieved person would only be M/s. Excel Process Pvt. Ltd. As has been stated by the advocate of M/s. Mahindra and Mahindra Ltd. excise duty being an indirect tax, the ultimate burden would be on the consumer but that does not mean that every consumer of the goods in issue can be treated as an aggrieved person for filing his claim either before the Central Excise authorities or the government or, as the case may be, the Tribunal."
In this view the Tribunal dismissed the appeal, holding that M/s. Mahindra and Mahindra Ltd. had no locus standi to file a revision application or appeal.
20. The decisions cited above by Shri Sundar Rajan, particularly the two High Court judgments, are very relevant to the matter before us. As against those judgments Shri Sil sought to rely on two other High Court judgments which, according to him, had carried greater weight as being judgments of Division Benches. Moreover, one of them was based on a judgment of the Hon'ble Supreme Court. We have considered the effect of those judgments. We find that both of them related to the question of unjust enrichment. In both cases the refund of duty was claimed by the manufacturer at a period long after the goods had been manufactured, cleared on payment of normal duty and sold. Both cases were decided against the manufacturers who claimed the refund of duty. The ground which weighed with the Hon'ble High Courts was that the refund, if granted to the manufacturers, would not be passed on to the ultimate consumers who had actually borne the incidence of the tax. It is in this context that the Hon'ble Gujarat High Court made the following observations in paragraph 21 of its judgment, on which Shri Sil placed reliance :-
"As already pointed out, it is an admitted position that the bills have passed on the burden of excise duty paid on blended yarn to the buyers of the fabric. That being the position, it is the buyers of the finished goods who are entitled to remission in the shape of refund of excise duty not legally recoverable. As pointed out above, if the excise duty legally not recoverable is to be refunded or repaid, it would amount to remission within the meaning of Section 64A(1) of the Sale of Goods Act. Therefore, it would be the buyer of the fabric to whom the burden of excise duty paid on blended yarn is passed on would be entitled to the remission and not the Mills. Under these circumstances, it is impossible to hold that the money which is to be refunded on the ground that the excise duty is illegally recovered, can be said to belong to the Mills. It belongs to the buyers of the fabric. Since the money does not belong to the Mills, they cannot claim restitution under Section 72 of the Contract Act. It is. however, argued on behalf of the Mills that levy of excise duty is on the manufacture or on production of goods and therefore, it is the liability of the manufacturer to pay the excise duty on the goods manufactured. It was having regard to this liability of the manufacturer who has paid the duty to claim refund of duty. Under Section 11B the person who has paid duty is entitled to make application for refund within six months from the date of payment. Relying on this provision, it was argued that it is the right of the manufacturer to claim the refund. Answer to the above contention is in the decision of the Supreme Court in Chotabhai v. Union of India, AIR 1962 S.C. 1006. The Supreme Court observed therein that Section 64-A of the Sale of Goods Act refers in express terms to "duties of excise" and has, therefore, to be read as part and parcel of every legislation imposing a duty of excise. Therefore, the provisions of Section 11B of the Excise Act will have to be read subject to the provisions contained in Section 64-A of the Sale of Goods Act. If the provisions of Section 11B are so read, it is clear that it would be the ultimate buyer who would be entitled to remission or refund of the excise duty paid on blended yarn."
21. In the case of Godavari Plywoods a similar view was taken by the Andhra Pradesh High Court as would be seen from the following observations in paragraph 18 of the judgment :-
"18A. Incidence of Excise duty : A duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced as held by Lord Simond in Governor General in Council v. Province of Madras-A.I.R. 1945 P.C. 98. It is an indirect tax which the manufacturer or producer passes on to the ultimate consumer i.e., its ultimate incidence will always be on the consumer, as held by Subba Rao, J. (as he then was) speaking for the Court in R.C. Jail case (supra). Thereby the burden of incidence of tax is thus passed on by the manufacturer or producer to the consumer. He did not bear any burden of the tax. By ordering refund, the benefit of refund of excise duty must normally go to the consumer but not the intermediary manufacturer or producer. It is common knowledge that in the case of collection of indirect tax when it is found to be unconstitutional and refund is ordered, invariably the consumer would remain unidentified or even it is possible to identify, his chance to get back the refunded amount is a remote one since by then the consumer may not preserve the evidence of purchase made from the producer or manufacturer to whom the refund is ordered. As a result, the producer or manufacturer retains the benefit and get the windfall of money refunded for which he has no legal right, title or interest and thereby he gets an unjust enrichment."
22. We have also perused the judgment of the Hon'ble Supreme Court in the case of Chhotabhai Jethabhai Patel, As will be seen from the extract in paragraph 20 above, it was referred to by the Gujarat High Court in the context of the relation between Section 11B of the Central Excises and Salt Act and Section 64A of the Sale of Goods Act. The case before the Hon'ble Supreme Court related to a demand for excise duty on a warehouse licensee in consequence of an enhancement of the rate of duty by a legislative enactment. It was held that the Excise authorities were entitled to demand the differential duty from the licensee (who, in terms of the special provisions relating to the payment of duty on tobacco, was the person who was liable to pay duty to the Central Excise Department). This decision would, if anything, be against the contention advanced by the appellants in the present case, because its effect is that extra duty would be realisable from the person who paid the duty : therefore, per contra, refund, if any, should be payable only to the person who had paid the duty.
23. We therefore, find that the reliance placed by the learned advocate for the appellants on the decisions cited by him is not well-founded. This would become even more clearly apparent if the terms of those very judgments are closely studied. The observations made in those cases was to the effect that relief, if any, was deserved by the persons who actually bore the incidence of the duty, namely the ultimate consumers. In that view the present appellants are completely out of Court because in no sense can they be considered to be the ultimate consumers of the furnace oil purchased by them. They are a corporation functioning on commercial lines, manufacturing a product for sale to consumers at a price. Whatever are the elements of the cost which go into their products, including the excise duty paid by them, necessarily have to be reflected in the price at which they sell their products to the ultimate consumers who buy the fertilizers from them. It is those ultimate consumers, namely farmers, etc. who have in the last analysis borne the burden of the duty and would in equity be entitled to receive the ultimate benefit of any remission or refund. When it comes to enjoying the benefit of a duty reduction, the present appellants are in the position of an intermediary and cannot seek to benefit from the observations of the Hon'ble Supreme Court and the High Courts in the judgments cited by them.
24. Shri Sil had argued that the notification was intended for the benefit of the industrial users and not the manufacturer. It is obvious that excise duty, being a tax on consumption, would be borne by the ultimate user and therefore any relief in excise duty is also intended to benefit the ultimate consumer. This does not however mean that the ultimate consumer can deal directly with the Excise authorities. Again, Shri Sil had pointed out that under the Chapter X procedure the industrial user has to deal directly with the Central Excise authorities and that the eligibility for the concession depends on action to be taken by the industrial user. We observe that many concessions in regard to excise duties have been given on various social, economic or other grounds. Some of them are conditional exemptions, where the eligibility for the concession is related to action to be taken by persons other than the manufacturer-assessee. But even so, where the duty burden is discharged by the manufacturer, it is he who is liable to make up a short levy of duty if discovered subsequently, and it is equally he who is eligible to receive refund of duty from the Excise authorities. There can be a situation where the duty liability is transferred to a person other than the manufacturer, in that case both the liability to pay extra duty and the right to receive refunds may be passed on. Thus, in the case of an assessee working under Chapter X procedure, Rule 196 provides for demand of duty from him on goods not duly accounted for. If any duty has been levied on an industrial consumer under this rule he would no doubt be entitled to claim refund thereof. But these considerations are not applicable to the present case where the Chapter X procedure was not followed and where duty was paid unconditionally at the time of clearance by the manufacturer, namely IOC.
25. For the above reasons we find that the preliminary objection taken by the learned Departmental Representative is well-founded. We hold that the appellants before us had no locus standi to make the refund claim or to file further appeals. Accordingly, we dismiss their appeal as not maintainable.