Customs, Excise and Gold Tribunal - Bangalore
Reckitt And Colman Of India Ltd. vs Commissioner Of Central Excise on 13 June, 2003
Equivalent citations: 2003(89)ECC102, 2003(157)ELT316(TRI-BANG)
JUDGMENT S.S. Sekhon, J.
1. This appeal is filed by M/s. Reckitt & Colman Ltd., (hereinafter referred to as the appellants) against the rejection of the refund claim filed for an amount of Rs. 2,20,46,117.82 paid as excise duty during the period 7.8.87 to 31.5.93. The events that have culminated in the present appeal are set out in the form of list of dates indicated below:
SI. No Date Particulars
1. 26.8.86 Show cause notice is issued on the appellants filing classification lists, claiming classification of their product under chapter sub-heading 3206.19 of the Central Excise Tariff Act, 1985 proposing to reclassify under chapter sub-heading 3402.90 of Central Excise Tariff Act, 1985.
2. 29.10.86 Assistant Commissioner passes Order-in-Original dropping the proceedings and approving the classification as claimed by the Appellants.
3. 30.6.87 On an appeal filed by the department, the Collector of Central Excise (Appeals), passes Order-in-Appeal allowing the appeal of the department.
4. The Appellants file appeal to the Tribunal.
5. 7.8.87 The Appellants file classification list classifying their product under chapter sub-heading 3402.90 in terms of the order of the Collector (Appeals) and to pay duty under protest.
6. 14.8.87 The Appellants reiterate their request and register their protest.
7. The Appellants thereafter effect clearances by paying duty at higher rate under protest, The gate passes and RT 12 returns are marked with endorsements 'under protest'.
8. 12.7.88 The department issues show cause notice proposing to reclassify the product under ehaptersub-heading 3204.20 of Central Excise Tariff Act, 1985 and demand duty.
9. 3.8.89 The department issues show cause notice proposing to reclassify the product under chapter sub-heading 3204.20 of Central Tariff Act, 1985 and demand duty for the period 1.1.89 to 31.7.89.
10. 23.8.89 1.3.90 Show cause notices are issued proposing to reclassify the product under chapter sub-heading 3204.30 of Central Excise Tariff Act, 1985.
10.4.90 5.10.90 2.5.91 5.12.91 3.7.92 3.3.93 4.10.93
11. 16.2.94 The Tribunal allows appeal of the Appellants. It also rejects on merits the alternate classification proposed by the department under chapter sub-heading 3204.30.
12. 1.9.94 The Appellant seeks refund of the excess duty paid by them.
13. 5.10.94 The department approves all the classification lists filed by the Appellants.
14. 21.2.95 Show cause notice is issued proposing to reject the refund claim under section 11B(2).
15. 20.4.95 24.1.97 The Appellants file reply to show cause notice as also further submission alongwith an affidavit and Chartered Accountant Certificate that the duty burden has not been passed on; that the composite price shown in the sale invoice has remained the same both before and during the period in question.
16. 28.1.97 Assistant Commissioner passes order rejecting the refund claim.
17. 24.4.97 Appellants file appeal to the Commissioner (Appeals)
18. 7.4.99 Further written submissions are file wherein it is inter alia submitted that assessments were done on a provisional basis.
19. 14.5.99 Commissioner (Appeals) passes Order-in-Appeal rejecting the refund claim.
2. From the order, it is found that the Commissioner has upheld the order of the lower authority ordering the refund of Rs. 2,20,23,246 and transfer thereof to the Consumer Welfare Fund under the provisions to Section 11B(2) of the Central Excise Act read with Section 12(c) of this said Act and upheld the sanction of the refund of Rs. 6 lakhs which was paid by the appellant as deposit, on the following grounds:
"The appellants argue that since it is a case of provisional assessment the provisions of Section 11B are not applicable as per Hon. Supreme Court's decision in the Mafatlal Industries case [2002 (83) ECC 85 (SC)]. At the outset it may be mentioned that the appellants have not at all produced any proof that the assessments were provisional. In the findings of the order there is no evidence that the assessments were provisional. In any case, it is no doubt true that Hon, Supreme Court has held that in cases of provisional assessments, any recoveries or refunds consequent upon the adjustment under Rule 9B(5) will not be governed by Section 11A or 11B. In this case, the AC has not credited the refund amount in terms of Section 11B alone but in terms of Section 12B also. As regards reliance placed on the decision of Hon. Tribunal in the case of Needle Industries, 1998 (26) RLT 307, I find that the Hon. Single member of Tribunal has not at all considered and examined the case with reference to the provisions of Section 12B. It may be observed here that the provisions of Section 12B are independent of Section 11B. What has been mentioned by the Hon. Supreme Court and the Hon. Tribunal in the above cited cases is with reference to the limitation of time imposed by the section. This is clear by the fact that Hon. Supreme Court has specifically included and mentioned Section 11A alongwith Section 11B (at para 95). The Hon. Supreme Court has also added that where a separate refund claim is filed (as in this case) after decision under Rule 9B(5), it would also be governed by Section 11B. The bar of unjust enrichment is over-riding and is applicable to refund arising out of all assessment orders, appellate orders, court judgments, decrees and orders and legal provisions.
The appellants vehemently argue that the incidence of duty had not been passed on. In this regard, they rely on the Hon. Tribunals decision in the case of Metro Tyres Ltd. And the affidavit dt. 20.4.95 of Sri Ramkumar, Accountant. I shall first examine the affidavit. The affidavit contains the following details.
Price list No. & date Effective from Cum. Duty price Rate of duty Amount of duty 1/86 10.3.86 59.40 10% 4.94 1/87 7.8.87 59.40 25% 10.87 4/87 1.3.88 59.40 25% + 5% 11.30 The above information clearly shows that though the cum-duty price has not changed, but certainly and without doubt the burden of duty has been passed on to the customer. It is of little or no consequence that the cum-duty price has not changed or has not changed to the extent. What is relevant is that the incidence of duty should not have been passed on to the customer. Even though the customer may not have been burdened with higher price, it cannot be denied that the higher duty element was billed to them. This is obvious from the price lists filed by the appellants. Hon. Supreme Court in the Mafatlal case has repeatedly held that a manufacturer has no vested right to refund when has passed on the incidence of tax to others; that there is no automatic, absolute or unconditional right to refund; refund will be allowed only if the claimant has not passed on the incidence of tax to a third party; refunds to be allowed only subject to the bar of unjust enrichment. Hon. Supreme Court has categorically added that if the invoice does not show duty element separately it does not mean that the manufacturer is not passing on the incidence of duty to customer nor does it follow therefrom that the manufacturer is absorbing the duty himself. This finding of the Hon. Supreme Court is squarely applicable to the case at hand. The AC has specifically mentioned at page 5 of the OIO, "the depot invoices show that they are not collecting the CED separately and that the prices are inclusive of CED". In view of Hon. Supreme Courts finding that if the invoice does not show the duty element separately it does not mean that the manufacturer is not passing on the incidence of duty to the customer nor does it follow, therefrom that the manufacturer is absorbing the duty himself. It should necessarily be held that the incidence of duty has been passed on to the customer. Consequently, granting of refund to the appellants would undoubtedly result in unjust enrichment of the appellants. Hence the findings of the AC is fully legal and correct in terms of the said findings of the Hon. Supreme Court which is rightly relied upon. It may be added that the appeal has been filed against the decision of Hon. Tribunal in the Metro Tyres case in the Hon. Supreme Court which has been admitted and is pending decision [1996 (84) ELT A160]. Simply because the price has remained the same or not increased to the extent it cannot be concluded that the incidence of duty has not been passed. It is pertinent to mention that Section 11B does not stipulate that price should necessarily increase for application of doctrine of unjust enrichment. The appellants have also not substantiated nor proved with satisfactory evidence that the duty burden/incidence has not been passed on. Hence the order of the AC crediting the refund to the welfare fund is correct, legal and proper and does not require any interference."
Hence this appeal.
3. After hearing both sides and considering the submissions made, it is found:
(a) The refunds claimed are of duties, paid under protest, pursuant to clearances made on classification lists, which were pending approval since the appellant had questioned the earlier approvals of classification of their products at higher rates, as arrived at by the Department and had contested the case and taken it to the Tribunal. The claim of the refund is on the clearances effected during the pendency of these proceedings and the pending classification lists, as filed by the appellants with the Department from 14.8.87 to 5.10.94. When the classification lists were approved by the Department, as per the contentions made by the appellants, refunds on the clearances were claimed. These clearances, were submitted by the learned Advocate for the appellants to be under provisional assessment, therefore, the benefit of para 95 of the Mufatlal Industries (Supra) case 2002 (S3) ECC 85 (SC) ; 1997 (89) ELT 247 (SC) was required to be granted to them, as held by a catena of decisions cited by him. It was also submitted that the case of Metro Tyres and its pendency in appeal in the Supreme Court as reported in (1996 (84) ELT A 160), recorded and relied upon by the learned Commissioner (Appeals) in para 6 of his order, is uncalled as now it is reported that the Supreme Court has dismissed the appeal; therefore, the benefit of Metro Tyres decision should be granted and the refund ordered. The learned DR, on the other hand, read in detail, provisions of para 95 of the Mafatlal Industries case, to submit that the benefit under this paragraph will not be available, in the facts of this case, since there was no provisional assessment ordered under Rule 9B of the Central Excise Rules 1944 nor was the refund entitlement pursuant to an order under Rule 9B(5) of the said rule. The learned DR also submitted that once a refund claim had been filed, the bar of unjust enrichment could be invoked and reiterated the findings of the lower authorities.
(b) On an examination of the status of clearances made, for which the refund claim has been sought, it is observed that both sides agree that the classification lists during the relevant period were not approved. There is no evidence of the assessments being provisional. The removals, during the said period under the provisions of Rule 173F, which at the relevant time were required to be assessed under Rule 173(1) by the appropriate officer on the RT 12 returns, so filed by the assessee. Whether such assessments under Rule 173(1) have been made or not is not forthcoming,
(c) Rule 1730-I(2) reads as follows:
"The duty determined and paid by the assessee under Rule 173F shall be adjusted against the duty assessed by the proper officer under Sub-rule (1) and where the duty so assessed is more than the duty determined and paid by the assessee, the assessee shall pay the deficiency by making a debit in the account-current (within three months from the date of receipt of copy of the return from the proper officer and where such duty is less, the assessee shall take credit in the account-current for the excess on receipt of the assessment order in the copy of the return duly countersigned by a Superintendent of Central Excise".
(underlining supplied) A perusal of this rule indicates, that it mandates 'the assessee shall take credit in the account-current for the excess on receipt of the assessment order, the copy of the return duly countersigned by a Superintendent of Central Excise'. In the present case before us, it is not known why the provisions of Rule 173-I(2) were not followed, and when the said assessment memorandum, if at all, have been handed over to the assessee by the appropriate officer. The mandate of this Rule 173-I (2) does not create any liability or determination of an entitlement of a 'refund' by an officer. This omission, when this provision is read, compared to the provisions of Rule 9B(5) applicable in the case of provisional assessments, which uses the term 'entitled to a refund as the case me be', could not be ignored. Since there is no 'entitlement to a refund' and any excess under Rule 1731(2) necessarily had to be only taken as credit of in Account Current, a separate cash payment cannot be considered and granted. Therefore, it can be safely concluded, that there was no question of any 'refund', which could arise in the facts of this case, which requires to be dealt with under the provisions of Section 11B, which explain 'refund' to be as:
"refund" includes rebate of duty of excise on excisable goods exported put of India or on excisable materials used in the manufacture of goods which are exported out of India".
And does not include excess debits taken under Rule 173-1(2). This case cannot be considered therefore to be covered by Section 11(B). Therefore, it is not possible to uphold the orders of the lower authorities who have applied the provisions of Section 11(B) and not Rule 173-1(2) which would be the specific rule applicable in this case. In this view of the findings, the order of the lower authorities is set aside.
(d) Since there is no claim required to be entertained for 'refund,' the 'refund' application as made should be returned to the appellants with directions that they should follow the procedure as prescribed under Rule 173-1(2) of the Central Excise Rule 1944, as applicable in this case. For this purpose, the matter is required to be returned back to the original authority.
4. The appeal is disposed of in the above terms.