Custom, Excise & Service Tax Tribunal
M/S. Cosmo Films Ltd vs Commissioner Of Central Excise & ... on 13 March, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. C/11/2004-MUM (Arising out of Order-in-Appeal No. BPS (313)/2003 dt. 6.10.2003 passed by the Commissioner of Customs & Central Excise (Appeals) Aurangabad) For approval and signature: Honble Mr. Anil Choudhary, Member (Judicial) Honble Mr. P.S. Pruthi, 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?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy :
of the Order?
4. Whether Order is to be circulated to the Departmental :
authorities?
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M/s. Cosmo Films Ltd.
:
Appellant
VS
Commissioner of Central Excise & Customs, Aurangabad
:
Respondent
Appearance
Shri Anil Balani, Advocate for Appellant
Shri S.J. Shahu, Assistant Commissioner (A.R) for respondent
CORAM:
Mr. Anil Choudhary, Member (Judicial)
Mr. P.S. Pruthi, Member (Technical)
Date of hearing : 13/03/2015
Date of pronouncement : /2015
ORDER NO.
Per : P.S. Pruthi
The appellant, a manufacturer of BOPP Films and Electric Capacitor Grade Films, claimed concessional rate of duty on import of Polypropylene Granules under Sr. No. 145 List-B of Notification No. 64/95-Cus. Dt. 16.3.1995. The Assistant Commissioner, pending enquiry about applicability of Not64/95, vide order dt. 16.5.1995 assessed the goods provisionally under Section 18 of the Customs Act in respect of Ex-Bond Bill of Entry No.5 dt. 16.5.1995. Accordingly several consignments imported were cleared provisionally. Vide order dt. 9.8.1996 under Section 17 ibid, the Assistant Commissioner denied the benefit of notification No. 64/1995 and directed the appellant to pay differential duty on goods cleared during the period 16.5.1995 to 23.1.1996. On a writ petition filed by the appellant, the Honble Bombay High Court set aside the order dt. 9.8.1996 and remanded the case for fresh adjudication. This time the Assistant Commissioner extended the benefit of Notification No. 64/95 vide his order dt. 25.7.1997. In appeal, the Commissioner (Appeals) vide order dt. 27.10.1999, set aside the Order-in-Original dt. 25.7.1997 and remanded the case to the Assistant Commissioner for de novo consideration. However, the appellant preferred an appeal to CESTAT who vide Order No. C-II/1585-86/2000/WZB dt. 1.6.2000 set aside the Order-in-Appeal and restored the Order-in-original dt. 25.7.97 passed by the Commissioner (Appeals). Thus, on merits, the issue attained finality. As the department had levied full rate of duty on the goods cleared during the period 25.1.96 to 16.2.97, the appellant vide letters dt. 28.3.97, 3.1.98 and 15.4.98 requested for refund of excess duty of Rs.37,00,44.42 for the period Jan96 to Feb 97 which amount was later revised by them to Rs.25,06,105/-. In pursuance to SCN dt 30/10/98 proposing rejection of refund as time barred, the Assistant Commissioner vide his Order-in-Original No. 146/99 dt. 12.7.99 rejected the refund claim as time barred because the duty had not been paid under protest during the impugned period. In appellate proceedings, the Commissioner (Appeals) vide OIA No. A/216/2000 dt. 27.9.2000 set aside the above order-in-original and remanded the case to the Assistant Commissioner to re-examine the issue of limitation. He held that the appellants letter dt. 28.3.97 should be treated as a refund claim and in that case the claim will not be hit by limitation. This time around, the Dy. Commissioner of Central Excise vide his OIO No. 1256/RFD/2000 dt. 22.12.2000 rejected the refund claim on grounds of limitation as well as unjust enrichment. In appeal the Commissioner (Appeals) upheld the Order-in-Original dt.22.12.2000. The appellant are in appeal before us against this order of Commissioner (Appeals).
2. Heard both sides.
3. The Ld. Counsel for the appellant stated that once the High Court had set aside the original order dt. 9.8.1996 passed by the A.C., the provisional assessment order dt.16.5.95 got restored. Hence, all assessments were provisional. According to him since the appellant continuously pursued the matter at all levels, the payments made by them are obviously under protest. And there was no requirement of a formal letter of protest for each Bill of Entry. He referred to OIA dt. 22.12.2000 in which the Commissioner (Appeals) observed that the appellants letter dt. 28.3.97, if received, will have to be treated as a refund claim. This OIA was never challenged by the Department. In such cases, according to him, unjust enrichment does not apply as laid down by the Honble Supreme Court in the case of Mafatlal Industries Ltd. 1997 (89) ELT 247 (S.C.).
3.1 The Ld. Counsel drew our attention to the provisional assessment order dt. 16.5.95 which states that I order that the duty leviable on such goods to be assessed provisionally. Therefore, he contended, all the goods imported during the period January 96-Feb.97 were assessed provisionally. He further contended that the order dt. 9.8.96 finalizing the Bill of Entry No 5 dt 16.5.95 refers to subsequent bills of entry also. Therefore, this indicates that all Bills of Entry were assessed provisionally.
3.2. The Ld. Counsel relied on the following judgments holding that principles of unjust enrichments are not applicable to refunds arising out of finalization of provisional assessment:
(a) Scientific Instruments Co. Vs. Commissioner of Customs 2012 (286) ELT 261 (Tri. Chennai).
(b) Commissioner of Customs Kandla Vs. Hindustan Zinc Ltd. 2009 (235) ELT 629 ( Tri. LB).
( c) Oriental Exports Vs. Commissioner 2006 (200) ELT A138 (SC).
4. The Ld. AR reiterated the findings of the Commissioner. He referred to the letter dt. 1.3.1998 of the appellant addressed to the Assistant Commissioner regarding the refund claim and stated that there is no mention of duty payment under protest. According to him, the show cause notice dt. 30.10.1998 to the appellant proposed rejection because the appellant had paid the duty without any protest for the clearances effected during the period January 96 to February 97 and did not request for provisional assessment. He relied on the judgement of Honble Supreme Court in the case of Bussa Overseas and Properties Pvt. Ltd. Vs. UOI 2004 (164) ELT A177 (SC) in which the Honble Apex Court dismissed the partys SLP against the order of the Bombay High Court 2003 (158) ELT 135 (Bom) holding that all claims of refund arising from finalization of provisional assessment must past the test of unjust enrichment contained in Section 27 of the Customs Act.
5. We have carefully gone through the facts of the case and submissions made by both sides.
6. At the outset, we find that in his order dt. 16.5.1995, the Assistant Commissioner while ordering provisional assessments stated that I order that the duty leviable on such goods to be assessed provisionally under Section 18 of the Customs Act, 1962. Accordingly, the procedure of provisional assessment under Section 18 be followed until further orders. From this it appears that the provisional assessment was done for such goods, i.e. for all Bills of Entry during the period 16.5.1995 onwards and not for any particular Bill of Entry. Even, the order dt. 9.8.1996 finalizing the provisional assessments also refers to Ex-bond Bill of Entry No. 5 dt. 16.5.1995 and subsequent Bill of Entries. Therefore, it would be reasonable to conclude that the Bills of Entry for the period January 1996 to 9th August 1996 ( which is part of the impugned period January 1996- February 1997) were assessed provisionally. As regards the period from 9.8.1996 to February 1997 we find that the Commissioner (Appeals) vide his order dt. 27.9.2000 had accepted the appellants letter dt. 28.3.1997 as a refund claim, there being no evidence to the effect that the letter was not received by the Department. Even the order of the Assistant Commissioner dt. 22.12.2000 does not categorically state that the letter dt. 28.3.1997 was not received by the department.
Therefore, since the department did not challenge the Commissioner (Appeals) order, the refund for this period is not time barred. The contention of the appellant is also that the Bombay High Court order dt. 5.5.1997 setting aside the order of finalization dt. 9.8.1996 restores the status of provisional assessment in respect of all Bills of Entry filed upto the date of the High Court order and till the conclusion of the fresh adjudication proceedings. This contention merits acceptance because the High Court directed to continue the Bank Guarantee. In this view of the matter, we hold that the assessments were provisional and the question of payment of duty under protest did not arise.
7. The next issue to be decided is whether the test of unjust enrichment will apply to provisional assessments. The appellant have submitted various judgments to support their stand that the test of unjust enrichment will not apply to provisional assessments before 13.7.2006 when sub-section(5) to Section 18 was introduced. Sub-Section 18(5) brought the concept of unjust enrichment into Section 18. We have seen these judgments. In the case of Hindustan Zinc Ltd. (supra) the Larger Bench had considered the judgment of the Honble Supreme Court in Allied Photographic case 2004 (166) ELT 3 (S.C.) and came to the conclusion that unjust enrichment is not applicable to refunds arising out of finalization of provisional assessments prior to 13.7.2006. This view is also obtained from the Supreme Court judgement in the case of Oriental Exports (supra) which upheld the CESTAT judgement to the effect that the doctrine of unjust enrichment is not applicable to the provisional assessments even after the finalization thereof. However we note that the case of Allied Photograhic was in the context of provisions of Central Excise Law. The judgement in the case of Oriental Exports also referred to the case of Allied Photographic. We find that the issue is dealt in detail in the Mumbai High Court judgement in the case of Bussa Overseas (supra). The Honble High Court removed the confusion prevailing in the matter by distinguishing the provisions of the Customs Act and the Central Excise Act and held that unlike the Central Excise Act, Section 27 of the Customs Act has always been made applicable to the refunds arising under Section 18 which deals with refunds arising from finalization of provisional assessments. And therefore the test of unjust enrichment laid in Section 27 will apply. While delivering its judgement the High Court referred extensively to the case of Mafatlal Industries (supra). It also refers to the Supreme Court judgement in the case of TVS Suzuki which had been considered in the case of Oriental Exports, and then distinguished the same while arriving at its decision. The Mumbai High Court held as under :
26. .Thus, the ratio laid down by the Apex Court in the case of Mafatlal Industries (supra), Solar Pesticides Pvt. Ltd. (supra) and S.R.F. Limited (supra) conclusively establish that all claims of refund under the Customs Act must pass the test of unjust enrichment contained in Section 27 of the Act and unless it is established that the duty element has not been passed on to others, no refund can be granted. In the light of the above dictum laid down by the Apex Court, it is not open to the Petitioners to contend that in respect of the refund arising under Section 18 of the Customs Act, the principles of unjust enrichment contained in Section 27 of the Customs Act are not applicable. In the present case, since the incidence of duty element has been admittedly passed on to the consumer, no direction can be given to the Customs Authorities to refund the amount as it results in unjust enrichment to the Petitioners.
27.The contention of the Petitioners that once the refund is due under Section 18(2), then the Customs authorities are under an obligation to refund the amount is also without any merit because, from a bare perusal of Section 18 of the Customs Act it is seen that no such obligation is cast upon the Customs authorities. Section 18 merely entitles the assessee to get refund if the duty finally determined in less than the duty paid provisionally. Moreover, Section 18 cannot be read in isolation. It has to be read with Section 27 of the Customs Act. Explanation II to Section 27 of the Customs Act (Explanation 1 prior to 1-8-1998) provides that to obtain refund of any duty paid provisionally under Section 18, an application for refund must be made within the period of limitation prescribed therein. The limitation prescribed under Section 27 of the Customs Act requiring filing of an application for refund of duty arising on finalisation of the provisional assessment in the case of import made by any individual for his personal use or by Government or by any educational research or charitable institution or hospital, is, before the expiry of one year and in any other case before the expiry of six months from the date of adjustment of duty after the final assessment. In other words, the refund of duty arising on finalisation of the provisional assessment is governed by the limitation prescribed under Section 27 of the Customs Act. Therefore, even though the Petitioners are entitled to the refund on finalisation of the assessment under Section 18, to obtain that refund, the Petitioners are required to make an application within the period of limitation prescribed under Section 27 of the Customs Act. That is the scheme of the Customs Act. If the Customs authorities were under an obligation to refund the amount due under Section 18 of the Act then the Explanation II to Section 27 becomes redundant or nugatory. Therefore, the construction put forth by the Petitioners which runs counter to the express provision of the statute cannot be accepted. In fact, the Apex Court in the case of Mafatlal Industries Ltd. (supra) at Para 99 of its judgment has held that all refund claims except in the case of unconstitutional levy must be filed and adjudicated under Section 27 of the Customs Act. Later on it is held by the Apex Court that even the unconstitutional levy is governed by the principles of unjust enrichment. Therefore, the contention of the Petitioners that Section 27 does not apply to refund due under Section 18 and the Customs authorities are obliged to refund the amount due under Section 18 without the application of Section 27 cannot be accepted.
..
31.Let us now consider various decision cited before us. On behalf of the Petitioners. Heavy reliance was placed by the Counsel for the Petitioners on Para 95 of the judgment of the Apex Court in the case of Mafatlal Industries (supra) wherein it is held that any recoveries or refunds consequent upon the adjustment under Rule 9B(5) of the Central Excise Rules are not governed by Section 11A or Section 11B of the Central Excise Act. Relying upon the above observation it was contended that the principles of unjust enrichment contained in Section 27 are not applicable to the refund arising under Section 18 of the Customs Act. This contention of the Petitioners is totally misconceived. Although Section 18 of the Customs Act is substantially similar to Rule 9B of Central Excise Rules, there was material difference between the two Acts at the relevant time. It must be remembered that the Apex Court in the case of Mafatlal Industries (supra) has held that only in case of recoveries or refunds consequent upon the adjustment of Industries (supra) has held that only in the case of duty determined on finalisation of provisional assessment under Rule 9B(5) will not be governed by the provisions contained in Section 11A or Section 11B of the Central Excise Act. The Apex Court has not laid down that even in case of finalisation of the provisional assessment under Section 18 of the Customs Act, the provisions of Section 27 of the Customs Act are not applicable. There is a sound reason behind it. Under the Customs Act, since inception, the recoveries or refund arising on finalisation of the provisional assessment have been expressly subjected to the limitation prescribed under Section 27 of the Customs Act. Initially Explanation I to Section 27 provided for the limitation to claim refund of duty provisionally assessed under Section 18 of the Customs Act. By Act 21 of 1998 (with effect from 1-8-1998), the Explanation I to Section 27 has been renumbered as Explanation II. Thus, under the Customs Act, the refund of duty arising on finalisation of the provisional assessment has always been subject to the procedure prescribed under Section 27 of the Customs Act.
32.As stated hereinabove, provisions of Excise law were different at the material time. Explanation to Section 11B(1) of the Central Excises & Salt Act, 1944, as enacted originally provided that the refund arising on finalisation of provisional assessment will be subject to the limitation prescribed under Section 11B of the Excise Act. That explanation to Section 11(B)(1) was omitted by Act 44 of 1980. As a result, the procedure prescribed under Section 11B was not applicable to the refunds arising on finalisation of the provisional assessments. In view of this lacuna, the Apex Court in the case of Mafatlal Industries (supra) held that the recoveries or refund arising on finalisation of provisional assessment under Rule 9B are not governed by the provisions of Section 11A or Section 11B of the Central Excise Act.
33.This lacuna in the statute pointed out by the Apex Court in the case of Mafatlal Industries (supra) has been remedied by the Legislature, by Act 21 of 1998 Clause (eb) has been inserted to the definition of relevant date contained in Section 11B of the Central Excise Act with effect from 1-8-1998. Similarly by Notification No. 458 (E), dated 25-6-1999, Rule 9B of the Central Excise Rules, 1944 has been amended. As a result of these amendments, the refunds arising on finalisation of provisional assessment under Rule 9B is subjected to the procedure established under Section 11B(2) of the Centra1 Excise Act. The amended provisions of Rule 9B has been recently considered by the Apex Court in the case of Commissioner of Central Excise v. T.V.S. Suzuki Ltd. reported in 2003 (156) E.L.T. 161 (S.C.) and it is held by the Apex Court that the refund claims arising under Rule 9B prior to 25-6-1999 will not be governed by the restrictions in Section 11A and Section 11B of the Central Excise Act. In other words, after 25-6-1999, even the refunds arising under Rule 9B(5) are governed by the provisions of Section 11B of the Central Excise Act. Thus, in view of the above lacuna in the Central Excise Law, the Apex Court in the case of Mafatlal Industries held that the refund arising under Rule 9B is not subjected to Section 11A or Section 11B of the Central Excise Act. There was such lacuna in the provisions contained under the Customs Act. Therefore, the contention of the Petitioners that in view of the judgment of the Apex Court in the case of Mafatlal Industries (supra), the refund arising under Section 18 of the Customs Act cannot be subjected to the provisions of Section 27 of the Customs Act, cannot be accepted. Since refunds arising under Section 18 of the Customs Act has been expressly subjected to the procedure prescribed in Section 27 of the Customs Act, it is not open to the Petitioners to contend that the Parliament in its wisdom thought it fit not to subject the refunds arising on finalisation of provisional assessment within the purview of Section 27 of the Customs Act.
.
36. ?It is true that the Tribunal in the case of Alcatel Modi (supra) following the decision of the Apex Court in the case of Mafatlal Industries has held that the refund of duty or recovery of duty as a result of the finalisation of provisional, assessment has to be given suo motu by the Customs authorities. The decision of the Tribunal is based on total misreading of the law laid down by the Apex Court in the case of Mafatlal Industries. As stated hereinabove, the ratio laid down by the Apex Court in Mafatlal Industries (supra) is that in respect of refunds arising under Rule 9B(5), the provisions of Section 11B of the Central Excise Act are not applicable. That was the position in law under the Central Excise Act at the relevant time. But, that was not the position under the Customs Act, because Section 27 of the Customs Act has always been made applicable to the refunds arising under Section 18 of the Customs Act. Moreover, now the Excise Law has been amended so as to bring the Excise Law on par with the Customs Act. Under the circumstances, the findings recorded by the Tribunal in the case of Alcatel Modi (supra) that the refund arising on finalisation of the provisional assessment must be granted by the Customs authorities suo motu without the application of Section 27 of the Customs Act, is totally incorrect and contrary to law.
And this Mumbai High Court judgement in the case of Bussa Overseas(supra) has been affirmed by the Honble Supreme Court 2004(164)ELT A177(SC). Although it is argued that dismissal of SLP by the SC in the case of Bussa Overseas does not result in merger of the Tribunals Order, we find that the Allied Photographics ( supra) judgement was delivered in the context of Central Excise and therefore the situation was different in that case.
7.1 Having concluded that the test of unjust enrichment applies to refunds arising out of finalization of provisional assessments, we now proceed to examine whether in the present case the bar of unjust enrichment was crossed. The facts show that the appellant paid full customs duty during the period of dispute without availing the benefit of notification 64/95. It was argued by them before the adjudicating authority that when they paid full rate of customs duty they did not increase prices to the same extent by which their cost of production increased. And according to them this had eaten into their profits because they were selling the film (finished goods) at the same price at which they were selling when the raw material was cleared on concessional rate of duty. It is now a well settled matter that the principle of unjust enrichment would be applicable even to the raw material consumed in the manufacture of final products- Honble Supreme Court judgement in the case of Union of India versus Solar pesticides 2000 (116) ELT 401 (SC). There does not appear to be any doubt that the value of the finished products included the duty element because, as admitted by the appellant, due to charging of full rate of customs duty their total cost had increased. It is a well accepted fact that the price of finished goods depends on various factors such as raw material cost, manufacturing cost, market conditions, demand and supply situation. Therefore only because they did not increase the price when they paid duty does not by itself lead to a conclusion that the incidence of duty was not passed to the customers. The appellant had argued before the Commissioner appeals that they were showing the refund claim as receivables in their books of account. However on being given time by the Commissioner, they failed to produce a Chartered Accountants certificate certifying that the element of duty was not included in the cost of their products. Therefore, in the absence of any evidence to the contrary, it cannot be accepted that the duty element was not included in the price of the finished goods. Accordingly, we hold that the incidence of duty had been passed on to the consumers of the finished goods and therefore the bar of unjust enrichment was not crossed.
8. In view of the above, the impugned order is upheld and the appeal is dismissed (Pronounced in court on ..) (Anil Choudhary) Member (Judicial) (P. S. Pruthi) Member (Technical) Sm ??
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