Custom, Excise & Service Tax Tribunal
Commissioner Of Customs (Import), ... vs M/S Be Office Automation Pvt Ltd on 4 December, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal Nos. C/24/08 Mum, C/89/08 Mum to C/93/08 Mum (Arising out of Order-in-Appeal No. 503/2007/MCH/DC/Gr.VB/07 dated 23.10.2007, Order-in-Appeal No 597/2007/MCH/AC/Gr.VB/07 dated 28.12.2007, Order-in-Appeal No 600/2007/MCH/AC/Gr.VB/07 dated 28.12.2007, Order-in-Appeal No 595/2007/MCH/AC/Gr.VB/07 dated 19.12.2007, Order-in-Appeal No 594/2007/MCH/AC/Gr.VB/07 dated 28.12.2007 and Order-in-Appeal No 593/2007/MCH/AC/Gr.VB/07 dated 19.12.2007 all passed by Commissioner of Customs (Appeals), Mumbai.) For approval and signature: Honble Mr.A.K.Srivastava, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Yes of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Commissioner of Customs (Import), Mumbai Appellants Vs M/s BE Office Automation Pvt Ltd
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M/s Bhagwan Electro Photo Copier
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Respondents Appearance:
Shri P.K. Agarwal, S.D.R. for Appellants Shri Ashok Singh, Advocate, for Respondents CORAM:
Honble Mr.A.K. Srivastava, Member (Technical) Date of Hearing : 07.11.2008 Date of Decision: 04.12.2008 O R D E R NO..
Per: Mr A.K. Srivastava, Member (Technical)
1. These appeals have been filed by the Revenue against the Orders-in-Appeal, referred to above, passed by the Commissioner of Customs (Appeals), New Custom House, Mumbai I. The Commissioner, vide the impugned orders, upheld the Orders-in-Original passed by the Assistant Commissioner of Customs, Group V B sanctioning the refund claims to the Respondents i.e. M/s Bhagwan Electro Photo Copier, Gurgoan and M/s B.E. Office Automation Pvt. Products Ltd., New Delhi
2. Since the issue involved in all the six appeals are common, these appeals are being taken up for disposal by the Common order.
3. Heard both the sides and perused the records.
4. The issue involved is whether unjust enrichment is involved in these cases.
5. The facts of the cases are that the respondents herein imported reconditioned Mainframes of photocopiers and filed Bills of Entry for their clearance for home consumption. The goods, on examination, were found to be old and used. It was also reported that the goods have the essential features of photocopiers without constituting a full photocopier.
6. It was held by the Assessing Group of the Department that:
(i) The declared value of the mainframes is low and is liable to be enhanced;
(ii) The old and used mainframes of photocopiers, being in the nature of assembly/sub-assembly of components for photocopiers, cannot be freely importable under Sr No. 9009909010 of ITC (HC) classification;
(iii) As per the examination report, the mainframes have the essential features of a photocopier. Therefore, in terms of interpretative Rule 2 (a) of the Customs Tariff Act, 1975, the imported mainframes are liable to be classified as photocopiers under heading 9009.11, attracting duty @40% (basic customs duty) instead of 25% under heading 9009.90 claimed by the importers.
7. The case was adjudicated and the value of the imported mainframes was ordered to be enhanced by the adjudicating authority. The imported mainframes were ordered to be confiscated and the same were allowed to be redeemed on payment of a fines and penalties. It was also ordered that the imported goods, having the essential character of photocopier machine, were to be classified and assessed as photocopier machines in terms of interpretative Rule 2 (a) of the Customs Tariff Act, 1975.
8. Aggrieved by the said Orders, the importers preferred appeals before the Commissioner of Customs (Appeals), who, vide Orders-in-Appeal No 159 to 167/2003-MCH dated 10.04.2003, rejected the importers appeals. The importers preferred appeals before the CESTAT, Delhi. The CESTAT, vide their Order Nos 563-564 & 667-671/04-M/NBA dated 08.06.2004, set aside the Orders of the Commissioner (Appeals). The importers had proceeded before the CESTAT on three grounds i.e., relating to import control, the other relating to classification and the third relating to valuation. All these aspects were deliberated upon and the CESTAT allowed the appeals on all the counts.
9. Against the said Orders, the Department has preferred appeals before the Honble High Court of Bombay, in which there are no stay as yet.
10. The importers filed refund claims consequent to the CESTAT order for the amount of Redemption Fine and Personal Penalty paid and the enhanced duty paid.
11. The adjudicating authority, relying upon the Chartered Accountants certificate dated 12.02.07, audited Balance sheet of 1999-2000, and tax returns for the year 2000-01, 2001-02, 2002-03, sanctioned the refund claims to the importers on the ground that the Chartered Accountant has certified that the excess customs duty and redemption fine paid against the impugned Bills of Entry has not been charged to Profit and Loss Account and are being shown as customs duty, redemption fine and personal penalty recoverable from Customs Department under the account head customs duty recoverable.
12. Aggrieved against the Orders, the Revenue filed appeals before the Commissioner of Customs (Appeals) on the ground that the adjudicating authority did not examine the provisions of unjust enrichment and that the documents like the Chartered Accountants certificate relied upon without any substantiating supporting documents and on the ground that it has been held in various decisions reported in M/s A.K. Enterprises Vs CC (Port), Kolkata [2006 (199) ELT 67 (Tri-Kol)]; M/s Merimex and Co Vs CC Ex Allahabad [2004 (174) ELT 216 (Tri- Delhi)]; M/s Eltech Enterprises Vs CC (Mumbai) [1999 (112) ELT 877 (Tri)] that the Chartered Accountants certificate not supported by relevant sales bills or documents relating to placing order and terms of supply, is not sufficient to show that the burden has not been passed on to any other person, with a prayer to remand the case back to the original adjudicating authority.
13. The Commissioner of Customs (Appeals), vide the impugned Orders, rejected the said appeals stating that since the question of passing of burden to the ultimate buyer of the goods does not arise, presumption of unjust enrichment under Section 28D of the Customs Act, 1962 would not apply on the ground that the goods are second hand, old and used. The sale prices of these goods was determined not on the basis of the landed cost and duty payment but on the basis of the negotiations depending on the demand of the particular model, the condition of the goods and the availability of similar goods in the market, which further stands to logic that the sale price of the goods in the instant case would have no relationship with landed cost and the other cost burden such as duty, fine and penalty and, therefore, the question of passing of such burden to the ultimate buyer of the goods does not arise. Hence, these appeals by the Revenue.
14. The Revenue, in the present appeals, has contended as under:
(i) It is incorrect to say that the sale price of the old and used goods would have no relation with landed cost and other cost burden such as duty, fine and penalty but rather on the condition of the goods and that sale price of such goods usually arrived at on the basis of negotiations without reference to the cost involved and, therefore, unjust enrichment would not apply to the second hand goods. The Commissioner of Customs (Appeals) has not considered the fact that if the goods have some market value, whether it is new or old, it has to contain the element of purchase cost and duties and other expenses and that the sale price of any commodity has the relationship between demand and availability. The cost of the goods, expenditure incurred therein till date sale or uses are the basic element to arrive at market value/sale price. Hence, it is incorrect to justify that unjust enrichment would not apply on second hand goods.
(ii) The Commissioner (Appeals) has also not examined the case in relation to the case laws cited by them in support of their claim that the Chartered Accountants certificate without supported by relevant sales bills or documents relating to placing order and terms of supply to substantiate the claim, is not sufficient to show that burden has not been passed on to any other person as held in various decisions reported in case of M/s A.K. Enterprises Vs CC (Port) Kolkata [2006 (199) ELT 67 (Tri-Kol)]; M/s Merimex and Co Vs CC Ex, Allahabad [2004 (174) ELT 216 (Tri-Delhi)]; M/s Eltech Enterprises Vs CC (Mumbai) [1999 (112) ELT 877 (Tri)]. The Commissioner (Appeals) has also not considered the fact that prayer was made only to remand the case to original authority to redetermine the matter.
15. In addition to the above, the learned SDR placed reliance on the following case laws:
(i) HCL Office Automation Ltd. Vs. CCE, Meerul I [2005 (183) ELT 106 (Tri-Del)] in which it was held that the balance sheet and the Chartered Accountants certificate brought on record, provided no details as to whether the assessees sale price includes the amounts being claimed as refund. Since the assessee sought to adduce further evidence on that score, the matter was remanded.
(ii) Hanil Era Textiles Ltd Vs CCE, Raigad [2008 (225) ELT 171 (Tri-Mumbai)] in the which refund was rejected on the ground that the Chartered Accountants certificate produced is not sufficient to discharge the burden cast upon the appellants.
(iii) Stay Order No S/626/08/CSTB/C-I dated 4.11.2008 of the Mumbai Tribunal in the case of M/s Larsen and Toubro Ltd; in which it was held that the amount shown as recoverable in the balance sheet and the C.A. certificate dated 13.7.2006 are not the conclusive proof of having not passed on the incidence of duty to EIL/ONGC and, therefore, the Order of the Commissioner (Appeals) granting refund to M/s Larsen and Toubro Ltd was stayed. It was also observed in the said stay order that it is the incidence of duty and not the duty of customs as such which is required to be shown to have not been passed on from the sale record/contract price.
(iv) Kirloskar Oil Engines Ltd Vs Commissioner of Customs, Mumbai [2004 (174) ELT 54 (Tri-Mum)] in which it was held that the certificate of the C.A., without any supporting documents is not sufficient to prove that the burden of duty has not been passed on to the customers.
16. The learned S.D.R. also questioned the veracity of the C.As certificate dated 12.2.2007 in as much as the same was claimed to have been given after examination of the books of account and other relevant records of the importers, when the fact is that the importers had filed the F.I.R. dated 02.10.2006 stating that all documents relating to the imports have been lost alongwith the Bills of Entry, TR-6 challans, Bills of Lading, invoices etc. He contended that when the documents themselves were lost on 02.10.2006, how the C.A. can give the certificate on 12.2.2007, basing on the examination of the non-existent documents/records.
17. The learned Counsel of the respondents contended as under:
(i) The refunds have already been sanctioned and paid to them. For recovery of the refund erroneously paid, simultaneous proceedings need to be initiated both under Section 28 of the Customs Act, 1962 and Section 129D ibid. He relied upon the following case laws in this connection:
(a) Sree Digvijay Cement Co Ltd Vs Collector of Central Excise [1991 (52) ELT 631 (T)];
(b) Doothat Tea Estate Kanoi Plantation (P) Ltd Vs CCE, Shillong [2001 (135) ELT 386 (Tr-Kolkata)].
In these case laws, it was held that the Department is required to take action simultaneously under Section 35E (2) of the Central Excise Act, 1944 (to set aside the earlier refund sanction Order) as well as under Section 11A (to issue the demand show cause notice). Otherwise, the proceedings are not valid.
He maintained that the provisions of Section 35 E (2) and Section 11A of the Central Excise Act, 1944 are pari materia to the provisions of Section 129D(2) and Section 28 of the Customs Act, 1962 and since no demand show cause notices have been issued under Section 28 of the Customs act, 1962 for recovery of the refund erroneously paid, the present proceedings are not valid and the Revenues appeals are liable to be dismissed on this ground alone.
(ii) The learned Counsel also relied upon the following case laws:
(a) Commissioner of Customs, Air Cargo Unit, New Delhi Vs Maruti Udyog Ltd [2003 (155) ELT 523 (Tri-Del)] in which the bar of unjust enrichment was held to be not applicable and the refund claim was allowed to the assessee on the ground that the Balance-sheet was showing refund as amount recoverable from Customs under other current assets and the certificate of the Chartered Accountant was also produced to that effect;
(b) Jaipur Syntex Ltd Vs Commissioner of Central Excise, Jaipur [2002 (143) ELT 605 (Tri-Del)] in which it was held that the incidence of duty is not passed on by the assessee to the customers in view of the evidence produced by them in the form of balance sheets for various years and, therefore, the refund is admissible.
(iii) The learned Counsel of the respondents also maintained that the Chartered Accountants certificate is based on the audited Balance sheet of the company as on 31st March, 2000; that refunds from Customs have not been considered for costing at the time of sale of the end product and; that the amounts have not been credited to Profit and Loss Accounts.
18. I have carefully considered the rival submissions and perused the records. I find that the Honble Karnataka High Court in the case of Dynamatic Technologies Ltd Vs Union of India [2005 (186) ELT 277 (Karnataka) has held as under:
Show cause notice Protective demand notice Validity of Recovery of erroneous refund Refund being only as a consequence of an order/direction issued by Appellate Authority, as a quasi-judicial functionary, any recovery of amount can only be made if order is again modified further in appeal proceedings and not otherwise, and even in such an event, amount can be recovered as a consequential action and not independently Show cause notice unnecessary and not within scope of power under Section 11A of Central Excise Act, 1944.
19. In view of the clear cut legal position enunciated by the Honble Karnataka High Court, which is a superior judicial forum than the CESTAT, I hold that the proceedings initiated in the instant cases are valid and the issue of the show cause notice under Section 28 of the Customs Act, 1962 simultaneously is not necessary.
20. I further find that it was not correct on the part of the Commissioner (Appeals) to hold that unjust enrichment would not apply to second hand goods as sale price of the goods has no relation with the landed cost of the second hand goods and duty, fine and penalty. The goods, whether new or old, have got some market value and contain the element of purchase cost, duties and other expenses. The cost of the goods, expenditure incurred therein till the date of sale are the basic elements required to arrive at the market value/sale price. Every prudent businessman normally does that, while working out the price of the product, unless he proves to the contrary duly supported by the documents/records citing exceptional circumstances.
21. The Commissioner (Appeals) has not discussed any of the factual aspect of the case laws cited by the Revenue in the appeal memorandum filed by them before him, while holding that the appeals are not maintainable, as the presumption of unjust enrichment under Section 28D of the Customs Act, 1962 would not apply.
22. The Commissioner (Appeals) has not considered the fact that original adjudicating authority had not examined the provisions of unjust enrichment in a true manner, who had considered the Chartered Accountants certificate to the effect that incidence has not been passed on to consumer, without examining the supporting documents to substantiate the fact of such certificate, as held in the various decisions cited in the appeal memorandum.
23. Further, it is not understood how the Chartered Accountant has given the certificate on 12.2.07, when the relevant documents like Bills of Entry, TR6 challans, Bill of Lading, invoices etc of the respondents were already lost on 02.10.2006.
24. In view of the above facts and circumstances, I hold that the Orders passed by the Commissioner (Appeals) are not legal and proper. I set aside the same and remand the cases to the original adjudicating authority for de novo decision, keeping in view the submissions made by the Revenue/learned S.D.R. and the learned Counsel of the respondents, including the case laws cited by them and my observation as above. The Original adjudicating authority is directed to pass appropriate orders in accordance with law after hearing both the Revenue and the respondents.
25. The appeals filed by the Revenue are allowed by way of remand.
(Pronounced in Court.) (A.K. Srivastava) Member (Technical) rk 2