Custom, Excise & Service Tax Tribunal
M/S,Makson Nutrition Food India ... vs Cce, Bhopal on 4 June, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
Court No.III
Appeal No. E/3360/2005-EX[DB]
(Arising out of OIA No. 43/CE/BPL/2005 dt. June, 2005 passed by Commissioner of CCE (Appeals), Bhopal)
Date of Hearing: 22.05.2015
Date of Pronouncement:04/6/2015
For approval & Signature:
Honble Mr. Rakesh Kumar, Member (Technical)
Honble Smt.Sulekha Beevi C.S., Member (Judicial)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordships wish to see the fair copy of the order?
seen
4.
Whether order is to be circulated to the Department Authorities?
Yes
M/s,Makson Nutrition Food India Pvt.Ltd. Appellant
Vs.
CCE, Bhopal Respondent
Appearance:
Present for the Appellant: Shri Ravinder Narain, Advocate Present for the Respondent: Shri Pramod Kumar, JCDR Coram: Honble Mr. Rakesh Kumar, Member (Technical) Honble Smt.Sulekha Beevi C.S., Member (Judicial) Final Order No.51775/2015 Per: Sulekha Beevi C.S. The issue that arises for determination in this appeal is whether the appellant is eligible for refund of differential duty of Rs.1,88,57,557/-.
2. The appellant is a job work manufacturer for Hindustan Lever Ltd. (hereinafter referred to as HLL) of sugar confectionary falling under sub-heading No.1704.90 and 1804.00 of the Central Excise Tariff Act, 1985. The appellant started commercial production 0n 6.6.2002 and filed requisite declaration for payment of duty on valuation made under section 4 of Central Excise Act, 1944 (hereinafter referred to as Act). It is the case of the appellant that on 17.09.2002, the officers of Central Excise visited the factory and took some samples. A search was further made on 19.09.2002 and the officers seized the goods manufactured by the appellant. as according to the Department, the value was to be determined under section 4A. As the appellant apprehended recurrence of such coercive steps, the appellant applied for provisional assessment under Rule 7 of Central Excise Rules, 2002. Thereupon a show cause notice dt.27.9.2002 was issued to the appellant to show cause as to why the application for provisional assessment should not be rejected.
3. Upon this, the appellant filed writ petition No.6280/2002 dt.11.11.2002 before Honble Madhya Pradesh High Court at Jabalpur. The writ petition was posted for hearing on 15.11.2002. Meanwhile on 13/11/02 the Assistant Commissioner passed an order rejecting the request for provisional assessment and deciding the issue of valuation on merits holding that duty was payable on the value determined section 4A of the Act and not on the transaction value determined under section 4 of the Act.
4. The Writ petition which was then pending before Honble High Court was disposed of by taking into account the submissions made by both sides before the Honble High Court. In para 7 and 8 of the judgement, Honble High Court has considered the submissions of both sides and stated that appellant would be entitled to refund of differential duty as stated by respondent, if the dispute regarding valuation was decided in favour of the appellant.
5. The appellant then paid duty on the value determined under section 4A for the period 19.11.2002 to 15.12.2003 under protest. The appellant also filed an appeal before the Commissioner (Appeals). During pendency of the appeal, two further show cause notices were issued to the appellant. The show cause notice dt.26.2.2003 was in regard to payment of differential duty for the goods cleared for the earlier period from 6.6.2002 to 1.11.2002 and for confiscation of the goods seized on 19.9.2002. The second show cause notice dt.2.4.2003 was in respect of seizure of the truck which was seized on 2.11.2002 in which the goods were being transported. The above two show cause notices were adjudicated by the Commissioner of Central Excise by order dt.11/12.12.2003. The Commissioner decided the issue of valuation in favour of the appellant holding that the appellant had paid duty correctly under section 4 of the Act. Thereupon on 16.9.2004, the appellant filed a refund claim in respect of duty paid under protest for the period 19.11.2002 to 15.12.2003 which is the subject matter of this appeal.
6. While so, the appellant had filed an appeal before the Commissioner (Appeals) against the order of the Assistant Commissioner dt.13.11.2002 ((order upon which show cause notice was issued to the appellant under which writ petition filed). Interestingly, although two show cause notices as stated above, regarding valuation for the earlier period was discharged; the Commissioner (Appeals) dismissed the appeal of the appellant vide order dt.27.4.2004 and held that valuation under section 4A is applicable. Against this order, the appellant filed appeal No.E/2945/2004-NB(C) before the Tribunal. The Revenue also filed an appeal No.E/610/2005-NB(A) against the order dt.11/12.12.2004 of the Commissioner of Central Excise. Both these appeals were heard together and disposed of by this Tribunal by a common order dt.11.10.2011 in favour of the appellant holding that valuation is to be done under section 4 and not under section 4A of the Act.
7. With regard to the refund claim filed by the appellant on 16.9.2004, a show cause notice dt.15.12.2004 was issued to the appellant to show cause as to why the claim for refund should not be rejected on the ground of unjust enrichment. The Assistant Commissioner after adjudication, vide Order-in-Original dt.16.3.2005 rejected the refund claim holding that it is hit by the bar of unjust enrichment.
8. The appellant then filed an appeal before the Commissioner (Appeals) and vide order dated June, 2005, the Commissioner (Appeals) upheld the rejection of refund claim. Aggrieved by this order of the Commissioner (Appeals) rejecting the claim for refund of differential duty, the appellant is now before us.
9. The learned Counsel for the appellant contended that the appellant is entitled to refund of differential duty paid under protest. The argument advanced by Shri Ravinder Narain, the learned Counsel for the appellant was twofold. Firstly, that there was specific undertaking/agreement between the appellant and the department before the Honble High Court while disposing of the writ petition No.6280/2002 and in pursuance of such agreement recorded in the order of the High Court, the appellant is entitled for refund. Secondly, as per Sourcing Agreement entered into between the appellant and HLL, the differential duty in dispute was paid by the appellant by obtaining an unsecured loan from HLL. As per agreement with HLL, the appellant is bound to return the same to HLL on receiving the refund. It is also the case of the appellant that HLL has absorbed higher duty and has not passed it on to other person.
10. According to the learned JCDR, Shri Pramod Kumar the agreement entered into by the appellant and HLL cannot be made the basis for determination of the question whether the appellant had borne the incidence of excess duty paid where refund is sought and is entitled for refund or not. Reiterating the contentions of the Assistant Commissioner in the order dated 16.3.2005, he submitted that the appellant has failed to furnish any documentary evidence to establish that the incidence of duty has not been passed on to the customer. That from the copies of invoices, bills and documents, it was noticed that the duty burden has been passed on to others. Therefore, the claim of refund was rightly rejected as hit by unjust enrichment. He also relied on the decision rendered by the Tribunal in General Manager, Govt.Milk Scheme v.CCE, Nagpur reported in 2010 )19) STR 798 (Tri.-Mum.).
11. Heard both sides. We have examined the records and rival submissions carefully.
12. To substantiate his first leg of argument learned Counsel for the appellant laid thrust on para 7 and 8 of the order of the Honble High Court of Madhya Pradesh at Jabalpur. According to the appellant, an interim arrangement was arrived at the instance of the department, and the differential duty of excise was agreed to be paid by the appellant upon specific agreement/undertaking by the department before Honble High Court that if the issue of valuation is decided in favour of the appellant, the differential duty would be refunded. By an additional affidavit filed by the appellant on 5.1.2015 before this Tribunal, the Appellant affirms as under:
4. Before the Honble High Court, as it is clear from the proceedings dated 15.11.2002 (referred to in the above appeal an marked Annexure-D) an interim arrangement was arrived at, so that as an interim measure, differential duty of excise was paid by the Appellant Company on the clear understanding and undertaking recorded on behalf of the Department i.e. if the issue on merits is decided in favour of the Appellant company, the differential duty paid as an interim measure would be returned. On the basis of the aforesaid arrangement and undertaking, in order to enable the Appellant Company to pay the said amount of differential duty, as an interim measure, HLL made the said amount available to the Appellant Company. The Appellant Company was required to take further steps to have the correct amount of duty determined and to take necessary proceedings for such determination. As such, the aforesaid amount of differential duty was made available by HLL to the Appellant Company, as an advance, on returnable basis, pending determination of the correct amount of duty, as aforesaid. Thereupon, the Appellant Company deposited the aforesaid amount of differential duty under protest and without prejudice to their contention as to the correctness of the demand.
6. In the above circumstances, the aforesaid amount provided by HLL to the Appellant Company were given as unsecured loan, vide clear understanding, obligation and undertaking on the part of the Appellant Company that upon final decision on merits relating to the correct amount of duty payable, the refund of differential duty so made, would be returned by the Appellant Company to HLL.
13. The relevant portion of para 7 and 8 of the High Courts order dated 13.11.2002 is reproduced as under:-
7. The grievance of the petitioner that in case as per Section 4A of the Act, it pays excise duty, it will not be refunded by the respondents. The learned counsel for the respondents submits that this apprehension of the petitioner is misconceived. In case, the petitioner is not found chargeable excise duty under section 4A of the Act, the duty so paid will be either refunded or will be adjusted. In view of the aforesaid statement of the learned counsel for the respondents, petitioner submits that he may be permitted to withdraw this petition with liberty to file appeal and to pay excise duty section 4A of the Act under protest and in case the appeal is decided in its favour, the same be refunded by the respondents.
8. In view of the aforesaid statement, petitioner is permitted to withdraw this petition with liberty to field an appeal against the order Annex.R/5. So far as the payment of excise duty is concerned, the petitioner may pay excise duty under section 4A of the Act and in case the petitioner is found liable to pay excise duty under section 4 of the Act only, then it will be entitled for adjustment of the excise duty paid excessively as stated by the learned counsel of the respondent.
14. On going through the order of the High Court, we are unable to find any such agreement/undertaking as put forth by the appellant. We do not find any whisper about an agreement/undertaking between the appellant and the department whereby the department has agreed to refund the differential duty to the appellant unconditionally. On plain reading of para 7 and 8 of the order of High Court what can be understood is that on considering the submissions made by both the sides, the High Court was of the view that the appellant had a chance to get refund if higher duty is paid. It is noteworthy to mention that the Honble High Court had not gone into the issue of unjust enrichment or eligibility of the appellant, otherwise. It is seen that on the statement made by the department, that appellant is entitled to claim for refund, the appellant/petitioner had chosen to withdrawn the writ petition. The Honble High Court has observed in para 8 that in case the petitioner is found liable to pay excise duty under section 4 of the Act only, then it will be entitled for adjustment of the excise duty paid excessively as stated by the learned counsel of the respondent. The word refund has to be read and understood as eligible refund under the provisions of law. The issue of unjust enrichment on the ground of passing on the higher duty to the customer (HLL) was not an issue before High Court. Further, the appellantt has not undertaken before the High Court that the incidence of higher duty will not be passed on to others.
15. Needless to say that to receive refund, the appellant has to be eligible for refund of duty under the provisions of law. Relevant provisions of section 11B are noticed as under:-
Sub section (2) of section 11B ?If, on receipt of any such application, the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise] is satisfied that the whole or any part of the [duty of excise and interest, if any, paid on such duty] paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund :
Provided that the amount of [duty of excise and interest, if any, paid on such duty] as determined by the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise] under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to -
(a)?rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
(b)?unspent advance deposits lying in balance in the applicants account current maintained with the [Principal Commissioner of Central Excise or Commissioner of Central Excise];
(c)?refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act;
(d)?the [duty of excise and interest, if any, paid on such duty] paid by the manufacturer, if he had not passed on the incidence of such [duty and interest, if any, paid on such duty] to any other person;
(e)?the [duty of excise and interest, if any, paid on such duty] borne by the buyer, if he had not passed on the incidence of such [duty and interest, if any, paid on such duty] to any other person;
(f) the [duty of excise and interest, if any, paid on such duty] borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify :
Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of [duty and interest, if any, paid on such duty] has not been passed on by the persons concerned to any other person.
Sub-section 3 of section 11B ?Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2).
16. From the perusal of sub-section (2) of section 11B, we find that sub-section (2) lays down the conditions to be fulfilled to be eligible for refund of duty. Sub-section (3) makes clear that notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court, the refund shall be made only if the condition stated in sub-section (2) are fulfilled. Clause (d) of sub-section (2) provides that the manufacturer has to establish that the incidence of such duty has not passed on to any other person. If the incidence of duty is passed on to any other person, the claim of refund would be hit by the bar of unjust enrichment. The provision of law as stated above makes it clear that it is burden of the appellant/applicant to establish that the incidence of duty has not been passed on any other persons. In view of sub-section (3) of section 11B, the first leg of argument of the appellant fails.
17. Let us now proceed to analyze whether the claim for refund of duty is hit by the bar of unjust enrichment. The appellant is a contract manufacturer for HLL. According to the appellant, the Sourcing Agreement entered into with HLL stipulates that excise duty paid by the appellant on manufacture of products is to be reimbursed by HLL. A copy of Sourcing Agreement dt.10.1.2003 has been produced alongwith additional affidavit filed on 5.1.2015.
18. The goods manufactured by the appellant was sold to HLL in terms of the agreement entered into between them. HLL in turn sells the products to redistributors/stockist, who are large wholesalers of the various confectionary products and other products. The redistributors/stockist have the option of selling directly to the wholesalers in an area which are not directly covered by the redistributors/stockiest. In such situation, it is for the appellant to establish with documents that the incidence of duty has not been passed on to any other person.
19. Learned Counsel for the appellant submitted that HLL had absorbed the higher duty. That the higher duty was paid under protest by the appellant by obtaining unsecured loan from HLL, and in the event of refund of duty, the appellant is bound to return the same to HLL. In support of this contention, the appellant relies upon the Sourcing Agreement as well as Termination Agreement entered into by the appellant with HLL. In sub-clause (ii) of para 10 of the Termination Agreement, it is stipulated as under:
To diligently pursue, in active consultation with HLL, and obtain refund of the central excise duty amount of Rs.1,86,47,942 which is due to HLL pursuant to order-in-original No.103 to 104/Commr/CEX/2003 dated 11.12.2003 passed by the Commissioner of Central Excise, Bhopal. In accordance with the adjudication order dated 11.12.2003, MNFIPL shall take all steps as may be necessary and appropriate to obtain the refund. MNFIPL shall take all steps, as may be necessary to secure the refund of the amount without any delay.
20. Further, the appellant vide their letter dated 16.9.2004 has informed the department that the duty of Rs.1,86,47,942.49 is borne by HLL and Rs.2,09,614.51 borne by Jayco and therefore they undertake to pass on the same to HLL and Joyco as and when the refund is received from the department.
21. On perusal of the records, we are not able to reach a conclusion whether the claim for refund is hit by the bar of unjust enrichment for the reason that the issue whether the higher duty was absorbed by HLL has not been considered and examined by the authorities below and for this purpose, the matter has to be remanded to the original adjudicating authority. However, if in the invoices raised by the Appellant to HLL, the higher duty paid on the value determined under section 4A had been mentioned and the Appellant had received only the lower amount of duty paid on the value determined under section 4, and the difference between the duty payable under section 4 and the higher duty payable under section 4A had been received by the Appellant from HLL in the form of a loan which had been utilized by the appellant to pay the higher duty to the Department, and which in terms of legally enforceable Agreement of the appellant with HLL was to be returned to HLL as soon as the Appellant gets refund of the excise duty; the refund would not be hit by the bar of unjust enrichment.
22. In the facts and circumstances of the case, we find that it is a fit case for de novo adjudication by the authorities below. Therefore, we set aside the impugned order and remand the case back to the Assistant Commissioner, who shall determine the issue of unjust enrichment as per our directions in this appeal after giving opportunity of personal hearing to the appellant and to adduce further evidence in support of their claim.
(Pronounced on 4.6.2015)
(Sulekha Beevi C.S.) (Rakesh Kumar)
Member (Judicial) Member (Technical)
mk
12