Custom, Excise & Service Tax Tribunal
Advance Steel Tubes Ltd vs Cce, Ghaziabad on 11 September, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
BENCH-DB
Excise Appeal No.E/3511/2005-EX[DB]
[Arising out of Order0in-Appeal No.117-CE/GZB/2005 dated 30.09.2005 passed by the Commissioner (Appeals), Customs & Central Excise, Ghaziabad].
Advance Steel Tubes Ltd. Appellant
Vs.
CCE, Ghaziabad Respondent
Present for the Appellant : Shri P.R. Mullick, Advocate
Present for the Respondent: Shri Sanjay Jain, DR
Coram: Honble Mr.D.N.Panda, Judicial Member
Honble Mr. Rakesh Kumar, Technical Member
Date of Hearing/Decision: 08.05.2013
Interim ORDER NO. 298/2013 DATED: 08.05.2013
FINAL ORDER NO. 57605/2013 Dated: 11.09.2013
PER: RAKESH KUMAR
In this case the factory premises of the appellant, manufacturer of MS tubes and pipes, was visited by Jurisdictional Central Excise Officers on 15.09.2001 and they found shortage of the finished goods and cenvated raw-materials. During investigation of the case, on the persuasion of the investigating officers the appellant deposited an amount of Rs.18,75,000/- under protest by debit entries in the cenvat credit account on 15.09.2001. Subsequently, two show cause notices were issued. One show cause notice resulted in confirmation of duty demand of Rs.2,84,389/- which was appropriated. In respect of second show cause notice the appellant filed an application before Settlement Commission. The Settlement Commission vide order No.168/CE/04/CC[PB] dated 11.06.2004 ordered for the settlement of the matter for Rs.5,55,731/-. This amount was appropriated by the Settlement Commissioner against the pre-deposit. Since after adjustment of the departmental dues as determined by the adjudicating authority and the Settlement Commission, a net unappropriated amount of Rs.10,34,880/- still remained with the Department, the appellant filed a refund claim on 4th August, 2004 for refund of this amount. This refund claim was decided by the jurisdictional Deputy Commissioner vide Order-in-Original No.10/05/12 dated 06.05.2005 by which he rejected the claim on the ground of unjust enrichment on the ground that during the year 2001-02 this amount had been shown as Revenue expense in the profit and loss account for that year as a result of which this amount would result in increased cost of the product and higher price and thus refunding the amount would result in unjust enrichment. On appeal being filed against this order before the Commissioner (Appeals), the same was dismissed by the Commissioner (Appeals) vide order in appeal dated 30th September, 2005 against which this appeal has been filed.
2. Heard both sides.
3. Shri P.R. Mullick, ld. Counsel for the appellant, pleaded that the amount which is sought to be refunded had been paid during investigation, that the same had not been recovered from any customers, that just because this amount was shown in the profit and loss account of the year 2001-02, as Revenue expense, as at that time the Appellant felt that their tax liability on account of Departments investigates would be of this magnitude, its refund cannot be said to result in unjust enrichment, that under section 11 B the refund claim of excess duty paid can be denied only when the incidence of the duty whose refund has been claimed has been passed on to the buyers, that since in this case this has not happened and just because the amount of Rs.18.75 Lakhs, paid before adjudication was shown as Revenue expenditure in profit and loss account of 2001-02, it cannot be assumed that this amount has been passed on as increased cost and hence increased sale price of the goods and that in view of these submissions, the impugned order rejecting the refund claim on the ground of unjust enrichment is not sustainable.
4. Shri Sanjay Jain, ld. DR, defended the impugned order by reiterating findings of the Commissioner (Appeal) and submitted that once the amount in shown in profit and loss account as Revenue expenditure, the same gets included in the costing of the product and therefore in this case, since the duty whose refund had been claimed has been recovered from the customers in form of increased cost and hence higher sale price, the refund claim is hit by unjust enrichment. He therefore, pleaded that there is no infirmity in the impugned order.
5. We have considered the submissions from both the sides and perused the record. The only point of dispute in this case is as to whether the amount whose refund is being claimed is hit by unjust enrichment or not.
6. Firstly, the provisions of Section 11B would be applicable to a refund claim only if the claim is for refund of excess Central Excise duty paid. The bar of unjust enrichment is prescribed in 1st proviso to Section 11B (2). The provisions of Section 11B and hence the principle of unjust enrichment would not be applicable to the refund claims of amounts which are not duty like refund of excess fine or penalty or refund of pre-deposit paid under section 35 F on the direction of the Appellate authority where subsequently the assessees appeal is allowed. In this case, the amount of Rs.18.75 Lakhs was paid during investigation even before the issue of Shaw cause notice. After adjudication by the adjudicating authority and Settlement Commission the total duty liability plus penalty was determined as Rs.2,84,389 +1,00,000 + 5,55,731/- i.e. Rs.8,40,120/- which was appropriated by the respective authorities from the deposit of Rs.18,75,000/-. The refund is sought of the unappropriated amount of Rs.10,34,880/- left after adjusting the duty and penalty from the provisional deposit of Rs.18,75,000/-. This amount is not even duty and hence there is no question of applying the provisions of Section 11B and the principle of unjust enrichment for its refund. This amount should have been refunded without even refund application.
7. Even if this amount is treated as duty and section 11B is held as applicable the unjust enrichment principle would not be applicable, under the 1st proviso to section 11B (2), the refund is payable to a manufacturer only if the incidence of excise duty whose refund is claimed has not been passed on to another person. In this regard, section 12A provide that any person who is liable to pay duty of excise on any goods, shall at the time of clearance of the goods, prominently indicate in all the documents relating to assessment, sales invoice, and other like documents, the amount of such duty which will form part of the price at which such goods are to be sold. Under section 12 B, every person who has paid the duty of excise on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods. Thus when a manufacturer while clearing some goods under invoice on payment of duty shows some amount as excise duty paid, it shall be presumed that its incidence has been passed on unless contrary is proved by him. In this case, the amount of Rs.10,34,880/- paid during investigation prior to issue of SCN and where refund is claimed, is not even excise duty paid on any goods cleared under an invoice issued to a buyer, while presumption under section 12B applies only in respect of excise duty paid on any goods cleared under an invoice. Therefore section 12 B read with section 12A is not applicable to this case and no presumption can be made that the amount of Rs.10,34,880/- where refund is sought, had been recovered from the customers as increased cost and hence increased price. The burden would be on the Department to prove that this amount had been recovered from the buyers as increased price. In this regard no presumption can be made that just because this amount has been shown as revenue expense in the profit & loss account for the year 2001-02, it has contributed towards costing of the goods resulting in higher cost and higher sale price and has been recovered from the customers. No price data of that period has been produced.
8. In our view, therefore, the Revenues stand that the refund claim is hit by unjust enrichment is not only totally incorrect but absurd and as such the impugned order is not sustainable. Appeal is, therefore, allowed.
PER: D.N. PANDA
9. I have listened to the dictation of my learned brother in the preceding paragraphs made in the open Court today and respectfully disagree with the reason of decision and the decision dictated holding that there was no unjust enrichment by the Appellant.
10. When refund of Rs.10,34,880/- arose out of the consequence of Settlement Commissions order referred to in the impugned order, refund was claimed by appellant before the ld. Adjudicating Authority. That Authority denied the refund on the ground that the same was hit by bar of unjust enrichment. Examining the claim, ld. Adjudicating authority issued show cause notice and upon consideration of the reply of the appellant and also examining the balance sheet pertaining to the financial year 2001-02, he reached to the conclusion of denial of refund.
11. It was admitted by the appellant through its financial statements before ld. Adjudicating authority that the amount in question was debited to the profit and loss account for the financial year 2001-02 under the head excise duty. Admittedly the amount did not appear in the balance sheet to show that the amount was deposited under protest and awaiting recovery from department. But the refund amount claimed was part of the deposit during pre-settlement stage and upon Settlement Commission passed order, the amount sought to be refunded was recovered from buyers of goods absorbing that amount through excise duty account in sales price though profit and loss account constituting the cost of manufacture.
12. The authority inferred that when the amount sought to be refunded was considered as excise duty in the financial statement for the financial year 2001-02 and that added to the cost of manufacture of the goods and such cost was realized through the sale price, burden of that amount was passed on to the buyers in the above manner being reflected by the profit and loss accounts as admitted by the appellant and its documents. Considering such material aspect which comes out from page No.3 of the adjudication order, the authority denied refund. Such decision of denial was also concurred by ld. Commissioner (Appeals).
13. The question therefore comes up for consideration in this appeal is when cost of manufacture took into account excise duty to arrive at total cost and charged to the profit and loss account and such cost recovered through sale value appearing in the credit side of profit and loss account whether that is a case of absorption of the duty burden in sale price and recovered from the buyers. The material facts recorded above admittedly shows that the amount in dispute did not appear on the balance sheet in the asset side for recovery from the Department. Once there is no such disclosure of recovery from the Department and exhibited by Balance Sheet, definitely the amount in question was adjusted in the cost of manufacture through profit and loss account as excise duty as has been done by appellant in this case and admitted by it as well as absorbed by sale value. Thus the amount sought to be refunded by appellant was already recovered by him through sale. Therefore, it has no locus standi to seek refund from Revenue to be unjustly enriched at the cost of Reveneu. The amount in dispute having been a constituent of the cost of manufacture, it cannot be said that such cost was not absorbed by sale price. This is the basic matching principle of accounting which is followed by manufacturing concerns depicting the accounting elements in the debit side of the profit and loss account to represent cost. Such material facts were governing features of the case which was rightly considered by the ld. Adjudicating authority and concluded to deny the refund. Therefore, there cannot be difference with the finding of learned adjudicating authority and learned Commissioner (Appeals) to deny the refund which shall otherwise unjustly enrich the appellant if refunded. Consequently appeal is bound to be dismissed and that is ordered accordingly.
DIFFERENCE OF OPINION
14. In view of the difference in reason of decision and the decision recorded by us separately as above, below mentioned question arises for reference to the Honble President for his appropriate order to resolve the difference. Registry is directed to place this matter before him:-
Whether the amount in dispute charged as excise duty in the debit side of profit and loss account constituted cost of manufacture and absorbed by sale value depicted in credit side of that account bars the refund claim by doctrine of unjust enrichment and deniable? [Dictated & Pronounced in the open Court].
(RAKESH KUMAR) (D.N.PANDA) TECHNICAL MEMBER JUDICIAL MEMBER Anita Per Sahab Singh :
15. I have gone through the order passed by Shri Rakesh Kumar, Member (Technical) and the order passed by Shri D. N. Panda, Member (Judicial) and difference of opinion referred to me by the President.
16. Brief facts of the case have been fairly narrated by the Ld. Member (Technical) in Para 1 of the order recorded by him and therefore I do not find any necessity of repeating the same.
17. Issue involved in the present case relates to the refund of Rs. 10,34,880/- and it is to be decided whether this amount is hit by bar of unjust enrichment under Section 11B of the Central Excise Act.
18. Shri P.R. Mullick, Ld. Counsel appearing for the appellant submits that amount in question was paid by them during the course of investigation through debit entries in RG 23 A on 15.09.2001. The amount was never recovered from any of the buyers. He submits that the denial of the refund on the ground that amount in question was shown in Profit and Loss Account of the year 2001-2002 as expenditure is not sustainable as it can not assumed that this amount has been passed on due to increased cost and increased price of the goods. He also refers to the Profit and Loss Account of year 2001-2002 and submits that there was profit of Rs. 84,00,601/- as shown in the Profit and Loss Account and Excise duty as expenditure is shown as Rs. 79,12,47,77/- which includes the amount of refund in question. He submits that if the refund is granted their profit amount will go up from Rs. 84 lakhs to about Rs. 95 lakhs and there is no question of any increase in the cost of the price of product. He submits that since refund pertains to advanced deposit paid by them unjust enrichment is not applicable to their case.
19. Ld. Departmental Representative appearing for the Revenue submitted that once the amount is shown in Profit and Loss Account as revenue expenditure same gets included in the costing of the product and the duty paid is recovered from the customers by way of increased cost and hence higher sale price attracting the bar of unjust enrichment. Ld. DR also relied upon the decision of the Supreme Court in case of Solar Pesticide Pvt. Ltd. Reported in 2000 (116) ELT 401 (S.C.) in which it was held by the Court that duty paid on raw material gets added to price of finished goods and incidence of duty is considered to have been passed to buyers. He further submits that refund has rightly been rejected by the lower authorities on the ground of unjust enrichment.
21. Heard both sides.
22. I find that the issue involved in the present case is applicability of bar of unjust enrichment to refund claimed by the appellant. Appellant claims that duty sought to be refunded was paid during the course of investigation by way of debit entries in RG 23 A register. I find that under clause d of sub-Section 2 of the Section 11B of the Central Excise Act bar of unjust enrichment is not attracted to duty of excise paid by the manufacturer if he had not passed on the incidence of such duty to any other person.
23. I also note that under Section 12 A of the Central Excise Act every manufacturer clearing the goods on payment of duty has to indicate on documents of assessment, sale invoices and other like documents the amount of excise duty which will form part of the price at which such goods are sold. This provision will not be attracted as in the present case goods are already cleared and duty is paid subsequently. Also under Section 12 B of the Act any person who paid the duty on any goods shall be deemed to have passed on the incidence of duty unless contrary is proved by that person. In this case duty involved in refund was not paid at the time of clearance of goods but subsequently during the course of investigation for the past period and therefore it is contention of the appellants that incidence has not been passed on by them to any other person.
24. I also note that duty sought to be refunded was debited in RG-23A on dated 15.09.2001. Out of the total duty of Rs. 18,75,000/- , Rs. 8,40,120/- has already been adjusted by Department against confirmed amount as per order of Settlement Commission. I note under Section 11 of the Act, Department can deduct any dues of Govt. from any money owing to the assessee.
25. In the present case Rs. 8,40,120/- has been adjusted by the Department from this amount of Rs.18,75,000/- . This amount of Rs. 18,75,000/- was paid by way of debit entries RG 23A. Therefore adjustment of Rs. 8,40,120/- is possible if Rs. 8,40,120/- is first credited to RG 23 A by treating it as sanctioned refund and then debiting against dues. This adjustment has been done by the Department without invoking bar of unjust enrichment to the amount of Rs. 8,40,120/-. Therefore, Department can not invoke the bar of unjust enrichment to remaining amount of Rs. 10,34,880/-.
26. Revenues contention is that the amount of excise duty is included is cost of goods in the year 2001-2002. But I find that out of the Rs. 18,75,000/-, Rs. 8,40,120/- has already been paid and adjusted by the Department without considering the cost structure of goods. Therefore is my view that bar of unjust enrichment can not be now applied to rest of Rs. 10,34,880/- in this case.
27. Revenue also relied on case of Solar Pesticide Pvt. Ltd. (Supra). In that case refund pertained to duty of customs paid on raw material and the court observed that raw material is used in the manufacture of final product duty portion has gone into cost of final product and subsequently gets passed on the buyers of final products. This case is distinguishable for the present case as refund claim is not in respect of raw material but pertains to goods already cleared by the appellant and amount was paid during the investigation
28. In view of above, I agree with view of Shri Rakesh Kumar, Member (Technical) and reference is answered accordingly. Registry is directed to place the matter before referred Bench.
(Pronounced in court on 04.09.2013) (Sahab Singh) Member (Technical) Neha MAJORITY ORDER PER: D.N. PANDA In view of the answer of Third Member in reference of difference of opinion between Members of the Bench, this appeal is disposed holding that Revenue stands that refund claim is hit by unjust enrichment is not tenable for which appeal is allowed.
(RAKESH KUMAR) (D.N. PANDA) (TECHNICAL MEMBER) JUDICIAL MEMBER ?? ?? ?? ?? 3 15 Excise Appeal No.E/3511/2005-EX[DB]