Custom, Excise & Service Tax Tribunal
Jk Tyre &Amp; Industries Ltd vs Commissioner Of Gst&Amp;Cce(Chennai ... on 14 January, 2020
1
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, CHENNAI
REGIONAL BENCH - COURT NO. III
Excise Appeal No.41443 of 2019
(Arising out of Order-in-Appeal No.88/2019, dated 29.04.2019 passed by the
Commissioner CGST & CE (Appeals-II), Chennai)
M/s. J.K. Tyre & Industries Ltd., : Appellant
Sriperumpudur -Tambaram Road,
(SH - 110), Village: Kolathur,
Taluk: Sriperumpudur,
District: Kancheepuram,
Sriperumpudur - 602 105.
VERSUS
Commissioner of Central Tax, : Respondent
CGST & CE, Newry Towers, No.2054/1, II Avenue, 12th Main Road, Anna Nagar, Chennai - 600 040.
APPEARANCE:
Shri Raghavan Ramabhadran, Advocate for the Appellant Shri S. Balamumar, Authorized Representative for the Respondent CORAM:
HON'BLE SMT. SULEKHA BEEVI C.S, MEMBER (JUDICIAL) FINAL ORDER NO. 40159/2020 DATE OF HEARING: 14.01.2020 DATE OF DECISION: 14.01.2020 Brief facts are that the appellants are engaged in the manufacture of tyres, tubes and flaps and are registered with the Central Excise department. They filed refund claim on 30.06.2017 for 2 an amount of Rs.23,20,371/- for the period July, 2016 to March, 2017 as arising out of finalisation/determination of actual discounts passed on to buyers. They have sold the goods allowing permissible discounts and claimed that they have passed such discounts to their dealers. The appellants had availed the facility of provisional assessment till 25.09.2013. Subsequently, their request for provisional assessment was rejected. It is the case of the department that even during 25.09.2013, when assessments were allowed provisionally, the appellants were not in a position to prove that the excise duty paid by them was not passed on to the buyers. A show-cause notice was issued proposing for rejection of the refund claim for the period July, 2016 to March, 2017 alleging unjust enrichment. After due process of law they sanctioned the refund and ordered the amount to be deposited in Consumer Welfare Fund. Being aggrieved by such order, the appellant filed appeal before Commissioner (Appeals), who vide order impugned herein, upheld the order passed by the original authority. Hence, the appellant is now before the Tribunal.
2.0 On behalf of the appellant, the learned counsel Shri Raghavan Ramabhadran appeared and argued the matter. He submitted that at the time of clearance from the factory, the appellant adopts the Normal Transaction Value as per Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 read with Section 4(1)(b) of the Central Excise Act, 1944 as the basis of Valuation of the excisable goods. The said Normal Transaction Value is based on declared NDP notified for each product. 3 2.1 Accordingly, at the time of clearance from the factory to depot, the appellant discharges excise duty on the NDP, treating it as cum-duty value, deducting a notional value towards discounts. The abatements are computed on a notional basis as the discounts, which are actually passed on to the customers are not determinable at the time of clearance from the factory. Subsequently, the goods are received by the depots for sale to the dealers.
2.2 With respect to certain discounts viz., turnover and prompt payment discount, the actual quantum of discount is declared on the face of the sale invoice itself issued by the depot to the dealers and accordingly deduction in respect of the same is claimed from the NDP on actual basis. There is no dispute with respect to this abatement claimed.
2.3 Whereas, other discounts such as, fleet discount and quantity slab discount are passed on subsequent to the sale made by the dealer in the form of credit notes and corresponding debit notes. The appellant, on quarterly basis, determines the discounts to be passed on to the dealers based on targets achieved (in terms of their marketing policy) and regularizes the differential discounts by issuance of credit notes and receipt of debit notes.
2.4 Thus, if the actual discount passed on to the dealers was lower than the abatement claimed in a month, the appellant paid the differential duty with interest.
42.5 On the other hand, if the actual discount computed on a monthly basis was more than the notional discount for which the abatement was claimed at the time of clearance from the factory, the excess excise duty paid on such differential discounts was claimed as refund. Furthermore, refund claim also included cases, where the actual quantum of turnover and prompt payment discount determined at the time of clearance from the depot was more than what was originally claimed as abatement at the time of clearance from the factory.
2.6 During the impugned period, the excess duty paid by the appellant amounted to Rs.23,20,371/- and the appellant filed a refund claim for the same. The appellant submitted relevant details and documents such as, details of debit and credit notes, certificate from Chartered Accountant, etc. 2.7 The claim was rejected by the department alleging that the appellant did not pass the test of unjust enrichment on the following reasons -
(a) the appellant has not produced documentary evidence to prove that they have not unjustly enriched themselves. No evidence submitted by the appellant about accounting treatment given to such transactions in the books of accounts; and
(b) Uniformity in prices does not lead to inevitable conclusion that incidence of duty has not been passed on as held by the Hon'ble Apex Court in CCE vs Allied Photographics India Ltd. [2004 (166) ELT 3 (SC)].5
3.0 He adverted to para 6 of the Order-in-Original and submitted that the appellant had produced all relevant documents including the credit note/debit note as well as the Chartered Accountant certificate. The original authority has recorded the same but has not given due consideration to the documents produced by the appellant. The original authority has erred in relying upon a draft circular of the department. It is emphasized by him that the circular being draft circular does not having binding effect of a circular issued by the Board.
3.1 Even assuming the draft circular can be relied upon, the circular has to be applied in entirety. The department has relied on selective portion of the circular, viz., the portion of the circular which helps the department in denying the refund claim. 3.2 The appellant further submits that the manner of disclosure in the books of accounts is not the only way in which to prove that the duty incidence has not been passed on. If the assessee is successful in proving by other means that the duty incidence has not been passed on, like details of the credit notes or debit notes, or Chartered Accountant certificates, the burden cast on the assessee should be held to have been discharged. Reliance is placed on the decision of Hon'ble Tribunal in M/s. Johnsons Matthey (India) Ltd. V. CCE, Delhi, reported in 2017 (3) TMI 1449 - CESTAT Chandigarh. 3.3 In the present case, the necessary documents namely, details of debit notes and credit notes and CA Certificate, all to prove that 6 duty incidence has not been passed on are available and submitted by the appellant. Accordingly, the finding in the impugned Order is erroneous.
3.4 In this regard, the appellant places reliance of the decision of the Hon'ble Apex Court in CCE, Madras vs Addison & Co Ltd. [2016 (339) ELT 177 (SC)]. In para 35 and 36 of the decision, which is more applicable to the present case, it was held that credit notes and certificate from Chartered Accountant are sufficient evidence to prove that the incidence of duty has not been passed on by the assessee. In the present case also, the appellant has submitted the credit notes and certificate from Chartered Accountant to prove that the duty incidence was borne by them in respect of the refund claim. Consequently, the bar of unjust enrichment is not applicable in the present case.
3.5 It is further submitted that the appellant's depot and the dealers were not registered under the Central Excise Law. Thus, they cannot raise invoice passing on the excise duty component to the individual customers. In fact, they only raised VAT invoice without charging excise duty from the customers. This fact is not disputed by the department. This being the case, it can be clearly concluded that the excise duty component was not passed on to the customers in the first place.
Further, the Department on one hand has refused to extend the period for provisional assessment and on the other hand has seized the 7 opportunity to deny the refund by imposing a larger onus on the Appellant. While the Appellant was operating under provisional assessment, the Appellant has succeeded in getting the excess payment adjusted against short payment. The Order of CESTAT for the prior period is reported in 2018 (10) TMI 697-CESTAT-Chennai. 3.6 It is also added by him that since the appellant comes to know of the discounts at a later stage for the clearance of the goods, the price is adjusted by issuing credit notes/debit notes. So, there is no payment of money by way of cheque and, therefore, the accounts of the dealer as well as the appellant are adjusted by issuance of credit of credit notes/debit notes. The findings of the authorities below that the appellant has to produce payment receipt and bank statements in order to prove that the burden of duty has not been passed on to customers does not arise and is highly impractical. It is also submitted by him that though the appellants produced the Chartered Accountant's certificate along with the reply to the show- cause notice, the same has been disregarded noting that the Chartered Accountant has endorsed only his initials in the working sheets. He prayed that the appeal may be allowed.
4. On behalf of the department, the Learned Authorised Representative Shri S. Balakumar appeared and argued the matter. He submitted that the appellants have not produced any documents to show that the duty has not been passed on to another. He adverted to para 8 of the Order-in-Appeal and submitted that the appellants have not furnished the payments receipts, bank statements etc., pertaining to the transactions to prove that the burden of duty has not been 8 passed on. As per section 12B of Central Excise Act, 1944, there is presumption that the duty has been passed on when such duty is reflected in the invoices issued by the appellant. In the present case, the Chartered Accountant's certificate produced is not correct since the signature of the Chartered Accountant is only on the certificate and each page of the work sheet does not contain the full signature of the Chartered Accountant. Further, the amount claimed as refund is not shown as "Receivables" in their balance sheet. The draft circular relied by the adjudicating authority clarifies that the appellant has to furnish relevant documents along with the Chartered Accountant's certificate to prove that the duty burden has not been passed on. He thus supported the findings in the impugned order.
5. Heard both sides.
6. The issue that has to be decided is whether the appellant has passed the test of unjust enrichment in order to claim the refund amount. It is not in dispute that the appellant has paid excess duty. The amount sanctioned has been directed to be paid to the Consumer Welfare Fund.
7. The main ground on which the authorities below have directed the amount to be credited to the Consumer Welfare Fund is for the reason that the appellant has failed to furnish documents to show that the burden of duty has not been passed on to another. In para 6 of the Order-in-Original, the original authority has noted that the appellant has furnished all details with regard to invoices on which 9 discounts have been claimed etc. It is also noted that they have produced the Chartered Accountant's certificate in support of their contention that the duty liability has not been passed on. The said Chartered Accountant's certificate has been rejected by the original authority holding that there is no certification of the correctness of the statements and also that the full signature of the Chartered Accountant's certificate is not endorsed in the worksheets. I do not find much substance in the grounds raised with regard to the Chartered Accountant's certificate. On perusal of the certificate enclosed in page116 - 118 of the appeal memorandum, the Chartered Accountant has not given worksheets attached to the said certificate. It is seen that wherever the excise duty has not been passed on to the buyer the same is noted in the work sheet. it is shown as discounts passed on which credit notes are allowed. One has to read the certificate issued by the Chartered Accountant along with worksheet. In such as case, it can be seen that only for the incidence where the duty has not been passed on to another, the appellant has claimed refund. Thus, on a perusal of the Chartered Accountant's certificate, I do not find any prima facie discrepancy, so as to reject the same. Another ground on which the rejection has been made is that the appellants have not produced payment receipts or bank statements pertaining to the transactions. In case of allowing discounts, the general practice is to adjust the payment by way of credit note/debit note. Thus, credit note/debit note itself would reflect the amount paid and the payments cannot be seen from the bank transactions or such other payment receipts. Therefore, the allegation that the appellant 10 has not produced payment receipts and bank statements cannot sustain.
8. One other ground on which the rejection has been made is that the appellants have not mentioned the amount as "Receivables" in the balance sheet. In the case of Commissioner of Central Excise, Madras Vs M/s. Addison & Co. Ltd., reported in 2016 (339)E.L.T.177 (S.C.), the Hon'ble Apex Court had occasion to analyse the issue of eligibility of refund claim on credit notes and the test of unjust enrichment. In Paras 35 and 36, Civil Appeal No.8488 of 2009 was discussed. The relevant paragraphs is reproduced herein below:-
"35. The respondent-Assessee is a 100 per cent Export Oriented Unit (EOU) manufacturing cotton yarn. The respondent filed an application for refund of an amount of Rs. 2,00,827/- on 14-8-2002 on the ground that it had paid excess excise duty at the rate of 18.11 per cent instead of 9.20 per cent. The Assessee initially passed on the duty incidence to its customers. Later the Assessee returned the excess duty amount to its buyers which was evidenced by a certificate issued by the Chartered Accountant on 2-8-2002. The refund claim was rejected by the Deputy Commissioner of Central Excise, Kolhapur Division vide an order dated 24-9-2002 on the ground that the Assessee did not submit either the credit notes or the Chartered Accountant's certificate at the time of filing the refund application. Not satisfied with the genuineness of the documents the Deputy Commissioner rejected the refund claim. The Commissioner (Appeals), Central Excise, Pune allowed the appeal filed by the Assessee by taking note of the certificate issued by the Chartered Accountant and the credit notes dated 29-7-2002. The Appellate Authority accepted the Assessee's contentions and held that there was no reason to doubt the genuineness of the documents produced. The Appellate Authority allowed the appeal of the Assessee and the said order was confirmed by the Customs, Excise and Service Tax Appellate Tribunal vide judgment and order dated 6-10-2005. The said order of Central Excise and Service Tax Appellate Tribunal was further confirmed by the High Court of Judicature at Bombay in Customs Excise Appeal No. 100 of 2008 filed by the Revenue. The Revenue has filed the above Civil Appeal challenging the validity of the judgment of the High Court in Central Excise Appeal No. 100 of 2008.
36. Except for a factual dispute about the genuineness of the certificate issued by the Chartered Accountant and the credit notes raised by the Assessee regarding the return of the excess duty paid by the Assessee, there is no dispute in this case of the duty being passed on to any other person by the buyer. As it is clear that the Assessee has borne the burden of duty, it cannot be said that it is not entitled for the refund of the excess duty paid. In view of the 11 facts of this case being different from Civil Appeal No. 7906 of 2002, the appeal preferred by the Revenue is dismissed."
It can be seen from the above discussion that when the appellant has produced Chartered Accountant's certificate along with credit notes to prove that the burden of duty was not passed on to another, the same was accepted by the Apex Court. Therefore, it is not always necessary that the amount has to be reflected in the balance sheet as "Receivables". The evidence in the form of Chartered Accountant's certificate accompanied by credit note/debit note is also sufficient documents to prove that the burden of duty has not been passed on to another. Taking note of these facts, I am of the view that the authorities below have not considered the issue in the right manner.
9. Since both the authorities have stated that the appellants have not produced the credit note/debit note before them and only produce a detailed worksheet, I am of the opinion that the matter can be remanded to the adjudicating authority for reconsideration of documents by call of the report from range superintendent based on the detailed worksheets attached to the Chartered Accountant's certificate in order to satisfy whether the burden of duty has not been passed on. If the report called for is in order as reflected in the worksheets of the Chartered Accountant's certificate, the appellant would be eligible for the refund as it can be concluded that the duty burden has not been passed on to another. In order to look into the worksheets attached to the Chartered Accountant's certificate, I remand the matter to the original authority, who shall also consider 12 the discussions made in the above paragraphs. I, therefore, set aside the impugned order and remand the matter with the above directions.
(Dictated and pronounced in the open court) (SULEKHA BEEVI C.S.) MEMBER (JUDICIAL) ksr 20-01-2020