Custom, Excise & Service Tax Tribunal
C.C.E., Raipur (C.G.) vs M/S Blastech (India) Pvt. Ltd on 8 June, 2011
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
West Block No.2, R.K.Puram, New Delhi
COURT-I
Date of hearing: 8.6.2011
Date of decision: .2011
Central Excise Appeal No.1131 and 1132 of 2006
Arising out of the order in appeal No.03 & 04/RPR-I/2006 dated 13.1.2006 passed by the Commissioner (Appeals), Customs & Central Excise, Raipur.
For Approval and Signature:
Honble Shri Justice R.M.S. Khandeparkar, President
Honble Shri Rakesh Kumar, Technical Member
1
Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 26 of 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?
Seen
4
Whether Order is to be circulated to the Departmental authorities?
Yes
C.C.E., Raipur (C.G.) Appellant
Vs.
M/s Blastech (India) Pvt. Ltd. . Respondents
Appearance:
Shri S.R. Meena, Authorized Departmental Representative (DR) for the Revenue Shri S.K. Pahwa, Advocate for the respondents Coram: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri Rakesh Kumar, Technical Member Oral Order No.____________________ Per Shri Justice R.M.S. Khandeparkar:
Heard the DR for the appellant and the Advocate for the respondents.
2. These appeals arise from the a common order in appeal passed by the Commissioner (Appeals), Raipur on 13.1.2006 dismissing the appeals filed by the Department against the orders passed by the adjudicating authority granting refund. The challenge to the order of refund was on the ground that the claim was hit by principle of unjust enrichment. The lower appellate authority relying upon the decision in the matter of Telephone Cables Ltd. vs. C.C.E., Chandigarh reported in 2003 (154) ELT 237, Birla Ericsson Opticals Ltd. vs. C.C.E., Bhopal reported in 2003 (157) ELT 97 has held that since clearances of goods were on provisional basis and settlement was made subsequently , the principle of unjust enrichment is not attracted.
3. The undisputed facts are that the respondents are manufacturer of explosives falling Chapter 36 of the First Schedule to the Central Excise Tariff Act, 1985. They had been supplying the explosives to Coal India Ltd. during the period 1.7.2003 to 29.2.2004. It is the contention of the respondents that such sale was on provisional price basis and subsequently, the prices were finalized. The provisional price was much higher than the price which was finalized and therefore, the respondents had filed refund claim in relation to excess duty paid by them. Being so, according to the respondents, there is no applicability of the principle of unjust enrichment. The claim is seriously disputed by the Department and hence the present appeals.
4. In Telephone Cables Ltd. case (supra), the Tribunal after referring to the clause of the agreement between the parties held that the terms of the agreement clearly disclosed that the price agreed between the parties was subject to fluctuation and the clearance was not against firm price. The stand taken by the Revenue that it was post sale reduction of price was not correct. The price reduction in respect of the quantity of cable delivered during the period had been specifically agreed upon between the parties under the terms of the agreement and therefore, it was to be held that the goods were cleared at the reduced price in terms of the agreement between the parties.
5. In Birla Ericsson Opticals Ltd. case, the Tribunal held that records disclosed a letter dated 5.10.99 of DoT which made it clear that it was not the case of reduction of price subsequent to sale and removal of goods but one of deciding price subsequent to removal and supply of goods , therefore, refund could not be denied.
6. The Larger Bench of the Tribunal in Grasim Industries (Chemical Divisionm) vs. C.CE., Bhopal reported in 2003 (153) ELT 694 dealing with the case of claim for refund of duty held that the assessees contention that provisions contained under Section 11B were not applicable in their case as they had already issued credit note to the buyer and as such they had borne the duty by themselves could not be accepted in view of the decision in Sangam Processors (Bhilwara) Ltd. vs. C.C.E., Jaipur reported in 1994 (71) ELT 989 which was confirmed by the Supreme Court in the case reported in 1994 (70) ELT A-182, and therefore, the claim for refund was not maintainable as it was hit by the principle of unjust enrichment.
7. Perusal of the impugned order apparently discloses that the same is contrary to the law laid down by the Larger Bench in Grasim Industries case.
8. The provisions of law are very clear to the effect that the assessment of duty is to be on the basis of transaction value as disclosed in the invoices issued at the time of clearance of goods unless there is suppression of correct value in the invoices. It is nobodys case that there was any suppression of the correct value. It is the contention of the assessee that the clearance was on the basis of provisional price. As regards the provision of law, there is no concept called provisional price. In case there is any doubt about the price of the goods at the time of clearance, then it is the duty of the manufacturer to seek provisional assessment. The provisional assessment is different from the provisional price.
9. Any arrangement between the parties in relation to the price of the goods cannot override the statutory provision. Once the law requires that duty should be paid based on the price disclosed in the invoice issued at the time of clearance of the goods, mere subsequent reduction in price on the basis of some understanding arrived at between the parties cannot affect the duty liability in terms of the price disclosed in the invoice. Only exception to this is in a case where the manufacturer collects additional price by issuing a supplementary invoice. There is no provision under the law for issuance of supplementary invoices reducing the price.
10. The Tribunal in Commissioner of Central Excise , Madras vs. Addison & Co. reported in 1997 (93) ELT 429 while dealing with the similar issue after taking into consideration the various provisions of law held thus:-
We observe that in terms of the scheme of this Section, the assessee would be entitled to grant of refund only if he is able to show that he had not passed on the duty burden which is claimed as refund, to the customers. In case the duty burden has been passed on to the buyers then, it would be buyer in turn will be entitled to claim the refund in question. He too will be entitled to the refund in case he has not passed on the incidence of duty to any other person. Provisions of Section 11B(2) are also applicable in case of refund which arise out of the judgment decree, order or direction of the Appellate Tribunal or any court or any provisions of the Act or Rules or any other law for the time being in force in terms of Section 11B(3) as above. The order relating to refund as determined by the CCE (Appeals) had to be therefore, considered in the light of the above provisions. The lower appellate authority, it is seen, has merely agreed with the observation of the AC that it is not the concern of the respondents to find out as to whether the benefit had in turn been passed on by the dealer or purchaser of the goods to whom the discount the allowed to the ultimate buyer. We observe that the provisions of Section 11B clearly enunciate that once incidence of duty has been passed on to the buyer of the goods refund cannot be given to the assessee and it will be the buyer who will be eligible to the refund and by amendment to Section 11B in terms of the explanation, limitation of 6 months for claiming refund for the buyer has also been fixed with reference to the date of purchase of the goods by him. We observe that event under the Central Excise law which gives rise to cause of action for refund is payment of duty made in respect of the goods cleared from the factory. The claim of the assessee has to be related to this event of clearance of the goods on payment of duty. Once the assessee has passed on the duty burden at the time of clearance of the goods thereafter, notwithstanding the fact that he has issued credit notes to the buyer, he cannot come forward to claim the refund in terms of Section 11B and the person who becomes entitled to the benefit of refund is the buyer of the goods. Post clearance transaction by issue of credit note is not the concern of the Central Excise authorities and there is no requirement in law nor any stipulation that in the event of credit given subsequent to the clearance of the goods, the assessee will continue to remain eligible to the refund if available in terms of Section 11B. As mentioned above, the event of payment of excise duty is the one which gives rise to the cause for refund. The claim for refund is to be with reference to the date of payment of duty in respect of certain clearances and after that date if any other payment adjustments are made by the assessee with the customers, the same cannot be taken cognisance of for the purpose of Section 11B of the CEA, 1944. The scheme of Section 11B is so devised that if the duty burden has been passed on by the assessee then the buyer of the goods becomes eligible to the claim of refund. He (customer) has also to establish that duty burden has not been passed to any other person. This provision in law has been made to ensure that the refund is allowed only to the person who ultimately absorbs the duty burden. In this context it is relevant to note that duty burden is normally passed down line by the dealer as urged by the Revenue. In the above view of the matter, we therefore, hold that the appellants could not have been allowed the refund. We, therefore, allow the appeal of the Revenue and the Revenue can take necessary follow up action.
11. The Tribunal in Sangam Processors (Bhilwara) Ltd. vs. C.C.E., Jaipur reported in 1994 (71) ELT 989 while dealing with the issue as to whether the issuance of credit note would entitle the refund, after considering the provisions of law, held thus:-
Sub-section 2 of Sec. 11C provides for refund of duty that has been paid on the goods in respect of which Notification under Sec. 11C has been issued. Therefore, the refund claim under sub-sec. (2) should flow from the 11C Notification, and as a consequence thereof, which is, further, indicated by the requirement therein that the application should be made to the Assistant Collector within six months from the issue of the Notification. The provisions of Sec. 11C and sub-sec. (2), thereof cannot come into play in the case of any other refund application made under Sec. 11B for reasons other than the issue of 11C Notification. In the present appeals, appellants had filed refund claims in the year 1986 whereas the 11C Notification 35/88 was issued much later on 21-12-1988 when sub-sec. (2) was already on the statute. Moreover, sub-sec. (2) was inserted and came into effect on 1-7-1988 and was in force when the refund claim was disposed of by the Assistant Collector for the first time in his orders in these cases issued in January, 1989 rejecting their claims for non-fulfilment of condition in sub-sec. (2) that the duty should not have been passed on to any other person. The appellants do not deny the fact that during the relevant period they had passed on the duty incidence to the customers and their claim is that the incidence of duty so passed on had since been made good by the appellants granting credit notes to the customers as verified by the Assistant Collector in his second order during de novo proceedings and that thereby they have fulfilled the condition in Sec. 11C(2). It is not possible to accept the contention because a plain reading of Sec. 11C(2) would show what is required thereunder is that the person claiming refund should apply within six months of the issue of 11C Notification with satisfactory proof to show that duty incidence has not been passed on to `any other person. Such is not the case here because in these cases the appellants have admittedly passed on the incidence at the time of clearance of the goods on payment of duty and had filed the refund claims under Sec. 11B in 1986 and at much later stage, apparently, after the insertion and coming into force of sub-sec. (2) to Sec. 11C from 1-7-1988, and even before the issue of notification under Sec. 11C on 21-12-1988 in respect of their goods, the appellants have sought to show that the duty incidence passed on had been remedied by issue of credit notes to customers. It is not possible to interpret sub-sec. (2) of Sec. 11C to accommodate such situations and to say that even when duty has been passed on to the customers at the time of clearance the assessee can still claim refund under Sec. 11C(2) of Central Excises and Salt Act by issuing credit notes. The Tribunal decision in the case of Collector of Central Excise v. Mahavir Spg. Mills (supra) does not also advance the case of the appellants as it was a decision relating to a demand of duty and not a refund claim rendered in the context of Sec. 11C prior to introduction of sub-sec. (2) thereto. In the result, there is no reason to interfere with the order passed by the Collector (Appeals) and the appeals are rejected.
12. Law being settled by the above decisions, we have no hesitation in holding that the authorities below erred in allowing the refund ignoring the principle of unjust enrichment. The mere understanding between the parties about price variation on the lower side after clearance of the goods accompanied by the invoices can be of no help to the assessee to justify the refund claim.
13. In fact, the points sought to be raised stand concluded by the decision of the Apex Court in MRF Ltd. vs. C.C.E., Madras reported in 1997 (92) ELT 309, the Apex Court therein had clearly held thus:-
2. We have heard the learned counsel for the? assessee. Once the assessee has cleared the goods on the classification and price indicated by him at the time of the removal of the goods from the factory gate, the assessee becomes liable to payment of duty on that date and time and subsequent reduction in prices for whatever reason cannot be a matter of concern to the Central Excise Department insofar as the liability to payment of excise duty was concerned. This is the view which was taken by the Tribunal in the case of Indo Hacks Ltd. v. Collector of Central Excise, Hyderabad - 1986 (25) E.L.T. 69 (Tribunal) and it seems to us that the Tribunals view that the duty is chargeable at the rate and price when the commodity is cleared at the factory gate and not on the price reduced at a subsequent date is unexceptionable. Besides as rightly observed by the Tribunal the subsequent fluctuation in the prices of the commodity can have no relevance whatsoever so far as the liability to pay excise duty is concerned. That being so, even if we assume that the roll back in the price of tyres manufactured by the appellant-company was occasioned on account of the directive issued by the Central Government, that by itself, without anything more, would not entitle the appellant to claim a refund on the price differential unless it is shown that there was some agreement in this behalf with the Government and the latter had agreed to refund the excise duty to the extent of the reduced price. That being so, we see no merit in this appeal brought by the assessee and dismiss the same with no order as to costs.
14. Similar view has been taken by the Honble Punjab & Haryana High Court in the case of Mauria Udyog Ltd. vs. C.C.E. reported in 2007 (207) ELT 31. It was clearly held therein that once it is not shown that the clearance of goods was made on provisional basis, reduction of price at a later date could not be made foundation for seeking refund. This decision was not interfered with by the Apex Court as the appeal filed against the same was dismissed in the case of Mauria Udyog Ltd. vs. C.C.E. reported in 2008 (221) ELT A 120 (SC)].
15. Similarly, it was held in Commissioner of Central Excise, Delhi IV vs. CESTAT reported in 2007 (207) ELT 33 that subsequent reduction in the price of goods could not be a ground for claiming refund.
16. Hence the appeals succeed. They are allowed. The impugned orders relating to the refund are set aside. Refund claims are dismissed.
(Pronounced in open Court on 2011)
(Justice R.M.S. Khandeparkar)
President
(Rakesh Kumar)
Technical Member
scd/