Customs, Excise and Gold Tribunal - Delhi
Cimmco Ltd. vs Collector Of Central Excise on 18 June, 1998
Equivalent citations: 1998(61)ECC535, 1998ECR59(TRI.-DELHI), 1999(107)ELT246(TRI-DEL)
ORDER K. Sankararaman, Member (T)
1. The appeal is directed against the appeal dated 18-6-1993 passed by the Collector of Central Excise (Appeals), New Delhi confirming the Order-in-Original dated 25-1-1993 passed by the Assistant Collector of Central Excise, Alwar sanctioning refund amount of Rs. 3,37,078.50 but ordering the credit of the same to the account of National Consumer Welfare Fund established under Section 12C of Central Excise Act, 1944.
2. Arguing the case of the appellant, Shri D.G. Chaturvedi, learned Counsel stated that the appellant had entered into a contract with M/s. Indian Oil Corporation (IOC) for "supply, fabrication and mounting of heating coils inside tank wagons for LSHS service". The contract covered 150 tank wagons. They applied for permission under Rule 173H of Central Excise Rules for bringing duty paid wagons and other duty paid materials for such fabrication job. After obtaining necessary permission from the department they executed the work and cleared the tank wagons on payment of duty, as demanded by the department, under protest. Thereafter, they claimed refund. When this was rejected they filed appeal to the Collector (Appeals) who, vide her order dated 27-2-1990, held that the processes carried out by the appellant did not amount to manufacture and that since the Assistant Collector had concluded that the goods are covered by Rule 173-H he should have allowed clearance without payment of duty. Armed with this order appellant filed refund claim for the consequential refund amount. The claim was rejected by the Assistant Collector vide his order dated 15/17-6-1991 on the ground of unjust enrichment. This led to a second round of appeal before the Appellate Collector and that authority vide order dated 30-12-1991 held that refund was available and the same should be sanctioned as per the provisions of Central Excise & Customs Laws (Amendment) Act, 1991. The appellant thereupon applied for refund before the Assistant Collector and the Assistant Collector passed order dated 25-1-1993 on the ground that schedule of rate of work order dated 28-1-1988 were inclusive of all duties, taxes and to and fro handling charges and hence concluded that appellant had passed on the duty burden to the customer and hence if refund is allowed to the appellant it will result in unjust enrichment. This order of the Assistant Collector having been upheld by the Collector (Appeals) vide Order-in-Appeal dated 18-6-1993 has led to the present appeal.
3. Explaining the case of the appellant that they had not passed on the duty burden to their customer M/s. IOC Ltd., learned Counsel referred to the contract entered into by them with IOC and in particular referred to the conditions of contract with reference to the rates. He pointed out that as may be seen from the said documents the rates are inclusive of all materials, labour, equipments, lifts, leads, sales-tax, octroi required in connection with completion of work to the entire satisfaction of the customer, (IOC). It was contended that there is no reference to Central Excise duty in this paragraph regarding rates. The only levies which have been covered are sales-tax and octroi. The Assistant Collector's reliance on the sentence appearing in another part of the contract relating to the schedule of rates to the effect that rates are inclusive of all duties, taxes and to and fro handling charges cannot be read in isolation and cannot be understood to mean that it provided for the collection of excise duties. This, he argued, is because no excise duty was leviable on the activity engaged in by them which did not lead to the emergence of any excisable product. He also made certain submissions citing the judgment of the Supreme Court in the Mafatlal Industries case on the aspect of unjust enrichment and pleaded that their case for refund to be paid to them will be not only justified on the ground of their not having recovered any excise duty from their customer but also by the observations of the Supreme Court in the aforesaid judgment.
4. Resisting the arguments of the learned Counsel, Shri M. Ali, JDR supported the findings of the lower authority. He referred to the findings of the Assistant Collector in his order dated 25-1-1993 that the schedule rates for the work of Rs. 54,770/- per tank wagon included the excise duty also for which he had relied upon the schedule of rates of the work order dated 28-1-1988 which referred to the rates being inclusive of all duties, taxes and to and fro handling charges. Shri Ali referred to the certificate dated 29-10-1992 issued by the customer, M/s. IOC stating that in respect of the particular work order dated 28-1-1988 they confirmed that no separate excise duty had been paid to the appellant. The said certificate goes on to state that as the work order in question had been placed on a lump sum price of Rs. 54,396/- per tank wagon as per the provisions of the work order. The fact that the customer had certified that no separate excise duty was paid by them would clearly imply that the amount mentioned in the work order included the excise duty and that was why they were not paying excise duty separately. Shri Ali also pointed that when the appellant had applied for permission under Rule 173H, the Assistant Collector had given such permission subject to the condition that they should pay the duty. Since the question of dutiability had been raised by the Assistant Collector and the appellant had in acquiescence of such a permission carried the fabrication work and quoted a lump sum amount for such activity, it has to be taken that the contract amount would include the excise duty element also which is also clear from the language of the annexure to the work order referred to already. For these reasons, he pleaded that as the Assistant Collector had correctly decided the matter holding that appellant had recovered the amount of duty in question from the customer by including it in the lump sum amount and the Collector (Appeals) had correctly upheld the same, the order may be upheld and the appeal dismissed.
4. Giving a brief rejoinder to the points canvassed by Shri Ali, learned Counsel for the appellant stated that they had paid duty on the clearances of wagons made by them during the intervening period after obtaining the Assistant Collector's order and before getting the order of the Collector (Appeals) before whom the direction of the Assistant Collector to pay duty was challenged. He reiterated his plea that the lump sum amount mentioned in the purchase order and schedule thereto did not provide for collection of any excise duty from the customer and in fact they had not included any amount in their price on account of each duty.
5. We have given careful consideration to the rival submissions. The clue to the problem in this case lies in a proper understanding of the provisions in the work order particularly with reference to the rates. There is an apparent conflict in what is stated in different parts of the schedule of rates. Thus, as against a note that the rates are inclusive of all duties, taxes and to and fro handling charges in one place there is another remark regarding the rates under the caption condition of contract which is more elaborate than the earlier referred to sentence. This reads as follows:
(1) Rates The rates are inclusive of all materials, labour, equipment, lifts, leads, Sales-tax, octroi required in connection with completion of work to the entire satisfaction of the Corporation. All the materials are to be supplied by the Contractor unless otherwise stated.
(2) Rates shall be valid till the entire work is 100% complete, and no escalation will be considered at any stage.
As pointed out by the learned Counsel the above mentioned condition refers specifically only to sales tax and octroi and there is no express mention about Central excise duty. The impugned order has been passed on the basis that the other stipulation in the works order that rates are inclusive of all duties, taxes, and to and fro handling charges is sufficiently wide enough to cover excise duty also and the non-mention of excise duty specifically in the conditions of contract extracted above would not be material. We do not, however, agree that the contention raised in support of the impugned order that the provision that the rates are inclusive of all duties would lead to the necessary presumption or conclusion that excise duty should be held to have been covered or provided for. The price here was a lump sum amount and the usual condition that the rates are inclusive of all duties and taxes is only with a view to avoid any possibility of the supplier raising any demand at a later stage on the ground that certain duties are to be paid. The expression "Rates are inclusive of all duties and taxes" have to be understood as applicable to only duties or taxes which are payable. In the present matter there is no case of the department that excisable goods have come into existence at the hands of the appellant and that such duties were leviable and therefore, they should have been taken to have been provided for when the lump sum price was quoted. A question was put to the learned Counsel whether the break down of the lump sum amount is available with him to throw light on the question whether the said amount has been arrived at by the appellant after taking only the cost of materials used by them in the fabrication work and their job charges and profits and that there was no excise duty contained in such calculation. Learned Counsel stated that such data is not available with him today but it may be available with the appellant and can be produced by him later on.
6. For the foregoing reasons we hold that the Assistant Collector erred in coming to the conclusion with reference to the condition in the schedule of rates that the rates are inclusive of all duties and taxes, that the rates mentioned therein conclusively included the element of excise duty and therefore, the appellant should be held to have passed on the duty burden to their customer. Such a conclusion of the duty burden of having been passed on to the customer would have been justified if the cost structure which had entered into the calculation for arriving at the prices mentioned in the schedule of rates had been examined to see whether that provided for the inclusion of any amount on account of Central Excise duty. We have already held that the general remark that the rates are inclusive of duties can cover only duties if they are actually leviable. It is the case of the appellant all along that goods are not chargeable to excise duty and that when a stand was raised by the Assistant Collector while granting the permission under Rule 173-H that duty was leviable, appellant had taken up the matter with the Collector (Appeals) questioning such a direction and had succeeded before that authority. The subject duty had been paid under protest during the intervening period before receipt of the favourable order of the Collector (Appeals). When it was the case of the appellant that no excise duty is leviable and appellant has been carrying on that dispute with the department, it cannot be taken that the price quoted in the contract was inclusive of such an element of excise duty. We also enquired from the learned Counsel whether their application before the authorities for availment of the procedure under Rule 173-H was on their own initiative or whether they had been advised by the customer to avail of the same, but he had no reply to give. We wanted to know this to ascertain whether customer had advised them to avail of this procedure in which case it would be an indication that customer was also aware of the facility available under that procedure. In that case it can be stated with certainty that not only was the appellant aware of the non-dutiability aspect but the customer also was equally aware of it in which case the question of duty burden being transferred to the customer would not arise. Notwithstanding this lack of information which would have clinched the matter, we feel that in the circumstances of the case, the correspondence exchanged by the appellant with the department all along in support of their case for availment of Rule 173H and other attendant facts, as has been noticed on perusal of the records and the impugned order, the appellant has made put a case that the duty burden in question had not been shifted by them to their customer. In the circumstances, we set aside the finding directing the credit of the amount of refund to the Consumer Welfare Fund. Accordingly, we hold that the appellant would be entitled to obtain refund in cash or credit to their Personal Ledger Account.