Custom, Excise & Service Tax Tribunal
Zodiac Clothing Company Ltd vs Commissioner Of Customs And Service Tax ... on 24 November, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No. 22075 / 2014 Appeal(s) Involved: C/2939/2011-DB [Arising out of OIA No.76-2011 dated 23/08/2011 passed by CC(Appeals), Bangalore] ZODIAC CLOTHING COMPANY LTD APTE PROPERTIES, NO.10/76, OFF DR.E.MOSES ROAD, WORLI, MUMBAI 400 018 Appellant(s) Versus Commissioner of Customs and Service Tax BANGALORE-CUS NULL C.R. BUILDING,QUEENS ROAD, P.B.NO. 5400, BANGALORE, - 560001 KARNATAKA Respondent(s)
Appearance:
Shri B.S JANAPATI, Advocate NO.231, 8TH E MAIN, KALYAN NAGAR I BLOCK, BANGALORE - 560043 KARNATAKA For the Appellant Shri N.Jagdish, Superintendent(AR) For the Respondent CORAM:
HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER Date of Hearing: 25/07/2014 Date of Decision: 24/11/2014 Order Per : S.K. MOHANTY This appeal is directed against the impugned order dated 09.08.2011 passed by the Commissioner of Customs (Appeals), Bangalore, wherein the adjudication order dated 20.10.2010, rejecting the refund claim of the appellant has been upheld.
2. The brief facts of the case leading to the present appeal are as follows :-
The appellant M/s Zodiac Clothing Company Ltd. imported Fusible Prints from Hong Kong vide Bill of Entry No. 863598 dated 23.09.2008 through Air Cargo Complex, Bangalore. In the said B/E, the appellant had declared the value in US$ as against the actual value of imported goods in Hong kong $ and accordingly, the B/E was assessed and the consignment cleared for home consumption. Realizing the mistake that excess duty was paid in applying different currency which had higher value, the appellant approached the assessing authority for re-assessing the Bill of Entry. The request of the appellant was turndown vide letter dated 28.07.2009 by stating that assessment of the B/E cannot be re-opened. On an appeal filed by the appellant against the said letter, the Commissioner (Appeals) vide order dated 07.10.2009 directed for re-assessment of the B/E. Pursuant to such directions, the original authority re-assessed the B/E, by assessing the duty payable as Rs.75,247/-, as against the duty paid amounting to Rs. 5,51,193/-. Consequently, the appellant filed the application, claiming excess Customs duty of Rs.4,75,946/- as refund. The Assistant Commissioner (Refunds) rejected the claim vide order dated 20.10.2010 on the ground that the amount of duty paid was shown as expenses in the P&L Account of the appellant and thereby attracted principles of doctrine of unjust enrichment. On the appeal filed by the appellant, the Commissioner (Appeals) vide the impugned order has upheld the order of original authority. Hence, the present appeal before this Tribunal.
3. In the grounds of appeal, the appellant submitted that the Chartered Accountant's certificates indicating that the excess amount of Customs duty was not loaded to the cost of final products exported and that the amount so paid was shown as receivable in the Balance Sheet for the year 2010-11, and therefore, the incidence of duty has been borne by the appellant, have not been considered in proper prospective in the impugned order; that the impugned order has erred in inferring that showing the amount in the books of accounts for the succeeding years as 'receivable' in terms of Section 41(1) of the Income Tax Act, 1961 is applicable only to Income Tax Act and not for refund of Customs duty; that when the amount was collected without the authority of law, it has to be treated as deposit, and thus, the mischief of 'unjust enrichment' does not arise; that the export order being received much before importation of the goods and the export price was constant, there is no scope of unjust enrichment and the appellant is entitled for refund of the excess paid duty amount. In support of said submissions, the learned Consultant has relied on the decision of the Tribunal in the case of CCE, Coimbatore - Vs. - Flow Tech Power, reported in 2005 (187) ELT 399 (Tri.-Chennai) and upheld by the Hon'ble Madras High Court, reported in 2006 (202) ELT 404 (Mad.).
4. Per contra, the learned A.R. appearing for the revenue-respondent reiterated the findings recorded in the impugned order and submitted that the burden of proof regarding non-passing of the duty incidence has not been satisfied by the appellant, and thus, the doctrine of unjust enrichment has the application to the present refund claim. He has cited the judgment of Hon'ble Madras High Court delivered in the case of Commissioner of Customs (Exports), Chennai - Vs. - BPL Ltd., reported in 2010 (259) ELT 526 (Mad.) and the Tribunal decision in the case of SRF Ltd. - Vs. - Commissioner of Customs, Chennai, reported in 2006 (193) ELT 186 (Tri.-LB), to justify his above stand.
5. Heard the learned counsel for the parties and perused the records. The issue involved in the present case for determination by this Tribunal is as to whether the refund amount has to be credited to the Consumer Welfare Fund as per the mandates of Section 27(2) of the Customs Act, 1962 (for short, the 'Act') by applying the doctrine of unjust enrichment, or the same is required to be paid to the appellant.
6. Claim for refund of duty is contained in Section 27 of the Act. In terms of sub-section (1) of the said section, an application for refund of any duty paid by a person in pursuance of an assessment or borne by him shall be made to the jurisdictional Assistant/Deputy Commissioner of Customs. Sub-section (2) of the said section provides that on receipt of the refund application, if the said statutory authority is satisfied that the duty paid by the applicant is refundable, then he has to pass an order accordingly and the amount of refund shall be credited to the Consumer Welfare Fund. As per the first proviso to sub-section (2) of the said section, the amount of duty as determined by the statutory authority shall, instead of being credited to the said Fund, be paid to the applicant, if such amount is relatable to the duty paid by the importer, if he had not passed on the incidence of such duty to any other person. Section 28D of the Act contains fiction to the effect that every person who has paid the duty on any goods under the Act shall be deemed to have passed on the full incidence of the duty to the buyer of the goods. This presumption is rebuttable by the person who claims refund of the duties. Therefore every person claiming refund under Section 27 of the Act has to demonstrate by relevant documentary evidence that he is not benefited by unjust enrichment. If the incidence of duty paid is borne by another/any other person, then the person claiming the refund will be unjustly enriched at the cost of other(s). Thus, in such eventuality, the refund amount shall be credited to the said Fund, instead of sanctioning in favour of the applicant.
7. I have perused the General Ledger/Balance Sheet and Chartered Accountant's certificate produced by the appellant at the time of hearing of appeal. I find that the duty paid on importation of subject goods was debited to the Profit & Loss account for the financial year 2008-09 under the head 'Customs Duty on Accessories'. But the said amount did not appear in the Balance Sheet for the said period to show that the excess paid Customs duty was awaiting recovery from the Customs Department, which has also been accepted by the appellant that the duty element has been absorbed in the material cost. It is observed from the journal voucher that for the first time the appellant had passed the entry on 02.12.2010 vide No. 1921 by debiting Customs duty receivable account and crediting the Customs duty refund received account [with the narration "On account of : Amount receivable towards customs duty paid on Accessories on 24.09.2008 (prior year income)]". In the Balance Sheet as at 31.03.2011, 'Customs duty receivable' was disclosed in the asset side under the head 'LONG-TERM LOANS AND ADVANCES (Balance with government authorities)'. The said subsequent disclosure in the Balance Sheet has been made after rejection of the refund claim by the original authority vide order dated 20.10.2010.
8. From the statement of accounts as indicated above, it is manifestly clear that in the year of importation of the subject goods i.e. 2008-09, the excess customs duty, for which the refund claim has been lodged, was added to the cost of production of goods i.e. garments and such cost was realized through the sale price, and thus, the incidence of duty has been passed on to the buyers in the financial year of import of goods in question. Thus, showing the excess amount of Customs duty in the Balance Sheet for the period 2011-12, that to after rejection of the refund application by the original authority, is not at all relevant since the said amount was admittedly considered in the cost of production for the year 2008-09 and was absorbed in the sale value. Therefore, as per my opinion, the appellant has no locus standi to seek refund from the revenue to be unjustly enriched at the expense of some other person.
9. In context with the above observations, I rely upon the judgment of Hon'ble Supreme Court delivered in the case of Union of India - Vs. - Solar Pesticides Pvt. Ltd., reported in 2000 (116) ELT 401 (S.C.), wherein it has been held that if the duty amount was considered in the product costing and consequently was added to the sale price, the incidence of duty will be held to have been passed on to the customer. The relevant paragraph is extracted below :-
"17.? The use of the words incidence of such duty.. is significant. The words incidence of such duty mean the burden of duty. Section 27(1) of the Act talks of the incidence of duty being passed on and not the duty as such being passed on to another person. To put it differently the expression incidence of such duty in relation to its being passed on to another person would take it within its ambit not only the passing of the duty directly to another person but also cases where it is passed on indirectly. This would be a case where the duty paid on raw material is added to the price of the finished goods which are sold in which case the burden or the incidence of the duty on the raw material would stand passed on to the purchaser of the finished product. It would follow from the above that when the whole or part of the duty which is incurred on the import of the raw material is passed on to another person then an application for refund of such duty would not be allowed under Section 27(1) of the Act."
10. In the certificate dated 07.12.2010, the practicing Chartered Accountant has certified that the excess amount of duty paid was not loaded to costing of final product. The said certification goes contrary to the books of accounts submitted by the appellant, which clearly depict that the refund amount is question is a constituent of making cost of garments. Hence, in absence of any plausible evidence, the certificate furnished by the appellant cannot be relied on to arrive at the conclusion that the refund claimed amount has not been loaded in the costing of the garments sold in the year of import. In this context, I rely on the judgment of Hon'ble Madras High Court, cited by the revenue-respondent in the case of BPL Ltd. (supra), wherein it has been held that certificate of a Chartered Accountant is merely a piece of evidence acknowledging certain facts and in itself not sufficient to show that duty in relation to refund not passed on to another person. The relevant paragraph in the said judgment is extracted below :-
9.? Therefore, considering the above said provisions and applying the same to the facts on hand, we are of the opinion that the Tribunal has committed an error in merely relying upon the certificate produced by the first respondent without taking into consideration of the fact that no evidence has been produced for considering the claim of refund. The Tribunal also relied upon the Judgment of Commissioner of C.Ex., Coimbatore v. Flow Tech Power reported in 2006 (202) 404 (Mad). The said Judgment is not applicable to the present case on hand and the Tribunal has wrongly relied upon the said Judgment. This Court in the said Judgment has clearly held that the certificate issued by the Chartered Accountant along with other evidence such as Profit and Loss Account are sufficient evidence to consider the claim for refund. The said Judgment cannot be construed to lay down the proposition of law that the certificate issued by the Chartered Account would automatically enable the person to get exemption in the absence of any other evidence to support that he is entitled to refund. Hence, on a consideration of the above said Judgment and also on the consideration of the facts involved, we are of the opinion that the appeal will have to be allowed and accordingly the same is allowed and the question of law framed is answered in favour of the revenue.
11. I concur with the findings recorded in the impugned order that showing the amount in the books of accounts for the succeeding years as 'receivable' in terms of Section 41(1) of the Income Tax Act, 1961 is applicable only to Income Tax Act and have no applications for refund of Customs duty. The Customs duties, Excise duties, Service tax constitute indirect taxes. These levies have been so named owing to the fact that even though the levy is upon the assessee or the person liable to pay tax, the burden is usually passed on to the customer, who in turn indirectly pays the tax. Hence, in such an event, if the refund is sanctioned to the assessee without proper verification of the books of account, there is every possibility of enrichment by the receipt of a benefit to which he is not entitled to, and accordingly, the advantage of refund benefit at some other's cost and expense will be unjust. Considering the said view, the doctrine of unjust enrichment was incorporated in the Customs statute in the year 1991 consequent to the enactment of the Central Excise and Customs Law (Amendment) Act, 1991. The effect of the amendment is that every assessee seeking refund of any duty to prove that he had not passed on the burden of such duty to any other person. Contrary is the state of affairs in case of Income Tax, where there is no scope of passing the incidence of tax burden to anybody else and the tax payer has to pay the tax from his own sources. Thus, it is erroneous to assume that the provisions of Income Tax Act will be applicable for refund of customs duty.
12. With regard to the submissions of the appellant that the export order being received much before importation of the goods and the export price remain constant, and hence, there is no scope of unjust enrichment, my primary observation is that no documentary evidences have been produced by the appellant either before the lower authorities or before this Tribunal to substantiate that the imported raw materials have been used exclusively in the making of exported garments; thus, in absence of any credible evidence and in view of the fact that the appellant has its retail outlets and dealer networking for selling the garments domestically, it is difficult to accept that the entire imported goods have been used for making the garments, sold in the international market. Further, the uniformity of export price before or after importation of goods does not lead to the inevitable conclusion that duty burden has not been passed, as such uniformity may be due to various factors.
13. The appellant submitted that when the amount was collected without the authority of law, the same has to be treated as mere deposit, and thus, the mischief of 'unjust enrichment' will have no application to such case. My view in this regard is that the refund amount has not been collected or retained illegally by the exchequer, rather the refund claim has been sanctioned and the amount has been credited to the Consumer Welfare Fund, in absence of any evidence produced by the appellant that the incidence of such duty amount has been borne by it and not passed on to any other person. Even assuming that the amount has been collected without the authority of law, still the doctrine of unjust enrichment is applicable for its refund to the applicant as per the ruling of Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. -Vs. - Union of India, reported in 1997 (89) ELT 247 (S.C.). The relevant portion of the said rule as recorded in paragraph 99 is reproduced below :-
"The doctrine of unjust enrichment is a just and salutory doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person."
14. The decision in the case of Flow Tech Power (supra) cited by the appellant is contextually different to the facts of the present case, in as much as, in the said decided case, the excess paid duty has been absorbed by the applicant, and upon verification of the records that the duty burden has not been passed on to the buyer, the refund claim was sanctioned in favour of the applicant; whereas, contrary is the situation in the case of the present appellant, where the books of accounts clearly demonstrate that the incidence of excess paid customs duty has been passed on to the buyer of garments. Thus, I agree with the views of the lower authorities and held that the refund amount has been correctly transferred to the Consumer Welfare Fund.
15. In the above view of the matter, I do not find any infirmity in the impugned order, and accordingly, the appeal filed by the appellant is rejected.
(Pronounced on .) S.K. MOHANTY JUDICIAL MEMBER Raja.
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