REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 7906 of 2002
Commissioner of Central Excise, Madras
.... Appellant(s)
Versus
M/s Addison & Co. Ltd.
… Respondent(s)
WITH
CIVIL APPEAL No. 8488 of 2009
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 25055 of 2009)
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 18426 of 2015)
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 18423 of 2015)
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 18425 of 2015)
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 23722 of 2015)
CIVIL APPEAL No. 14689 of 2015
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 12282 of 2016)
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 16142 of 2016)
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 16141 of 2016)
J U D G M E N T
L. NAGESWARA RAO, J.
The above Appeals have been listed before us because of an order
dated 16.07.2008, by which there was a reference to a Larger Bench in view
of the importance of the questions involved.
2. Civil Appeal No. 7906 of 2002 arises from the judgment dated
23.11.2000 passed by the Madras High Court in R.C. No. 01 of 1999. Civil
Appeal No. 14689 of 2015 was filed by the Revenue against the judgment
dated 26.11.2014 in Central Excise Appeal No. 21 of 2009. Special Leave
Petition (C) Nos. 18426 of 2015, 18423 of 2015, 18425 of 2015, 23722 of
2015, 12282 of 2016, 16142 of 2016 and 16141 of 2016 are filed against the
judgment of the Andhra Pradesh High Court in Central Excise Appeal Nos. 21
of 2005, 9 of 2005, 51 of 2004, 10 of 2005, 44 of 2004, 38 of 2004 and 18
of 2005 respectively.
3. Civil Appeal No. 8488 of 2009 is filed against the judgment dated
20.08.2008 passed by the Bombay High Court in Central Excise Appeal No. 100
of 2008 and Special Leave Petition (C) No. 25055 of 2009 is filed by the
Union of India against the judgment dated 26.11.2008 of the High Court of
Rajasthan at Jodhpur in D.B. Central Excise Appeal No. 34 of 2007.
4. Civil Appeal No. 7906 of 2002 will be taken as the lead matter as SLP
(C) Nos. 18426, 23722, 18425, 18423 of 2015 and 12282, 16141 and 16142 of
2016 and Civil Appeal No. 14689 of 2015 were disposed of by the Andhra
Pradesh High Court by following the Madras High Court’s impugned judgment
in Civil Appeal No. 7906 of 2002. Civil Appeal No. 8488 of 2009 and SLP
No. 25055 of 2009 will be dealt with separately as the facts and the point
involved are slightly different.
Civil Appeal No. 7906 of 2002
5. The respondent in the above appeal is a manufacturer of cutting
tools. The respondent-Assessee filed a refund claim for Rs. 40,22,133/- on
19.07.1988 and a supplementary refund claim for Rs. 5,44,688/- on
15.06.1989 towards excise duty paid on various taxes and discounts such as
turnover tax, surcharge, additional sales discounts, transitory insurance,
excise discounts, additional discounts and turnover discounts. The said
claim was later on revised to Rs. 40,37,938/- on 17.08.1988. The claim of
the Assessee was that the said amount was deductable from the excise duty.
The Department was of the opinion that the refund towards turnover discount
and additional discount was to be rejected as the Assessee was not eligible
for deduction from the wholesale price for determination of value under
Section 4 of the Central Excises & Salt Act, 1944. On 23.08.1989 a notice
was issued to the respondent to show cause as to why the refund claim
involving turnover discount and additional discount should not be rejected.
After hearing the Assessee, the Assistant Collector by an order dated
06.12.1989 rejected the refund claim amounting to Rs.26,37,462/- and
Rs.17,17,808/- in respect of turnover discount and additional discount
respectively on the ground that the quantum of discount become known only
at the year end. The Collector of Central Excise Appeals set aside the
said order dated 06.12.1989 of the Assistant Collector by his order in
appeal dated 21.02.1990 and held that the Assessee was entitled to refund.
6. As per the amendment made to Section 11-B of the Central Excise Act,
1944, (hereinafter referred to as “the Act”) an application filed for
refund prior to the Central Excises & Customs Laws (Amendment) Act 1991
shall be deemed to have been made under the Amendment Act and considered
accordingly. The Assistant Collector of Excise issued a show cause notice
dated 13.02.1992, directing the Assessee to produce evidence in support of
the refund claim. It was mentioned in the said notice that the burden of
proof to show that the full incidence of duty has not passed on to the
buyers is on the Assessee as per Section 12-B of the Act.
7. The Assistant Collector passed an Order-in-Original dated 27.10.1992
holding that the Assessee is entitled for the refund claimed by him. The
Collector of Central Excise by Order-in-Appeal dated 20.10.1993 rejected
the appeal filed by the Revenue and upheld the order dated 27.10.1992 of
the Assistant Collector of Central Excise, Madras Vth Division. The
Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT), South Zone
Bench of Madras allowed the appeal filed by the Revenue against the order
dated 20.10.1993 of the Collector of Central Excise. The Tribunal held
that the Assessee would be entitled to grant of refund only if he had not
passed on the duty burden to his buyers. It was also held that the buyer
in turn, would be entitled to claim refund only if he has not passed on the
incidence of duty to any other person. It was further held by the Tribunal
that the event which gives rise to cause of action for refund is payment of
duty made in respect of goods cleared from the factory and once the duty
burden has been passed on to the buyer at the time of clearance, issuance
of credit note at a later point of time would not entitle the Assessee to
claim any refund. The Tribunal also held that burden of duty is normally
passed by the manufacturer and the dealer to the ultimate consumer.
8. The Assessee filed an application for reference of questions arising
out of the final order dated 07.12.1996. The Tribunal referred the
following questions for consideration of the High Court by its order dated
28.08.1998, taking note of the fact of the existence of divergent views on
the point.
“1. Whether by passing on the duty element on the discount to its dealers
the applicant had satisfied the requirements of proviso ‘d’ to sub Section
11-B (2) of the Central Excise Act, 1944 and was therefore, entitled to be
paid the amount claimed as refund?
2. Whether the Tribunal after finding that the burden of duty was passed
on by the applicant to its various dealers by issue of credit notes was
right in concluding that the ingredients of Section 11-B were not
satisfied.”
9. The High Court of Madras answered the reference in favour of the
Assessee by its judgment dated 23.11.2000. The High Court held that the
refund towards deduction of turnover discount cannot be denied on the
ground that there was no evidence to show who is the ultimate consumer of
the product and as to whether the ultimate consumer had borne the burden of
the duty. According to the High Court, Section 11-B of the Act cannot be
construed as having reference to the ultimate Consumer and it would be
sufficient for the claimant to show that he did not pass on the burden of
duty to any other person. It was further held by the High Court that the
claim for refund made by the manufacturer is not dependent on the
identification of the ultimate consumer. The word ‘buyer’ used in Section
12-B of the Act does not refer to ultimate consumer and has reference only
to the person who buys the goods from the person who has paid duty i.e. the
manufacturer. The High Court concluded that the Tribunal committed an
error in holding that the Assessee was not entitled for refund despite the
Assessee proving that the duty was not passed on to its buyers.
Challenging the legality and validity of the said judgment of the High
Court, the Commissioner of Central Excise, Madras has filed Civil Appeal
No. 7906 of 2002.
10. We have heard Mr. Atmaram N. S. Nadkarni, Additional Solicitor
General and Mr. K. Radhakrishnan, Senior Advocate for the appellant and Mr.
N. Venkatraman, Senior Advocate for the respondent. The learned Additional
Solicitor General submitted that a claim for refund can be entertained only
when the claimant has not passed on the duty to any other person. By
referring to the statement of objects and reasons for the amendment made to
the Central Excises & Customs Laws (Amendment) Act 1991, the learned
Additional Solicitor General submitted that the Act had given effect to the
recommendations of the Public Accounts Committee whereby the refund of any
duty was proposed to be made only to the person who ultimately bears the
incidence of such duty. He submitted that it would be necessary for a
verification to be done to find out as to who actually bore the burden of
duty. According to him such verification would not stop with the
manufacturer and his buyer but would extend to the ultimate buyer i.e. the
consumer. He submitted that there can be no claim for refund on the basis
of post clearance transactions. He further submitted that there is a
presumption, though rebuttable, that the full incidence of the duty has
passed on to the buyer of the goods. The learned Additional Solicitor
General has strongly relied upon Mafatlal Industries Ltd. and Others Vs.
Union of India And Ors., reported in (1997) 5 SCC 536 to support his
contentions on unjust enrichment.
11. Mr. N. Venkatraman, Senior Advocate appearing for the Assessee
contended that turnover discount is an admissible deduction, the scheme of
turnover discount was known to the buyer even at the time of sale, discount
was given on the basis of the turnover of sales made by the buyer and that
the credit notes issued to the buyer contains the discounts and the duty
element. Though there is a confusion from the pleadings and the order
passed by the High Court regarding the passing of the incidence of duty,
Mr. N. Venkatraman had fairly submitted that the incidence of duty was
originally passed on to the buyer. He submitted that the turnover discount
should be allowed to be deducted from the sale price as held in Union of
India and Others Vs. Bombay Tyre International Pvt. Ltd. reported in (1984)
1 SCC 467 and (2005) 3 SCC 787. He contends that in the said judgments it
was held that trade discounts should not be disallowed only because they
are not payable at the time of each invoice or deducted from the invoice
price. He also placed reliance on IFB Industries Ltd. Vs. State of Kerala
reported in (2012) 4 SCC 618 to support his submission that to qualify for
exemption, discounts need not be shown in the invoice itself.
12. Mr.Venkatraman further submitted that the eligibility of the Assessee
for refund of amounts towards turnover discounts is no longer in doubt as
this Court by its judgment dated 11.03.1997 in Addison & Company Ltd.,
Madras Vs. Collector of Central Excise, Madras reported in (1997) 5 SCC 763
had held that turnover discount is an admissible deduction. He stated that
Section 4 read with Section 11-B of the Act permits the respondent to claim
for refund of turnover discount given after the sale, provided the scheme
of discount has been agreed upon prior to the removal of the goods. The
Assessee while issuing a credit note for the turnover discount has returned
the duty component forming part of the said discount. As the Assessee has
not retained the duty component of the turnover discount, he does not stand
to benefit from both ends and hence he is entitled for claiming a refund of
the excess duty paid. The refund to which the Assessee is entitled to
would not result in any unjust enrichment. While referring to the relevant
provisions of Section 11-B, 12-A and 12-B of the Act, Mr. Venkatraman
submitted that the buyer mentioned in the said provisions would be the
buyer of the goods from the manufacturer Assessee. He stressed upon
Clauses ‘a’ to ‘f’ of the Proviso to Section 11-B (2) in support of his
submission that the only persons eligible to make a claim for refund would
be the manufacturer, his buyer and a class of persons as notified by the
Central Government. On the basis of the above submission, he states that
there is absolutely no necessity for any verification to be made as to who
is the ultimate consumer and as to whether he had borne the burden of the
duty. According to him, if the manufacturer is entitled for a refund
towards an admissible deduction, such refund has to be given to him if he
did not retain the benefit. He also stated that the judgment of this
Court in Mafatlal Industries Ltd. & Ors. Vs. Union of India (supra) which
was relied upon by the learned Additional Solicitor General would, in fact,
support his case. He further submitted that the identity of the Excise
duty is lost at the sales conducted downstream as the duty becomes part of
the price.
13. In reply to the submissions of Mr. Venkatraman, Sr. Advocate, the Ld.
Additional Solicitor General stated that the verification to be done by the
Department to enquire about the ultimate buyer who has actually paid the
duty is not a futile exercise. He stated that the refund can be granted
only to the person who has paid the duty and not to anyone else. If the
ultimate consumer cannot be identified, the amount would be retained in the
Fund and utilized for the benefit of Consumers.
14. We have considered the submissions made by the Counsel carefully and
examined the material on record. The questions that arise for consideration
in this case are whether the Assessee is entitled for a refund and whether
there would be unjust enrichment if the said refund is allowed. It was
held by the Special Bench of CEGAT, New Delhi by its judgment dated
17.03.1994 in Collector of Central Excise, Madras Vs. Addison & Co. Ltd.
that the turnover discount is not an admissible abatement on the ground
that the quantum of discount was not known prior to the removable of the
goods. In an appeal filed by the respondent-Assessee, this Court by its
judgment dated 11.03.1997 in Addison & Co. Ltd. Vs. Collector of Central
Excise, Madras (supra) held that the turnover discount is an admissible
deduction. This Court approved the normal practice under which discounts
are given and held that the discount is known to the dealer at the time of
purchase. The Additional Solicitor General submitted that any credit note
that was raised post clearance will not be taken into account for the
purpose of a refund by the Department. We do not agree with the said
submission as it was held by this Court in Union of India Vs Bombay Tyre
International (supra) that trade discounts shall not be disallowed only
because they are not payable at the time of each invoice or deducted from
the invoice price. It is the submission of the Assessee that the turnover
discount is known to the dealer even at the time of clearance which has
also been upheld by this Court. It is clear from the above that the
Assessee is entitled for filing a claim for refund on the basis of credit
notes raised by him towards turnover discount.
15. The following provisions of Central Excise Act, 1944 are relevant for
appreciating the point of unjust enrichment:-
SECTION 11B. Claim for refund of duty. —
“(1) Any person claiming refund of any duty of excise may make an
application for refund of such duty to the [Assistant Commissioner of
Central Excise or Deputy Commissioner of Central Excise] before the expiry
of [one year] [from the relevant date] [[in such form and manner] as may be
prescribed and the application shall be accompanied by such documentary or
other evidence (including the documents referred to in section 12A) as the
applicant may furnish to establish that the amount of duty of excise in
relation to which such refund is claimed was collected from, or paid by,
him and the incidence of such duty had not been passed on by him to any
other person :
Provided that where an application for refund has been made before the
commencement of the Central Excises and Customs Laws (Amendment) Act, 1991,
(40 of 1991), such application shall be deemed to have been made under this
sub-section as amended by the said Act and the same shall be dealt with in
accordance with the provisions of sub-section (2) as substituted by that
Act :]
[Provided further that] the limitation of [one year] shall not apply where
any duty has been paid under protest.
* * * *
(2) If, on receipt of any such application, the [Assistant Commissioner of
Central Excise or Deputy Commissioner of Central Excise] is satisfied that
the whole or any part of the duty of excise paid by the applicant is
refundable, he may make an order accordingly and the amount so determined
shall be credited to the Fund :
Provided that the amount of duty of excise as determined by the [Assistant
Commissioner of Central Excise or Deputy Commissioner of Central Excise]
under the foregoing provisions of this sub-section shall, instead of being
credited to the Fund, be paid to the applicant, if such amount is relatable
to-
(a) rebate of duty of excise on excisable goods exported out of India
or on excisable materials used in the manufacture of goods which are
exported out of India;
(b) unspent advance deposits lying in balance in the applicant’s account
current maintained with the [Commissioner of Central Excise];
(c) refund of credit of duty paid on excisable goods used as inputs in
accordance with the rules made, or any notification issued, under this Act;
(d) the duty of excise paid by the manufacturer, if he had not passed on
the incidence of such duty to any other person;
(e) the duty of excise borne by the buyer, if he had not passed on the
incidence of such duty to any other person;
(f) the duty of excise borne by any other such class of applicants as the
Central Government may, by notification in the Official Gazette, specify :
Provided further that no notification under clause (f) of the first proviso
shall be issued unless in the opinion of the Central Government, the
incidence of duty has not been passed on by the persons concerned to any
other person.
(3) Notwithstanding anything to the contrary contained in any judgment,
decree, order or direction of the Appellate Tribunal of any Court in any
other provision of this Act or the rules made thereunder or any other law
for the time being in force, no refund shall be made except as provided in
sub-section (2).
(4) Every notification under proviso to sub-section (2) shall be laid
before each House of Parliament, if it is sitting, as soon as may be after
the issue of the notification, and, if it is not sitting, within seven days
of its re-assembly, and the Central Government shall seek the approval of
Parliament to the notification by a resolution moved within a period of
fifteen days beginning with the day on which the notification is so laid
before the House of the People and if Parliament makes any modification in
the notification or directs that the notification should cease to have
effect, the notification shall thereafter have effect only in such modified
form or be of no effect, as the case may be, but without prejudice to the
validity of anything previously done thereunder.
(5) For the removal of doubts, it is hereby declared that any notification
issued under clause f of the first proviso to sub-section (2), including
any such notification approved or modified under sub-section (4), may be
rescinded by the Central Government at any time by notification in the
Official Gazette.]
[Explanation. — For the purposes of this section, -
(A) “refund” includes rebate of duty of excise on excisable goods exported
out of India or on excisable materials used in the manufacture of goods
which are exported out of India;
(B) “relevant date” means, -
(a) in the case of goods exported out of India where a refund of excise
duty paid is available in respect of the goods themselves or, as the case
may be, the excisable materials used in the manufacture of such goods, -
(i) if the goods are exported by sea or air, the date on which
the ship or the aircraft in which such goods are loaded, leaves
India,
or
(ii) if the goods are exported by land, the date on which
such goods pass the frontier,
Or
(iii) if the goods are exported by post, the date of
dispatch of goods by the Post Office concerned to a place outside
India;
(b) in the case of goods returned for being remade, refined,
reconditioned, or subjected to any other similar process, in any factory,
the date of entry into the factory for the purposes aforesaid;
(c) in the case of goods to which banderols are required to be affixed if
removed for home consumption but not so required when exported outside
India, if returned to a factory after having been removed from such factory
for export out of India, the date of entry into the factory;
(d) in a case where a manufacturer is required to pay a sum, for a certain
period, on the basis of the rate fixed by the Central Government by
notification in the Official Gazette in full discharge of his liability for
the duty leviable on his production of certain goods, if after the
manufacturer has made the payment on the basis of such rate for any period
but before the expiry of that period such rate is reduced, the date of such
reduction;
[(e) in the case of a person, other than the manufacturer, the date of
purchase of the goods by such person;]
(ea) in the case of goods which are exempt from payment of duty by a
special order issued under sub-section (2) of section 5A, the date of issue
of such order;]
(eb) in case where duty of excise is paid provisionally under this Act or
the rules made thereunder, the date of adjustment of duty after the final
assessment thereof;]
(f) in any other case, the date of payment of duty.]
SECTION 12A. Price of goods to indicate the amount of duty paid thereon. —
Notwithstanding anything contained in this Act or any other law for the
time being in force, every 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.
SECTION 12B. Presumption that the incidence of duty has been passed on to
the buyer. —
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.
SECTION 12C. Consumer Welfare Fund. —
(1) There shall be established by the Central Government a fund, to be
called the Consumer Welfare Fund.
(2) There shall be credited to the Fund, in such manner as may be
prescribed, -
(a) the amount of duty of excise referred to in sub-section (2) of section
11B or sub-section (2) of section 11C or sub-section (2) of section 11D;
(b) the amount of duty of customs referred to in sub-section (2) of section
27 or sub-section (2) of section 28A, or sub-section (2) of section 28B of
the Customs Act, 1962 (52 of 1962);
(c) any income from investment of the amount credited to the Fund and any
other monies received by the Central Government for the purposes of this
Fund.
SECTION 12D. Utilisation of the Fund. —
(1) Any money credited to the Fund shall be utilised by the Central
Government for the welfare of the consumers in accordance with such rules
as that Government may make in this behalf.
(2) The Central Government shall maintain or, if it thinks fit, specify the
authority which shall maintain, proper and separate account and other
relevant records in relation to the Fund in such form as may be prescribed
in consultation with the Comptroller and Auditor-General of India”.
16. In the instant case, the Assessee has admitted that the incidence of
duty was originally passed on to the buyer. There is no material brought
on record to show that the buyer to whom the incidence of duty was passed
on by the Assessee did not pass it on to any other person. There is a
statutory presumption under Section 12-B of the Act that the duty has been
passed on to the ultimate consumer. It is clear from the facts of the
instant case that the duty which was originally paid by the Assessee was
passed on. The refund claimed by the Assessee is for an amount which is
part of the excise duty paid earlier and passed on. The Assessee who did
not bear the burden of the duty, though entitled to claim deduction, is not
entitled for a refund as he would be unjustly enriched.
It will be useful to refer to the relevant para of Mafatlal
Industries Vs. Union of India (supra) in this connection.
“108. (iii) A claim for refund, whether made under the provisions of the
Act as contemplated in Proposition (i) above or in a suit or writ petition
in the situations contemplated by Proposition (ii) above, can succeed only
if the petitioner/plaintiff alleges and establishes that he has not passed
on the burden of duty to another person/other persons. His refund claim
shall be allowed/decreed only when he establishes that he has not passed on
the burden of the duty or to the extent he has not so passed on, as the
case may be. Whether the claim for restitution is treated as a
constitutional imperative or as a statutory requirement, it is neither an
absolute right nor an unconditional obligation but is subject to the above
requirement, as explained in the body of the judgment. Where the burden of
the duty has been passed on, the claimant cannot say that he has suffered
any real loss or prejudice. The real loss or prejudice is suffered in such
a case by the person who has ultimately borne the burden and it is only
that person who can legitimately claim its refund. But where such person
does not come forward or where it is not possible to refund the amount to
him for one or the other reason, it is just and appropriate that that
amount is retained by the State, i.e., by the people. There is no
immorality or impropriety involved in such a proposition.
The doctrine of unjust enrichment is a just and salutary 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. The doctrine of unjust enrichment is, however,
inapplicable to the State. State represents the people of the country. No
one can speak of the people being unjustly enriched”.
17. Section 11-B (2) of the Act contemplates that the amount of refund
determined by the Authorities shall be credited to the fund. The Proviso to
Section 11-B (2) permits the refund to be paid to the applicant instead of
being credited to the fund if such amount is relatable to the manufacturer,
the buyer or any other such class of applicants as notified by the Central
Government.
18. Mr. Venkatraman interpreted the said provision to mean that the only
persons who were entitled for claim of refund are the manufacturer, his
buyer and any other class of persons as notified by the Central Government.
There is no dispute about the fact that no notification has been issued by
the Central Government as contemplated in Clause (f) to proviso to Section
11-B (2) of the Act. He contested that the claim for refund can be made
only by the manufacturer or his buyer and any enquiry pertaining to unjust
enrichment should be restricted only to the manufacturer and his buyer. The
ultimate buyer/ consumer will not figure in the scheme of Sections 11-B, 12-
A, 12-B and 12-C of the Act. This submission was accepted by the High
Court in the impugned judgment. We do not approve the findings of the High
Court in this regard.
19. The sine qua non for a claim for refund as contemplated in Section 11-
B of the Act is that the claimant has to establish that the amount of duty
of excise in relation to which such refund is claimed was paid by him and
that the incidence of such duty has not been passed on by him to any other
person. Section 11-B (2) provides that, in case it is found that a part of
duty of excise paid is refundable, the amount shall be credited to the
fund. Section 2 (ee) defines Fund to mean the Consumer Welfare Fund
established under Section 12-C. There is a proviso to Section 11-B (2)
which postulates that the amount of excise duty which is refundable may be
paid to the applicant instead of being credited to the fund, if such amount
is relatable to the duty of excise paid by the manufacturer and he had not
passed on the incidence of such duty to any other person. Clause (e) to
proviso of Section 11-B (2) also enables the buyer to receive the refund if
he had borne the duty of excise, provided he did not pass on the incidence
of such duty to any other person. There is a third category of a class of
applicants who may be specified by the Central Government by a notification
in the official gazette who are also entitled for refund of the duty of
excise. A plain reading of Clauses (d), (e) and (f) of the proviso to
Section 11-B (2) shows that refund to be made to an applicant should be
relatable only to the duty of excise paid by the three categories of
persons mentioned therein i.e. the manufacturer, the buyer and a class of
applicants notified by the Central Government. Clause (e) refers to the
buyer which is not restricted to the first buyer from the manufacturer.
The buyer mentioned in the above Clause can be a buyer downstream as well.
While dealing with the absence of a provision for refund to the consumer in
the rules this Court in Mafatlal Industries Vs. Union of India (supra) held
as follows:-
“98. A major attack is mounted by the learned counsel for petitioners-
appellants on Section 11-B and its allied provisions on the ground that
real purpose behind them was not to benefit the consumers by refusing
refund to manufacturers (on the ground of passing on the burden) but only
to enable the Government to retain the illegally collected taxes. It is
suggested that the creation of the Consumer Welfare Fund is a mere pretence
and not an honest exercise. By reading the Rules framed under Section 12-D,
it is pointed out, even a consumer, who has really borne the burden of tax
and is in a position to establish that fact, is yet not entitled to apply
for refund of the duty since the Rules do not provide for such a situation.
The Rules contemplate only grants being made to Consumer Welfare Societies.
Even in the matter of making grants, it is submitted, the Rules are so
framed as to make it highly difficult for any consumer organisation to get
the grant. There is no provision in the Act, Shri Nariman submitted, to
locate the person really entitled to refund and to make over the money to
him. “We expect a sensitive Government not to bluff but to hand back the
amounts to those entitled thereto”, intoned Shri Nariman. It is a
colourable device — declaimed Shri Sorabjee — “a dirty trick” and “a shabby
thing”. The reply of Shri Parasaran to this criticism runs thus: It ill-
becomes the manufacturers/Assessees to espouse the cause of consumers, when
all the while they had been making a killing at their expense. No
consumers' organisation had come forward to voice any grievance against the
said provisions. Clause (e) of the proviso to sub-section (2) of Section 11-
B does provide for the buyer of the goods, to whom the burden of duty has
been passed on, to apply for refund of duty to him, provided that he has
not in his turn passed on the duty to others. It is, therefore, not correct
to suggest that the Act does not provide for refund of duty to the person
who has actually borne the burden. There is no vice in the relevant
provisions of the Act. Rules cannot be relied upon to impugn the validity
of an enactment, which must stand or fall on its own strength. The defect
in the Rules, assuming that there is any, can always be corrected if the
experience warrants it. The Court too may indicate the modifications needed
in the Rules. The Government is always prepared to make the appropriate
changes in the Rules since it views the process as a “trial and error”
method — says Shri Parasaran”.
20. There was a further submission which was considered in the said
judgment about the convenience/difficulty for the ultimate consumer to make
applications for refund. In that connection it was held as follows:-
“99. We agree with Shri Parasaran that so far as the provisions of the Act
go, they are unexceptionable. Section 12-C which creates the Consumer
Welfare Fund and Section 12-D which provides for making the Rules
specifying the manner in which the money credited to the Fund shall be
utilised cannot be faulted on any ground. Now, coming to the Rules, it is
true that these Rules by themselves do not contemplate refund of any amount
credited to the Fund to the consumers who may have borne the burden; the
Rules only provide for “grants” being made in favour of consumer
organisations for being spent on welfare of consumers. But, this is perhaps
for the reason that clause (e) of the proviso to sub-section (2) of Section
11-B does provide for the purchaser of goods applying for and obtaining the
refund where he can satisfy that the burden of the duty has been borne by
him alone. Such a person can apply within six months of his purchase as
provided in clause (e) of Explanation B appended to Section 11-B. It is,
therefore, not correct to contend that the impugned provisions do not
provide for refunding the tax collected contrary to law to the person
really entitled thereto. A practical difficulty is pointed out in this
behalf by the learned counsel for appellants-petitioners: It is pointed out
that the manufacturer would have paid the duty at the place of “removal” or
“clearance” of the said goods but the sale may have taken place elsewhere;
if the purchaser wants to apply for refund — it is submitted — he has to go
to the place where the duty has been paid by the manufacturer and apply
there. It is also pointed out that purchasers may be spread all over India
and it is not convenient or practicable for all of them to go to the place
of “removal” of goods and apply for refund. True it is that there is this
practical inconvenience but it must also be remembered that such claims
will be filed only by purchasers of high-priced goods where the duty
component is large and not by all and sundry/small purchasers. This
practical inconvenience or hardship, as it is called, cannot be a ground
for holding that the provisions introduced by the 1991 (Amendment) Act are
a “device” or a “ruse” to retain the taxes collected illegally and to
invalidate them on that ground — assuming that such an argument is
permissible in the case of a taxing enactment made by Parliament. (See R.K.
Garg [(1981) 4 SCC 675 : 1982 SCC (Tax) 30 : AIR 1981 SC 2138] and other
decisions cited in paras 87 and 88.)”
21. That a consumer can make an application for refund is clear from
paras 98 and 99 of the judgment of this Court in Mafatlal Industries
(supra). We are bound by the said findings of a Larger Bench of this
Court. The word ‘buyer’ in Clause (e) to proviso to Section 11-B (2) of
the Act cannot be restricted to the first buyer from the manufacturer.
Another submission which remains to be considered is the requirement of
verification to be done for the purpose of finding out who ultimately bore
the burden of excise duty. It might be difficult to identify who had
actually borne the burden but such verification would definitely assist the
Revenue in finding out whether the manufacturer or buyer who makes an
application for refund are being unjustly enriched. If it is not possible
to identify the person/persons who have borne the duty, the amount of
excise duty collected in excess will remain in the fund which will be
utilized for the benefit of the consumers as provided in Section 12-D.
22. The High Court proceeded on an erroneous assumption of fact as well.
It was held by the High Court that there is no unjust enrichment as the
burden has not been passed on. The High Court’s interpretation of Section
11-B is also not correct.
23. In view of the above findings, the judgment of the High Court is
liable to be set aside. The Assessee is not entitled to refund as it would
result in unjust enrichment. The Appeal is allowed and the judgment of the
High Court is set aside.
Special Leave Petition (C) Nos. 18426, 23722, 18423, 18425 of 2015 and
12282, 16141 and 16142 of 2016.
Leave granted.
24. Civil Appeals arising out of Special Leave Petition (C) Nos. 18426,
23722, 18423 and 18425 of 2015 are filed by Commissioner of Central Excise,
Vishakapatnam, challenging the legality of judgment dated 19.02.2014 of a
Division Bench of the High Court of Andhra Pradesh in Central Excise Appeal
Nos. 51 of 2004 and 10, 9 and 21 of 2005. Civil Appeals arising out of SLP
(C) Nos. 12282, 16141 and 16142 of 2016 are filed by the Commissioner of
Central Excise, Vishakapatnam against the judgment dated 01.07.2015 of a
Division Bench of the High Court of Andhra Pradesh in Central Excise Appeal
Nos. 44 and 38 of 2004 and 18 of 2005. These three appeals were disposed of
by the High Court in terms of its earlier judgment dated 19.02.2014.
25. The Assessee i.e. Andhra Pradesh Paper Mills Ltd. manufactures Paper
and Paper boards. There is no dispute that excise duty is paid by the
Assessee and the same is passed on to its buyers. Applications were filed
by the Assessee for refund of amounts towards trade discounts that were
given to its buyers. The refund claim is on the basis of credit notes
raised by the Assessee subsequent to the sale/removal of goods. The credit
notes that were raised by the Assessee were towards trade discounts which
included the component of excise duty. The refund claims of the Assessees
were rejected by the Assistant Commissioner of Central Excise, Rajahmundry
Division. The Commissioner Customs, Central Excise (Appeals) Hyderabad
confirmed the said orders in the appeals filed by the Assessee. The
Customs, Excise and Service Tax Appellate Tribunal, South Zonal Division,
Bangalore dismissed the appeals filed by the Assessee.
26. The Assessee approached the High Court of Andhra Pradesh by filing
Central Excise Appeals. By a judgment dated 19.02.2014, the High Court of
Andhra Pradesh allowed the Central Excise Appeal Nos. 9, 10 and 51 of 2004
and 21 of 2005. The appeals were allowed, as being squarely covered by the
judgment of the Madras High Court in Addison and Company Ltd., Madras Vs.
Collector of Central Excise, Madras reported in (1997) 5 SCC 763.
27. The Revenue has filed Special Leave Petitions against the said
judgment dated 19.02.2014. Special Leave Petition (C) Nos. 12282, 16141 and
16142 of 2016 were filed by the Revenue against the judgment dated
01.07.2015 of the Division Bench of the Andhra Pradesh High Court which
followed its earlier judgment dated 19.02.2014. The issues involved in the
above Civil Appeals are similar to that of Civil Appeal No. 7906 of 2002.
28. The Appeals filed by the Revenue are allowed, in terms of the
judgment in Civil Appeal No. 7906 of 2002.
Civil Appeal No. 14689 of 2015
29. The above Civil Appeal is filed by the Commissioner of Central Excise
and Customs challenging the judgment of the Andhra Pradesh High Court in
Central Excise Appeal No. 21 of 2004. The Respondent-Assessee manufactures
Pesticide formulations which are used as pesticides in agricultural farms.
The Pesticides are sold at the factory gate and also through depots. The
Assessee submitted an application for refund towards allowable discounts
after the removal of goods from the factory. Credit notes were issued by
the Assessee in favour of the buyers towards trade discounts which also
contained a component of the excise duty. There is no dispute regarding
the fact of payment of the excise duty originally by the manufacturer being
passed on to his buyers. The refund claim of the Assessee was rejected by
the Deputy Commissioner vide Order-in-Original No. 58 of 2002 dated
30.12.2002. The above said order was reversed by the Commissioner of
Customs and Central Excise by his order dated 12.03.2003.
30. The Revenue filed an appeal before the Customs, Excise and Service
Tax Appellate Tribunal, South Zonal Division, Bangalore which was allowed.
The Assessee preferred an appeal to the High Court aggrieved by the order
of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal
Division, Bangalore. The High Court following its own judgment in Andhra
Pradesh Paper Mills Vs. Commissioner of Central Excise allowed the appeal.
The point in this appeal is identical to the issue in Civil Appeal No. 7906
of 2002. The Appeal filed by the Revenue is allowed in terms of the
judgment in Civil Appeal No. 7906 of 2002.
Special Leave Petition (C) No. 25055 of 2009
Leave granted.
31. The Assessee is engaged in the processing of man-made fibre. Prior to
11.06.2001 the CENVAT credit admissible on the declared inputs used in the
manufacture of process of man-made fibre was 45 per cent. The net duty
payable on the fibre was 55 per cent of the effective duty. On 11.06.2001,
a notification was issued increasing CENVAT credit from 45 per cent to 50
per cent which resulted in the net duty payable being 50 per cent. The
Assessee continued to pay the effective duty at 55 per cent for a short
period between 11.06.2001 to 13.06.2001. The effective duty of excise is
16 per cent and the duty payable from the personal ledger account prior to
the notification dated 11.06.2001 was 8.8 per cent and after 11.06.2001 the
duty payable is 8 per cent. The Assessee made an application for refund of
Rs. 61,146/- paid in excess on 31.07.2001. The said application for refund
was rejected by an Order-in-Original dated 12.08.2002 by the Assistant
Commissioner, Bhilwara on the ground that the Assessee was a job worker
engaged in the processing of grey fabric and that the said fabric was
returned to the owners of the fabric who sold the processed fabric in the
market. It was also held that the incidence of the duty was passed on to
the ultimate customers/consumers before the debit notes were raised by the
owners of the fabric. As the duty paid at 8.8 per cent was passed on by
the owner of the fabric to the ultimate consumer the processor was not
entitled for a refund.
32. The Assessee approached the Commissioner Appeals, II Customs &
Central Excise, Jaipur by filing an appeal which was rejected by an order
dated 27.02.2003. The Central Excise and Service Tax Appellate Tribunal by
its order dated 11.05.2005 allowed the appeal filed by the Assessee on the
ground that the incidence of duty was not passed on by the Assessee to the
customers. The customers protested to the charging of the net duty payable
at 8.8 per cent instead of 8 per cent in spite of the notification issued
on 11.06.2001. This protest was made without any delay so the question of
passing the incidence of duty by the owners of the fabric to their
customers does not arise.
33. In Central Excise Appeal No. 34 of 2005 filed by the Union of India
through Commissioner of Central Excise, Jaipur, the High Court of
Judicature for Rajasthan at Jodhpur confirmed the order of the Central
Excise and Service Tax Appellate Tribunal. Challenging the said judgment of
the High Court dated 26.11.2008, the Union of India has filed the above
Appeal. The contention raised by the Revenue before the High Court
regarding the presumption under Section 12-B of the Act was rejected by the
High Court by holding that once the Assessee shows that he has not passed
on the duty to his buyer, then the burden shifts to the Revenue. The
submission that there is a presumption of the duty being passed on to the
ultimate consumer was not accepted by the High Court. The High Court held
that the claim for refund should be accepted once the Assessee shows that
he has raised a credit note regarding the excess duty. The High Court had
further held that passing on the burden of excise duty to the ultimate
buyer cannot be left in the realm of presumption.
34. In Civil Appeal No. 7906 of 2002, we have already held that in the
claim for refund of excess duty paid can be allowed only in case where the
burden of duty has not been passed on to any other person, which includes
the ultimate consumer as well. The findings in the Order-in-Original and
the Order-in-Appeal are that the excise duty paid originally at the rate of
8.8 per cent was passed on from the Assessee-processor to the owner of the
fabric and later to the customers. The point in this Appeal is also
identical to that of Civil Appeal No. 7906 of 2002. The above appeal of
the Revenue is allowed.
Civil Appeal No. 8488 of 2009
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 14.08.2002 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
02.08.2002. The refund claim was rejected by the Deputy Commissioner of
Central Excise, Kolhapur Division vide an order dated 24.09.2002 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
29.07.2002. 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 Central Excise and Service Tax
Appellate Tribunal vide judgment and order dated 06.10.2005. The said
order of Central Excise and Service Tax Appellate Tribunal was further
confirmed by the High Court of Judicature at Bombay in Central 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 facts of this case being different from
Civil Appeal No. 7906 of 2002, the appeal preferred by the Revenue is
dismissed.
37. As held above, Civil Appeal Nos. 7906 of 2002 and 14689 of 2015 are
allowed. Civil Appeals arising out of Special Leave Petition (C) Nos. 18426
of 2015, 18423 of 2015, 18425 of 2015, 23722 of 2015, 12282 of 2016, 16142
of 2016, 16141 of 2016 and 25055 of 2009 are also allowed in terms of the
judgment in Civil Appeal No. 7906 of 2002. Civil Appeal No. 8488 of 2009
is dismissed. No order as to costs.
................................J.
[ANIL R. DAVE]
................................J.
[AMITAVA ROY]
................................J.
[L. NAGESWARA RAO]
New Delhi,
August 29, 2016
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 7906 of 2002
Commissioner of Central Excise, Madras
.... Appellant(s)
Versus
M/s Addison & Co. Ltd.
… Respondent(s)
WITH
CIVIL APPEAL No. 8488 of 2009
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 25055 of 2009)
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 18426 of 2015)
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 18423 of 2015)
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 18425 of 2015)
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 23722 of 2015)
CIVIL APPEAL No. 14689 of 2015
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 12282 of 2016)
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 16142 of 2016)
CIVIL APPEAL No. _________of 2016
(Arising out of SLP (C) No. 16141 of 2016)
J U D G M E N T
L. NAGESWARA RAO, J.
The above Appeals have been listed before us because of an order
dated 16.07.2008, by which there was a reference to a Larger Bench in view
of the importance of the questions involved.
2. Civil Appeal No. 7906 of 2002 arises from the judgment dated
23.11.2000 passed by the Madras High Court in R.C. No. 01 of 1999. Civil
Appeal No. 14689 of 2015 was filed by the Revenue against the judgment
dated 26.11.2014 in Central Excise Appeal No. 21 of 2009. Special Leave
Petition (C) Nos. 18426 of 2015, 18423 of 2015, 18425 of 2015, 23722 of
2015, 12282 of 2016, 16142 of 2016 and 16141 of 2016 are filed against the
judgment of the Andhra Pradesh High Court in Central Excise Appeal Nos. 21
of 2005, 9 of 2005, 51 of 2004, 10 of 2005, 44 of 2004, 38 of 2004 and 18
of 2005 respectively.
3. Civil Appeal No. 8488 of 2009 is filed against the judgment dated
20.08.2008 passed by the Bombay High Court in Central Excise Appeal No. 100
of 2008 and Special Leave Petition (C) No. 25055 of 2009 is filed by the
Union of India against the judgment dated 26.11.2008 of the High Court of
Rajasthan at Jodhpur in D.B. Central Excise Appeal No. 34 of 2007.
4. Civil Appeal No. 7906 of 2002 will be taken as the lead matter as SLP
(C) Nos. 18426, 23722, 18425, 18423 of 2015 and 12282, 16141 and 16142 of
2016 and Civil Appeal No. 14689 of 2015 were disposed of by the Andhra
Pradesh High Court by following the Madras High Court’s impugned judgment
in Civil Appeal No. 7906 of 2002. Civil Appeal No. 8488 of 2009 and SLP
No. 25055 of 2009 will be dealt with separately as the facts and the point
involved are slightly different.
Civil Appeal No. 7906 of 2002
5. The respondent in the above appeal is a manufacturer of cutting
tools. The respondent-Assessee filed a refund claim for Rs. 40,22,133/- on
19.07.1988 and a supplementary refund claim for Rs. 5,44,688/- on
15.06.1989 towards excise duty paid on various taxes and discounts such as
turnover tax, surcharge, additional sales discounts, transitory insurance,
excise discounts, additional discounts and turnover discounts. The said
claim was later on revised to Rs. 40,37,938/- on 17.08.1988. The claim of
the Assessee was that the said amount was deductable from the excise duty.
The Department was of the opinion that the refund towards turnover discount
and additional discount was to be rejected as the Assessee was not eligible
for deduction from the wholesale price for determination of value under
Section 4 of the Central Excises & Salt Act, 1944. On 23.08.1989 a notice
was issued to the respondent to show cause as to why the refund claim
involving turnover discount and additional discount should not be rejected.
After hearing the Assessee, the Assistant Collector by an order dated
06.12.1989 rejected the refund claim amounting to Rs.26,37,462/- and
Rs.17,17,808/- in respect of turnover discount and additional discount
respectively on the ground that the quantum of discount become known only
at the year end. The Collector of Central Excise Appeals set aside the
said order dated 06.12.1989 of the Assistant Collector by his order in
appeal dated 21.02.1990 and held that the Assessee was entitled to refund.
6. As per the amendment made to Section 11-B of the Central Excise Act,
1944, (hereinafter referred to as “the Act”) an application filed for
refund prior to the Central Excises & Customs Laws (Amendment) Act 1991
shall be deemed to have been made under the Amendment Act and considered
accordingly. The Assistant Collector of Excise issued a show cause notice
dated 13.02.1992, directing the Assessee to produce evidence in support of
the refund claim. It was mentioned in the said notice that the burden of
proof to show that the full incidence of duty has not passed on to the
buyers is on the Assessee as per Section 12-B of the Act.
7. The Assistant Collector passed an Order-in-Original dated 27.10.1992
holding that the Assessee is entitled for the refund claimed by him. The
Collector of Central Excise by Order-in-Appeal dated 20.10.1993 rejected
the appeal filed by the Revenue and upheld the order dated 27.10.1992 of
the Assistant Collector of Central Excise, Madras Vth Division. The
Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT), South Zone
Bench of Madras allowed the appeal filed by the Revenue against the order
dated 20.10.1993 of the Collector of Central Excise. The Tribunal held
that the Assessee would be entitled to grant of refund only if he had not
passed on the duty burden to his buyers. It was also held that the buyer
in turn, would be entitled to claim refund only if he has not passed on the
incidence of duty to any other person. It was further held by the Tribunal
that the event which gives rise to cause of action for refund is payment of
duty made in respect of goods cleared from the factory and once the duty
burden has been passed on to the buyer at the time of clearance, issuance
of credit note at a later point of time would not entitle the Assessee to
claim any refund. The Tribunal also held that burden of duty is normally
passed by the manufacturer and the dealer to the ultimate consumer.
8. The Assessee filed an application for reference of questions arising
out of the final order dated 07.12.1996. The Tribunal referred the
following questions for consideration of the High Court by its order dated
28.08.1998, taking note of the fact of the existence of divergent views on
the point.
“1. Whether by passing on the duty element on the discount to its dealers
the applicant had satisfied the requirements of proviso ‘d’ to sub Section
11-B (2) of the Central Excise Act, 1944 and was therefore, entitled to be
paid the amount claimed as refund?
2. Whether the Tribunal after finding that the burden of duty was passed
on by the applicant to its various dealers by issue of credit notes was
right in concluding that the ingredients of Section 11-B were not
satisfied.”
9. The High Court of Madras answered the reference in favour of the
Assessee by its judgment dated 23.11.2000. The High Court held that the
refund towards deduction of turnover discount cannot be denied on the
ground that there was no evidence to show who is the ultimate consumer of
the product and as to whether the ultimate consumer had borne the burden of
the duty. According to the High Court, Section 11-B of the Act cannot be
construed as having reference to the ultimate Consumer and it would be
sufficient for the claimant to show that he did not pass on the burden of
duty to any other person. It was further held by the High Court that the
claim for refund made by the manufacturer is not dependent on the
identification of the ultimate consumer. The word ‘buyer’ used in Section
12-B of the Act does not refer to ultimate consumer and has reference only
to the person who buys the goods from the person who has paid duty i.e. the
manufacturer. The High Court concluded that the Tribunal committed an
error in holding that the Assessee was not entitled for refund despite the
Assessee proving that the duty was not passed on to its buyers.
Challenging the legality and validity of the said judgment of the High
Court, the Commissioner of Central Excise, Madras has filed Civil Appeal
No. 7906 of 2002.
10. We have heard Mr. Atmaram N. S. Nadkarni, Additional Solicitor
General and Mr. K. Radhakrishnan, Senior Advocate for the appellant and Mr.
N. Venkatraman, Senior Advocate for the respondent. The learned Additional
Solicitor General submitted that a claim for refund can be entertained only
when the claimant has not passed on the duty to any other person. By
referring to the statement of objects and reasons for the amendment made to
the Central Excises & Customs Laws (Amendment) Act 1991, the learned
Additional Solicitor General submitted that the Act had given effect to the
recommendations of the Public Accounts Committee whereby the refund of any
duty was proposed to be made only to the person who ultimately bears the
incidence of such duty. He submitted that it would be necessary for a
verification to be done to find out as to who actually bore the burden of
duty. According to him such verification would not stop with the
manufacturer and his buyer but would extend to the ultimate buyer i.e. the
consumer. He submitted that there can be no claim for refund on the basis
of post clearance transactions. He further submitted that there is a
presumption, though rebuttable, that the full incidence of the duty has
passed on to the buyer of the goods. The learned Additional Solicitor
General has strongly relied upon Mafatlal Industries Ltd. and Others Vs.
Union of India And Ors., reported in (1997) 5 SCC 536 to support his
contentions on unjust enrichment.
11. Mr. N. Venkatraman, Senior Advocate appearing for the Assessee
contended that turnover discount is an admissible deduction, the scheme of
turnover discount was known to the buyer even at the time of sale, discount
was given on the basis of the turnover of sales made by the buyer and that
the credit notes issued to the buyer contains the discounts and the duty
element. Though there is a confusion from the pleadings and the order
passed by the High Court regarding the passing of the incidence of duty,
Mr. N. Venkatraman had fairly submitted that the incidence of duty was
originally passed on to the buyer. He submitted that the turnover discount
should be allowed to be deducted from the sale price as held in Union of
India and Others Vs. Bombay Tyre International Pvt. Ltd. reported in (1984)
1 SCC 467 and (2005) 3 SCC 787. He contends that in the said judgments it
was held that trade discounts should not be disallowed only because they
are not payable at the time of each invoice or deducted from the invoice
price. He also placed reliance on IFB Industries Ltd. Vs. State of Kerala
reported in (2012) 4 SCC 618 to support his submission that to qualify for
exemption, discounts need not be shown in the invoice itself.
12. Mr.Venkatraman further submitted that the eligibility of the Assessee
for refund of amounts towards turnover discounts is no longer in doubt as
this Court by its judgment dated 11.03.1997 in Addison & Company Ltd.,
Madras Vs. Collector of Central Excise, Madras reported in (1997) 5 SCC 763
had held that turnover discount is an admissible deduction. He stated that
Section 4 read with Section 11-B of the Act permits the respondent to claim
for refund of turnover discount given after the sale, provided the scheme
of discount has been agreed upon prior to the removal of the goods. The
Assessee while issuing a credit note for the turnover discount has returned
the duty component forming part of the said discount. As the Assessee has
not retained the duty component of the turnover discount, he does not stand
to benefit from both ends and hence he is entitled for claiming a refund of
the excess duty paid. The refund to which the Assessee is entitled to
would not result in any unjust enrichment. While referring to the relevant
provisions of Section 11-B, 12-A and 12-B of the Act, Mr. Venkatraman
submitted that the buyer mentioned in the said provisions would be the
buyer of the goods from the manufacturer Assessee. He stressed upon
Clauses ‘a’ to ‘f’ of the Proviso to Section 11-B (2) in support of his
submission that the only persons eligible to make a claim for refund would
be the manufacturer, his buyer and a class of persons as notified by the
Central Government. On the basis of the above submission, he states that
there is absolutely no necessity for any verification to be made as to who
is the ultimate consumer and as to whether he had borne the burden of the
duty. According to him, if the manufacturer is entitled for a refund
towards an admissible deduction, such refund has to be given to him if he
did not retain the benefit. He also stated that the judgment of this
Court in Mafatlal Industries Ltd. & Ors. Vs. Union of India (supra) which
was relied upon by the learned Additional Solicitor General would, in fact,
support his case. He further submitted that the identity of the Excise
duty is lost at the sales conducted downstream as the duty becomes part of
the price.
13. In reply to the submissions of Mr. Venkatraman, Sr. Advocate, the Ld.
Additional Solicitor General stated that the verification to be done by the
Department to enquire about the ultimate buyer who has actually paid the
duty is not a futile exercise. He stated that the refund can be granted
only to the person who has paid the duty and not to anyone else. If the
ultimate consumer cannot be identified, the amount would be retained in the
Fund and utilized for the benefit of Consumers.
14. We have considered the submissions made by the Counsel carefully and
examined the material on record. The questions that arise for consideration
in this case are whether the Assessee is entitled for a refund and whether
there would be unjust enrichment if the said refund is allowed. It was
held by the Special Bench of CEGAT, New Delhi by its judgment dated
17.03.1994 in Collector of Central Excise, Madras Vs. Addison & Co. Ltd.
that the turnover discount is not an admissible abatement on the ground
that the quantum of discount was not known prior to the removable of the
goods. In an appeal filed by the respondent-Assessee, this Court by its
judgment dated 11.03.1997 in Addison & Co. Ltd. Vs. Collector of Central
Excise, Madras (supra) held that the turnover discount is an admissible
deduction. This Court approved the normal practice under which discounts
are given and held that the discount is known to the dealer at the time of
purchase. The Additional Solicitor General submitted that any credit note
that was raised post clearance will not be taken into account for the
purpose of a refund by the Department. We do not agree with the said
submission as it was held by this Court in Union of India Vs Bombay Tyre
International (supra) that trade discounts shall not be disallowed only
because they are not payable at the time of each invoice or deducted from
the invoice price. It is the submission of the Assessee that the turnover
discount is known to the dealer even at the time of clearance which has
also been upheld by this Court. It is clear from the above that the
Assessee is entitled for filing a claim for refund on the basis of credit
notes raised by him towards turnover discount.
15. The following provisions of Central Excise Act, 1944 are relevant for
appreciating the point of unjust enrichment:-
SECTION 11B. Claim for refund of duty. —
“(1) Any person claiming refund of any duty of excise may make an
application for refund of such duty to the [Assistant Commissioner of
Central Excise or Deputy Commissioner of Central Excise] before the expiry
of [one year] [from the relevant date] [[in such form and manner] as may be
prescribed and the application shall be accompanied by such documentary or
other evidence (including the documents referred to in section 12A) as the
applicant may furnish to establish that the amount of duty of excise in
relation to which such refund is claimed was collected from, or paid by,
him and the incidence of such duty had not been passed on by him to any
other person :
Provided that where an application for refund has been made before the
commencement of the Central Excises and Customs Laws (Amendment) Act, 1991,
(40 of 1991), such application shall be deemed to have been made under this
sub-section as amended by the said Act and the same shall be dealt with in
accordance with the provisions of sub-section (2) as substituted by that
Act :]
[Provided further that] the limitation of [one year] shall not apply where
any duty has been paid under protest.
* * * *
(2) If, on receipt of any such application, the [Assistant Commissioner of
Central Excise or Deputy Commissioner of Central Excise] is satisfied that
the whole or any part of the duty of excise paid by the applicant is
refundable, he may make an order accordingly and the amount so determined
shall be credited to the Fund :
Provided that the amount of duty of excise as determined by the [Assistant
Commissioner of Central Excise or Deputy Commissioner of Central Excise]
under the foregoing provisions of this sub-section shall, instead of being
credited to the Fund, be paid to the applicant, if such amount is relatable
to-
(a) rebate of duty of excise on excisable goods exported out of India
or on excisable materials used in the manufacture of goods which are
exported out of India;
(b) unspent advance deposits lying in balance in the applicant’s account
current maintained with the [Commissioner of Central Excise];
(c) refund of credit of duty paid on excisable goods used as inputs in
accordance with the rules made, or any notification issued, under this Act;
(d) the duty of excise paid by the manufacturer, if he had not passed on
the incidence of such duty to any other person;
(e) the duty of excise borne by the buyer, if he had not passed on the
incidence of such duty to any other person;
(f) the duty of excise borne by any other such class of applicants as the
Central Government may, by notification in the Official Gazette, specify :
Provided further that no notification under clause (f) of the first proviso
shall be issued unless in the opinion of the Central Government, the
incidence of duty has not been passed on by the persons concerned to any
other person.
(3) Notwithstanding anything to the contrary contained in any judgment,
decree, order or direction of the Appellate Tribunal of any Court in any
other provision of this Act or the rules made thereunder or any other law
for the time being in force, no refund shall be made except as provided in
sub-section (2).
(4) Every notification under proviso to sub-section (2) shall be laid
before each House of Parliament, if it is sitting, as soon as may be after
the issue of the notification, and, if it is not sitting, within seven days
of its re-assembly, and the Central Government shall seek the approval of
Parliament to the notification by a resolution moved within a period of
fifteen days beginning with the day on which the notification is so laid
before the House of the People and if Parliament makes any modification in
the notification or directs that the notification should cease to have
effect, the notification shall thereafter have effect only in such modified
form or be of no effect, as the case may be, but without prejudice to the
validity of anything previously done thereunder.
(5) For the removal of doubts, it is hereby declared that any notification
issued under clause f of the first proviso to sub-section (2), including
any such notification approved or modified under sub-section (4), may be
rescinded by the Central Government at any time by notification in the
Official Gazette.]
[Explanation. — For the purposes of this section, -
(A) “refund” includes rebate of duty of excise on excisable goods exported
out of India or on excisable materials used in the manufacture of goods
which are exported out of India;
(B) “relevant date” means, -
(a) in the case of goods exported out of India where a refund of excise
duty paid is available in respect of the goods themselves or, as the case
may be, the excisable materials used in the manufacture of such goods, -
(i) if the goods are exported by sea or air, the date on which
the ship or the aircraft in which such goods are loaded, leaves
India,
or
(ii) if the goods are exported by land, the date on which
such goods pass the frontier,
Or
(iii) if the goods are exported by post, the date of
dispatch of goods by the Post Office concerned to a place outside
India;
(b) in the case of goods returned for being remade, refined,
reconditioned, or subjected to any other similar process, in any factory,
the date of entry into the factory for the purposes aforesaid;
(c) in the case of goods to which banderols are required to be affixed if
removed for home consumption but not so required when exported outside
India, if returned to a factory after having been removed from such factory
for export out of India, the date of entry into the factory;
(d) in a case where a manufacturer is required to pay a sum, for a certain
period, on the basis of the rate fixed by the Central Government by
notification in the Official Gazette in full discharge of his liability for
the duty leviable on his production of certain goods, if after the
manufacturer has made the payment on the basis of such rate for any period
but before the expiry of that period such rate is reduced, the date of such
reduction;
[(e) in the case of a person, other than the manufacturer, the date of
purchase of the goods by such person;]
(ea) in the case of goods which are exempt from payment of duty by a
special order issued under sub-section (2) of section 5A, the date of issue
of such order;]
(eb) in case where duty of excise is paid provisionally under this Act or
the rules made thereunder, the date of adjustment of duty after the final
assessment thereof;]
(f) in any other case, the date of payment of duty.]
SECTION 12A. Price of goods to indicate the amount of duty paid thereon. —
Notwithstanding anything contained in this Act or any other law for the
time being in force, every 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.
SECTION 12B. Presumption that the incidence of duty has been passed on to
the buyer. —
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.
SECTION 12C. Consumer Welfare Fund. —
(1) There shall be established by the Central Government a fund, to be
called the Consumer Welfare Fund.
(2) There shall be credited to the Fund, in such manner as may be
prescribed, -
(a) the amount of duty of excise referred to in sub-section (2) of section
11B or sub-section (2) of section 11C or sub-section (2) of section 11D;
(b) the amount of duty of customs referred to in sub-section (2) of section
27 or sub-section (2) of section 28A, or sub-section (2) of section 28B of
the Customs Act, 1962 (52 of 1962);
(c) any income from investment of the amount credited to the Fund and any
other monies received by the Central Government for the purposes of this
Fund.
SECTION 12D. Utilisation of the Fund. —
(1) Any money credited to the Fund shall be utilised by the Central
Government for the welfare of the consumers in accordance with such rules
as that Government may make in this behalf.
(2) The Central Government shall maintain or, if it thinks fit, specify the
authority which shall maintain, proper and separate account and other
relevant records in relation to the Fund in such form as may be prescribed
in consultation with the Comptroller and Auditor-General of India”.
16. In the instant case, the Assessee has admitted that the incidence of
duty was originally passed on to the buyer. There is no material brought
on record to show that the buyer to whom the incidence of duty was passed
on by the Assessee did not pass it on to any other person. There is a
statutory presumption under Section 12-B of the Act that the duty has been
passed on to the ultimate consumer. It is clear from the facts of the
instant case that the duty which was originally paid by the Assessee was
passed on. The refund claimed by the Assessee is for an amount which is
part of the excise duty paid earlier and passed on. The Assessee who did
not bear the burden of the duty, though entitled to claim deduction, is not
entitled for a refund as he would be unjustly enriched.
It will be useful to refer to the relevant para of Mafatlal
Industries Vs. Union of India (supra) in this connection.
“108. (iii) A claim for refund, whether made under the provisions of the
Act as contemplated in Proposition (i) above or in a suit or writ petition
in the situations contemplated by Proposition (ii) above, can succeed only
if the petitioner/plaintiff alleges and establishes that he has not passed
on the burden of duty to another person/other persons. His refund claim
shall be allowed/decreed only when he establishes that he has not passed on
the burden of the duty or to the extent he has not so passed on, as the
case may be. Whether the claim for restitution is treated as a
constitutional imperative or as a statutory requirement, it is neither an
absolute right nor an unconditional obligation but is subject to the above
requirement, as explained in the body of the judgment. Where the burden of
the duty has been passed on, the claimant cannot say that he has suffered
any real loss or prejudice. The real loss or prejudice is suffered in such
a case by the person who has ultimately borne the burden and it is only
that person who can legitimately claim its refund. But where such person
does not come forward or where it is not possible to refund the amount to
him for one or the other reason, it is just and appropriate that that
amount is retained by the State, i.e., by the people. There is no
immorality or impropriety involved in such a proposition.
The doctrine of unjust enrichment is a just and salutary 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. The doctrine of unjust enrichment is, however,
inapplicable to the State. State represents the people of the country. No
one can speak of the people being unjustly enriched”.
17. Section 11-B (2) of the Act contemplates that the amount of refund
determined by the Authorities shall be credited to the fund. The Proviso to
Section 11-B (2) permits the refund to be paid to the applicant instead of
being credited to the fund if such amount is relatable to the manufacturer,
the buyer or any other such class of applicants as notified by the Central
Government.
18. Mr. Venkatraman interpreted the said provision to mean that the only
persons who were entitled for claim of refund are the manufacturer, his
buyer and any other class of persons as notified by the Central Government.
There is no dispute about the fact that no notification has been issued by
the Central Government as contemplated in Clause (f) to proviso to Section
11-B (2) of the Act. He contested that the claim for refund can be made
only by the manufacturer or his buyer and any enquiry pertaining to unjust
enrichment should be restricted only to the manufacturer and his buyer. The
ultimate buyer/ consumer will not figure in the scheme of Sections 11-B, 12-
A, 12-B and 12-C of the Act. This submission was accepted by the High
Court in the impugned judgment. We do not approve the findings of the High
Court in this regard.
19. The sine qua non for a claim for refund as contemplated in Section 11-
B of the Act is that the claimant has to establish that the amount of duty
of excise in relation to which such refund is claimed was paid by him and
that the incidence of such duty has not been passed on by him to any other
person. Section 11-B (2) provides that, in case it is found that a part of
duty of excise paid is refundable, the amount shall be credited to the
fund. Section 2 (ee) defines Fund to mean the Consumer Welfare Fund
established under Section 12-C. There is a proviso to Section 11-B (2)
which postulates that the amount of excise duty which is refundable may be
paid to the applicant instead of being credited to the fund, if such amount
is relatable to the duty of excise paid by the manufacturer and he had not
passed on the incidence of such duty to any other person. Clause (e) to
proviso of Section 11-B (2) also enables the buyer to receive the refund if
he had borne the duty of excise, provided he did not pass on the incidence
of such duty to any other person. There is a third category of a class of
applicants who may be specified by the Central Government by a notification
in the official gazette who are also entitled for refund of the duty of
excise. A plain reading of Clauses (d), (e) and (f) of the proviso to
Section 11-B (2) shows that refund to be made to an applicant should be
relatable only to the duty of excise paid by the three categories of
persons mentioned therein i.e. the manufacturer, the buyer and a class of
applicants notified by the Central Government. Clause (e) refers to the
buyer which is not restricted to the first buyer from the manufacturer.
The buyer mentioned in the above Clause can be a buyer downstream as well.
While dealing with the absence of a provision for refund to the consumer in
the rules this Court in Mafatlal Industries Vs. Union of India (supra) held
as follows:-
“98. A major attack is mounted by the learned counsel for petitioners-
appellants on Section 11-B and its allied provisions on the ground that
real purpose behind them was not to benefit the consumers by refusing
refund to manufacturers (on the ground of passing on the burden) but only
to enable the Government to retain the illegally collected taxes. It is
suggested that the creation of the Consumer Welfare Fund is a mere pretence
and not an honest exercise. By reading the Rules framed under Section 12-D,
it is pointed out, even a consumer, who has really borne the burden of tax
and is in a position to establish that fact, is yet not entitled to apply
for refund of the duty since the Rules do not provide for such a situation.
The Rules contemplate only grants being made to Consumer Welfare Societies.
Even in the matter of making grants, it is submitted, the Rules are so
framed as to make it highly difficult for any consumer organisation to get
the grant. There is no provision in the Act, Shri Nariman submitted, to
locate the person really entitled to refund and to make over the money to
him. “We expect a sensitive Government not to bluff but to hand back the
amounts to those entitled thereto”, intoned Shri Nariman. It is a
colourable device — declaimed Shri Sorabjee — “a dirty trick” and “a shabby
thing”. The reply of Shri Parasaran to this criticism runs thus: It ill-
becomes the manufacturers/Assessees to espouse the cause of consumers, when
all the while they had been making a killing at their expense. No
consumers' organisation had come forward to voice any grievance against the
said provisions. Clause (e) of the proviso to sub-section (2) of Section 11-
B does provide for the buyer of the goods, to whom the burden of duty has
been passed on, to apply for refund of duty to him, provided that he has
not in his turn passed on the duty to others. It is, therefore, not correct
to suggest that the Act does not provide for refund of duty to the person
who has actually borne the burden. There is no vice in the relevant
provisions of the Act. Rules cannot be relied upon to impugn the validity
of an enactment, which must stand or fall on its own strength. The defect
in the Rules, assuming that there is any, can always be corrected if the
experience warrants it. The Court too may indicate the modifications needed
in the Rules. The Government is always prepared to make the appropriate
changes in the Rules since it views the process as a “trial and error”
method — says Shri Parasaran”.
20. There was a further submission which was considered in the said
judgment about the convenience/difficulty for the ultimate consumer to make
applications for refund. In that connection it was held as follows:-
“99. We agree with Shri Parasaran that so far as the provisions of the Act
go, they are unexceptionable. Section 12-C which creates the Consumer
Welfare Fund and Section 12-D which provides for making the Rules
specifying the manner in which the money credited to the Fund shall be
utilised cannot be faulted on any ground. Now, coming to the Rules, it is
true that these Rules by themselves do not contemplate refund of any amount
credited to the Fund to the consumers who may have borne the burden; the
Rules only provide for “grants” being made in favour of consumer
organisations for being spent on welfare of consumers. But, this is perhaps
for the reason that clause (e) of the proviso to sub-section (2) of Section
11-B does provide for the purchaser of goods applying for and obtaining the
refund where he can satisfy that the burden of the duty has been borne by
him alone. Such a person can apply within six months of his purchase as
provided in clause (e) of Explanation B appended to Section 11-B. It is,
therefore, not correct to contend that the impugned provisions do not
provide for refunding the tax collected contrary to law to the person
really entitled thereto. A practical difficulty is pointed out in this
behalf by the learned counsel for appellants-petitioners: It is pointed out
that the manufacturer would have paid the duty at the place of “removal” or
“clearance” of the said goods but the sale may have taken place elsewhere;
if the purchaser wants to apply for refund — it is submitted — he has to go
to the place where the duty has been paid by the manufacturer and apply
there. It is also pointed out that purchasers may be spread all over India
and it is not convenient or practicable for all of them to go to the place
of “removal” of goods and apply for refund. True it is that there is this
practical inconvenience but it must also be remembered that such claims
will be filed only by purchasers of high-priced goods where the duty
component is large and not by all and sundry/small purchasers. This
practical inconvenience or hardship, as it is called, cannot be a ground
for holding that the provisions introduced by the 1991 (Amendment) Act are
a “device” or a “ruse” to retain the taxes collected illegally and to
invalidate them on that ground — assuming that such an argument is
permissible in the case of a taxing enactment made by Parliament. (See R.K.
Garg [(1981) 4 SCC 675 : 1982 SCC (Tax) 30 : AIR 1981 SC 2138] and other
decisions cited in paras 87 and 88.)”
21. That a consumer can make an application for refund is clear from
paras 98 and 99 of the judgment of this Court in Mafatlal Industries
(supra). We are bound by the said findings of a Larger Bench of this
Court. The word ‘buyer’ in Clause (e) to proviso to Section 11-B (2) of
the Act cannot be restricted to the first buyer from the manufacturer.
Another submission which remains to be considered is the requirement of
verification to be done for the purpose of finding out who ultimately bore
the burden of excise duty. It might be difficult to identify who had
actually borne the burden but such verification would definitely assist the
Revenue in finding out whether the manufacturer or buyer who makes an
application for refund are being unjustly enriched. If it is not possible
to identify the person/persons who have borne the duty, the amount of
excise duty collected in excess will remain in the fund which will be
utilized for the benefit of the consumers as provided in Section 12-D.
22. The High Court proceeded on an erroneous assumption of fact as well.
It was held by the High Court that there is no unjust enrichment as the
burden has not been passed on. The High Court’s interpretation of Section
11-B is also not correct.
23. In view of the above findings, the judgment of the High Court is
liable to be set aside. The Assessee is not entitled to refund as it would
result in unjust enrichment. The Appeal is allowed and the judgment of the
High Court is set aside.
Special Leave Petition (C) Nos. 18426, 23722, 18423, 18425 of 2015 and
12282, 16141 and 16142 of 2016.
Leave granted.
24. Civil Appeals arising out of Special Leave Petition (C) Nos. 18426,
23722, 18423 and 18425 of 2015 are filed by Commissioner of Central Excise,
Vishakapatnam, challenging the legality of judgment dated 19.02.2014 of a
Division Bench of the High Court of Andhra Pradesh in Central Excise Appeal
Nos. 51 of 2004 and 10, 9 and 21 of 2005. Civil Appeals arising out of SLP
(C) Nos. 12282, 16141 and 16142 of 2016 are filed by the Commissioner of
Central Excise, Vishakapatnam against the judgment dated 01.07.2015 of a
Division Bench of the High Court of Andhra Pradesh in Central Excise Appeal
Nos. 44 and 38 of 2004 and 18 of 2005. These three appeals were disposed of
by the High Court in terms of its earlier judgment dated 19.02.2014.
25. The Assessee i.e. Andhra Pradesh Paper Mills Ltd. manufactures Paper
and Paper boards. There is no dispute that excise duty is paid by the
Assessee and the same is passed on to its buyers. Applications were filed
by the Assessee for refund of amounts towards trade discounts that were
given to its buyers. The refund claim is on the basis of credit notes
raised by the Assessee subsequent to the sale/removal of goods. The credit
notes that were raised by the Assessee were towards trade discounts which
included the component of excise duty. The refund claims of the Assessees
were rejected by the Assistant Commissioner of Central Excise, Rajahmundry
Division. The Commissioner Customs, Central Excise (Appeals) Hyderabad
confirmed the said orders in the appeals filed by the Assessee. The
Customs, Excise and Service Tax Appellate Tribunal, South Zonal Division,
Bangalore dismissed the appeals filed by the Assessee.
26. The Assessee approached the High Court of Andhra Pradesh by filing
Central Excise Appeals. By a judgment dated 19.02.2014, the High Court of
Andhra Pradesh allowed the Central Excise Appeal Nos. 9, 10 and 51 of 2004
and 21 of 2005. The appeals were allowed, as being squarely covered by the
judgment of the Madras High Court in Addison and Company Ltd., Madras Vs.
Collector of Central Excise, Madras reported in (1997) 5 SCC 763.
27. The Revenue has filed Special Leave Petitions against the said
judgment dated 19.02.2014. Special Leave Petition (C) Nos. 12282, 16141 and
16142 of 2016 were filed by the Revenue against the judgment dated
01.07.2015 of the Division Bench of the Andhra Pradesh High Court which
followed its earlier judgment dated 19.02.2014. The issues involved in the
above Civil Appeals are similar to that of Civil Appeal No. 7906 of 2002.
28. The Appeals filed by the Revenue are allowed, in terms of the
judgment in Civil Appeal No. 7906 of 2002.
Civil Appeal No. 14689 of 2015
29. The above Civil Appeal is filed by the Commissioner of Central Excise
and Customs challenging the judgment of the Andhra Pradesh High Court in
Central Excise Appeal No. 21 of 2004. The Respondent-Assessee manufactures
Pesticide formulations which are used as pesticides in agricultural farms.
The Pesticides are sold at the factory gate and also through depots. The
Assessee submitted an application for refund towards allowable discounts
after the removal of goods from the factory. Credit notes were issued by
the Assessee in favour of the buyers towards trade discounts which also
contained a component of the excise duty. There is no dispute regarding
the fact of payment of the excise duty originally by the manufacturer being
passed on to his buyers. The refund claim of the Assessee was rejected by
the Deputy Commissioner vide Order-in-Original No. 58 of 2002 dated
30.12.2002. The above said order was reversed by the Commissioner of
Customs and Central Excise by his order dated 12.03.2003.
30. The Revenue filed an appeal before the Customs, Excise and Service
Tax Appellate Tribunal, South Zonal Division, Bangalore which was allowed.
The Assessee preferred an appeal to the High Court aggrieved by the order
of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal
Division, Bangalore. The High Court following its own judgment in Andhra
Pradesh Paper Mills Vs. Commissioner of Central Excise allowed the appeal.
The point in this appeal is identical to the issue in Civil Appeal No. 7906
of 2002. The Appeal filed by the Revenue is allowed in terms of the
judgment in Civil Appeal No. 7906 of 2002.
Special Leave Petition (C) No. 25055 of 2009
Leave granted.
31. The Assessee is engaged in the processing of man-made fibre. Prior to
11.06.2001 the CENVAT credit admissible on the declared inputs used in the
manufacture of process of man-made fibre was 45 per cent. The net duty
payable on the fibre was 55 per cent of the effective duty. On 11.06.2001,
a notification was issued increasing CENVAT credit from 45 per cent to 50
per cent which resulted in the net duty payable being 50 per cent. The
Assessee continued to pay the effective duty at 55 per cent for a short
period between 11.06.2001 to 13.06.2001. The effective duty of excise is
16 per cent and the duty payable from the personal ledger account prior to
the notification dated 11.06.2001 was 8.8 per cent and after 11.06.2001 the
duty payable is 8 per cent. The Assessee made an application for refund of
Rs. 61,146/- paid in excess on 31.07.2001. The said application for refund
was rejected by an Order-in-Original dated 12.08.2002 by the Assistant
Commissioner, Bhilwara on the ground that the Assessee was a job worker
engaged in the processing of grey fabric and that the said fabric was
returned to the owners of the fabric who sold the processed fabric in the
market. It was also held that the incidence of the duty was passed on to
the ultimate customers/consumers before the debit notes were raised by the
owners of the fabric. As the duty paid at 8.8 per cent was passed on by
the owner of the fabric to the ultimate consumer the processor was not
entitled for a refund.
32. The Assessee approached the Commissioner Appeals, II Customs &
Central Excise, Jaipur by filing an appeal which was rejected by an order
dated 27.02.2003. The Central Excise and Service Tax Appellate Tribunal by
its order dated 11.05.2005 allowed the appeal filed by the Assessee on the
ground that the incidence of duty was not passed on by the Assessee to the
customers. The customers protested to the charging of the net duty payable
at 8.8 per cent instead of 8 per cent in spite of the notification issued
on 11.06.2001. This protest was made without any delay so the question of
passing the incidence of duty by the owners of the fabric to their
customers does not arise.
33. In Central Excise Appeal No. 34 of 2005 filed by the Union of India
through Commissioner of Central Excise, Jaipur, the High Court of
Judicature for Rajasthan at Jodhpur confirmed the order of the Central
Excise and Service Tax Appellate Tribunal. Challenging the said judgment of
the High Court dated 26.11.2008, the Union of India has filed the above
Appeal. The contention raised by the Revenue before the High Court
regarding the presumption under Section 12-B of the Act was rejected by the
High Court by holding that once the Assessee shows that he has not passed
on the duty to his buyer, then the burden shifts to the Revenue. The
submission that there is a presumption of the duty being passed on to the
ultimate consumer was not accepted by the High Court. The High Court held
that the claim for refund should be accepted once the Assessee shows that
he has raised a credit note regarding the excess duty. The High Court had
further held that passing on the burden of excise duty to the ultimate
buyer cannot be left in the realm of presumption.
34. In Civil Appeal No. 7906 of 2002, we have already held that in the
claim for refund of excess duty paid can be allowed only in case where the
burden of duty has not been passed on to any other person, which includes
the ultimate consumer as well. The findings in the Order-in-Original and
the Order-in-Appeal are that the excise duty paid originally at the rate of
8.8 per cent was passed on from the Assessee-processor to the owner of the
fabric and later to the customers. The point in this Appeal is also
identical to that of Civil Appeal No. 7906 of 2002. The above appeal of
the Revenue is allowed.
Civil Appeal No. 8488 of 2009
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 14.08.2002 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
02.08.2002. The refund claim was rejected by the Deputy Commissioner of
Central Excise, Kolhapur Division vide an order dated 24.09.2002 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
29.07.2002. 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 Central Excise and Service Tax
Appellate Tribunal vide judgment and order dated 06.10.2005. The said
order of Central Excise and Service Tax Appellate Tribunal was further
confirmed by the High Court of Judicature at Bombay in Central 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 facts of this case being different from
Civil Appeal No. 7906 of 2002, the appeal preferred by the Revenue is
dismissed.
37. As held above, Civil Appeal Nos. 7906 of 2002 and 14689 of 2015 are
allowed. Civil Appeals arising out of Special Leave Petition (C) Nos. 18426
of 2015, 18423 of 2015, 18425 of 2015, 23722 of 2015, 12282 of 2016, 16142
of 2016, 16141 of 2016 and 25055 of 2009 are also allowed in terms of the
judgment in Civil Appeal No. 7906 of 2002. Civil Appeal No. 8488 of 2009
is dismissed. No order as to costs.
................................J.
[ANIL R. DAVE]
................................J.
[AMITAVA ROY]
................................J.
[L. NAGESWARA RAO]
New Delhi,
August 29, 2016
