Akil Abdul Hamid Kureshi, J. -
(1.) THE appeal is preferred by the Commissioner, Central Excise & Customs, Vadodara challenging the judgment of the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench, Mumbai ("Tribunal" for short) dated 14th July, 2005 [ : 2005 (189) E.L.T. 425 (Tri. -Mum.)]. While admitting the appeal on 31st March, 2006, the following substantial questions of law were framed: -
(A) Whether, on the facts and in the circumstances of the case, the Customs, Excise & Service Tax Appellate Tribunal, West Zonal Bench at Mumbai has substantially erred in law in holding that the burden of duty had not been passed on by the respondent to the dealers/buyers?
(B) Whether, on the facts and in the circumstances of the case, the Tribunal has substantially erred in law in holding that principle of "unjust enrichment" is not applicable to the facts of the case because the respondent had filed an affidavit stating that burden of duty had not been passed on to its dealers/customers by maintaining uniformity of price?
(C) Whether, on the facts and in the circumstances of the case, the Tribunal has substantially erred in law in ignoring the ratio laid down by the Supreme Court in Commissioner of C. Ex., Mumbai -II v. Allied Photographies India Limited, : 2004 (166) E.L.T. 3 (S.C.), wherein it has been held that uniformity of price before and after assessment does not lead to an inevitable conclusion that duty has not been passed on to the buyers?
Briefly stated, the facts are as under: - -
(2.) 1 The respondent, a company registered under the Companies Act, is engaged in manufacture and sale of Pan -masala/Ghutka. They had been clearing such goods under Heading 2106.00 by paying excise duty accordingly. The Central Excise authorities at Vadodara, however, disputed the said classification and vide communication dated 12th December, 2000, directed the respondent to pay duty under the Heading 2404.90. It is not disputed that under the said Heading 2404.90, the basic excise duty leviable was at a higher rate of 16%. There would be corresponding increase in other duties viz., special excise duty and additional excise duty on the basis of such higher excise duty. Under the insistence of the Excise Department, therefore, the assessee had under protest paid duty at the higher rate for the months of January and February, 2011. With effect from 1st March, 2001, tariff rate was prescribed which put an end to this controversy. On 13th January, 2001, the respondent filed refund claim of Rs. 2,55,81,066/ - before the Deputy Commissioner of Central Excise, Vadodara. The Deputy Commissioner, however, issued a show cause notice dated 31st March, 2001 calling upon the assessee why such refund claim should not be rejected on the ground of unjust enrichment. In such notice, he noted that the assessee had produced a comparison chart establishing the fact that incidence of duty was borne by the assessee and was not passed on to the customers. He, however, noted that in the invoices, the assessee had separately shown the Central Excise duties, which would mean that such duties were recovered from the customers. He was therefore of the prima facie opinion that if the refund claim is granted, the same would amount to unjust enrichment.
2.2 The assessee appeared before the Deputy Commissioner and pointed out that the duty was paid under protest, before and after the increase in the excise duty at the insistence of the Department, the price of the goods had remained the same, the duty element was therefore borne by the assessee. An affidavit of the officer of the company was also filed declaring that the duty burden was not passed on to the customers.
2.3 Deputy Commissioner, however, was not impressed. In his order dated 23rd April, 2002, he rejected the refund application wherein he held and observed as under: - -
Findings and discussion: - -
I have carefully gone through the case records, grounds of refund claim and submissions made by the assessee during the personal hearing. I do not find merit in the submission made by the assessee that they have not changed the price structure despite the fact that price structure was change by them as evident from the invoices issued prior to change of duty structure and post -change of duty structure. II is beyond any dispute that in invoices they have shown duty separately and duty was charged accordingly, which inter alia makes well evident that the incident of duty paid as excise duty has been passed on to the customer and it is not refundable to the assessee. The concept of passing on of the incidence of duty squarely arise in this case as burden of duty paid on final products were directly passed on to the buyer which gives ample space for application of the bar of unjust enrichment. The relied upon case laws are also not relevant in the present case. This is a fact that the assessee recovered the Central Excise duties as mentioned in the invoices raised by the assessee from their respective customers and they have failed to produce the evidences that if the refund claim is to be sanctioned then it will not enrich them unjustly as required to be satisfied under section 11B of the Central Excise Act, 1944 under clause of unjust enrichment. For the above reasons, the refund claim requires to be credited to the Consumer Welfare Fund established under Section 12C of the Central Excise Act, 1944 even if considerable.
2. The assessee approached the Commissioner (Appeals) by filing Departmental appeal. Before the Appellate Commissioner, assessee placed written submissions and reiterated the contentions raised before the Deputy Commissioner. It was pointed out that the transaction value had remained the same, despite increase in the duty. The assessee was of the opinion that the matter was mis -interpreted by the Department and the issue would be finalized on the basis of merits shortly. Even the Parliament was in seisin of the matter. It was under these circumstances that the assessee did not increase the price structure of the product, even after the Department required the assessee to change classification. It was, therefore, that there was no change in the total value of the goods sold during the months of January and February, 2001, as compared to the price of the same product charged during the months immediately preceding the said period.
2.1 The Commissioner (Appeals), however, did not accept such explanation. He rejected the assessee's appeal and confirmed that of the Dy. Commissioner, by his order dated 28th April, 2003. He observed as under: - -
I have carefully gone through the case records and considered the submissions made in the appeal memorandum as well as made during the course of personal hearing. I have also gone through the case laws relied upon by the appellant.
As regards refund of differential duty amounting to Rs. 2,50,01,941/ - paid during the period from January to February, 2001 after re -classification of the goods, the appellant contended that there was no change in composite price and composite price remained the same before and after reclassification of the goods, however, I find from the records that duty was separately shown in invoices and accordingly duty has been collected from the customers. Therefore, mere argument that the price structure was not revised or no change in the composite price has taken place will not be sufficient to prove that the excess incidence of duty was not passed on to customer but absorbed by themselves in their pricing mechanism inasmuch as invoices issued by the appellants do not show composite price and duty is indicated separately. The appellant have not produced any documentary evidence to prove that differential duty has been absorbed by them in their pricing mechanism by lowering the basic sale price. The reduced price structure can be due to any other reason like reduction in profit margin or modification of cost structure. This does not establish that the burden of excess differential duty paid to the department was absorbed by them. The ratio of the case laws relied upon by the appellant is not applicable to the appellant's case. Since the facts of the case referred to in the aforesaid judgment/decision are different than the appellant's pertaining to the material period do not show composite price and the duty has been shown separately. In view of above, the amount of refund claim in respect of differential duty is hit by principle of unjust enrichment and has rightly been held so by the original authority.
Assessee carried the matter in further appeal before the Tribunal. The Tribunal by the impugned judgment allowed the appeal. Tribunal compared the invoices of the disputed period as well as the period immediately preceding such period and came to the conclusion that the price had remained exactly the same. The Tribunal referred to various decisions of the Apex Court; including in case of Mafatlal Industries Limited & Ors. v. Union of India & Ors., reported in : (1977) 5 SCC 536 : 1997 (89) E.L.T. 247 (S.C.). The Tribunal also referred to a decision of the Supreme Court in case of Assistant Collector of Customs v. Anam Electrical Manufacturing Company, reported in : 1997 (90) E.L.T. 260 (S.C.) and noted that in terms of the said judgment, the assessee had filed an affidavit stating that the company has not passed on the burden of duty to any one else. On the basis of such combined factors, the Tribunal came to the conclusion that the assessee's refund claim was not hit by the principle of unjust enrichment.
(3.) REVENUE has thereupon filed this appeal. Learned counsel Shri Ravani for the Department vehemently contended that - (a) the Deputy Commissioner as well as Commissioner had correctly held that the assessee failed to establish that the incidence of additional duty was not passed on to the consumers. The Tribunal, therefore, erred in reversing such findings; (b) the assessee had shown higher rate of duty in the invoices, clearly indicating that the said duty was charged from the customers; and (c) merely because before and after the increase in the duty, the price of the goods remained constant would not by itself mean that the duty element was not passed on to the consumers.;