Refund of Duty paid under Protest - Unjust enrichment

PJ/Case Laws/2011-12/1526

Refund of Duty paid under Protest - Unjust enrichment - proof required

Case: Incab Industries Ltd. V/s Commissioner Of Central Excise, Pune-III

Citation: 2011 (274) E.L.T. 537 (Tri. – Mumbai)

Issue:- Refund of Duty paid under Protest – Unjust enrichment – No change in price of goods during the disputed period and when goods becoming non-excisable – not sufficient to prove non-passing of duty incidence to customers.

Brief Facts:- The brief facts of the case are that the appellants are engaged in the manufacture of electrical wires & cables. The scrap of wires and cables generated in the process of manufacture of the final product was contended to be non-excisable commodity by the appellants whereas the same was disputed by the department. It is the contention of the appellants that the controversy in that regard was finally resolved by the order of the Commissioner (Appeals) dated 17-2-1992 in favour of the appellants. It is the further case of the appellants that since at the insistence of the department the appellants had paid under protest the duty in relation to the said scrap for the period from 22-9-1988 to 31-1-1992, the appellants are entitled for refund of the said amount which is claimed to Rs. 18,17,133/-. The appellants, therefore, filed an application for refund. The claim in that regard was disputed by the department and after issuing the show-cause notice, the claim was rejected by the adjudicating authority by the order dated 2-7-2002 and the appeal against the same was dismissed under the impugned order. Hence, the present appeal.

Appellant’s Contention:- Placing reliance upon the decision of the Tribunal in the matter of Commissioner of Central Excise, Kolkata v. NICCO Corporation Ltd. reported in 2003 (156) E.L.T. 144 (Tri.-Kolkata) and Sinkhai Synthetics & Chemicals Pvt. Ltd. v. C.C.E., Aurangabad reported in 2002 (143) E.L.T. 17 (S.C.), it was sought to be submitted on behalf of the appellants that the authorities below erred in dismissing the claim for refund solely on the ground of non-discharge of the obligation of the appellants in relation to non-transfer of the duty elements of the customers. It is the contention on behalf of the appellants that the very fact that there was no difference in the price charged for such scrap during the period the duty was paid and during the period subsequent to the order of the Commissioner (Appeals) dated 17-2-1992 holding that the product was non-excisable would disclose that the appellant had not charged and not transferred the duty elements upon the customers. To the specific query as to whether any material on record in support of the said contention and of the fact that the duty element was not transferred to the customer, the representative of the appellants fairly con-ceded that there is no other material placed on record except the invoices.

Respondent’s Contention:- Whether the duty element was transferred upon the customer or not is essentially a question of fact and in order to sustain the refund claim even in relation to the duty which was paid in excess of duty or even in cases where the payment was without any obligation to pay the duty, it is absolutely necessary for the assessee filing refund claim to establish that the amount so paid by the appellants as duty, to establish that the same either did not form part of the total price charged for clearance of the goods or that though it was included therein, it was not passed on to the customers. Mere contention that during the period during which the duty element was discharged by the assessee under protest as well as during the subsequent period during which there was authoritative pronouncement about the non-dutiability of the product, the price remained the same for clearance of the goods, that by itself cannot disclose whether the assessee had actually transferred the duty element upon the customer or not. It was necessary for an assessee at least to disclose and establish the various components which formed part of the total price for clearance of the foods. Since no such evidence was produced by the appellants in the case in hand, it is difficult b justify interference in the impugned order.

Reasoning of Judgement:- As regards the decision of the Tribunal in Nicco Corporation Ltd's case, it is true that the Tribunal has held that the assessee therein were entitled lot refund subsequent to the authoritative pronouncement that there was no duty liability in respect of the product which was the subject matter of consideration in the said case. However, the said finding was initially based on the facts and circumstance of that case. It was clearly held therein: "However, in the facts Ind circumstance of the case, the respondents have succeeded to establish that duty-burden was being borne by them and the duty was being deposited by reducing their profit margin." In other words, the assessee in Nicco Corporation's had satisfied the Tribunal based on the facts of that case that the profit margin subsequent to the authoritative pronouncement of non-dutiability of the product was established by placing evidence which could reveal reduction in the profit gin after such authoritative pronouncement regarding the non-dutiability of product. Undoubtedly, the Tribunal had also referred to the decision of the Supreme Court in Sinkhai Synthetics & Chemicals Pvt. Ltd. However, the order does not disclose in what way the said decision of the Supreme Court was applicable to the facts of the case of Nicco Corporation. Perusal of the decision of the Supreme Court in Sinkhai Synthetics & Chemicals Pvt. Ltd's. case discloses that it was in relation to a case wherein provisional assessment was ultimately finalized and the difference in the duty element was adjust at a time of such finalization by following the decision in the matter of Mafatial Industries Ltd. v. 1.101 reported in 1997(89) E.L.T. 247 (S.C.). That is not the case in the matter in hand. In the matter hand, there was no provisional assessment as such. The entire claim for refund was pursuant to the order of the Commissioner (Appeals) dated 17-2-1992 and the claim was in relation to the period 22-9-1988 to 31-1-1994. Being so, neither the decision in Sinkhai Synthetics & Chemicals Pvt. Ltd. nor the decision of the Tribunal in Nicco Corporation Ltd. can be of any held to the appellants to justify the refund claim.

Decision:- Appeal dismissed.

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PJ/Case Laws/2011-12/1526

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