Rejection of refund claim on unjust enrichment.

PJ/Case Law/2014-15/2356

Case:- COMMR. OF CUS. & C. EX., GUNTUR V/S CRANE BETEL NUT POWDER WORKS

Citation:- 2012(279) E.L.T. 487 (A.P.)

Brief facts:-The respondent- manufacturers of betel nut powder (a product known as supari) were paying duty, classifying the product under Ch. S.H. No. 2107.00. They filed a revised classification list with effect from 17-7-1997 classifying the product under Ch. S.H. No. 0801.00 attracting a ‘nil’ rate of duty. Nevertheless, they were paying duty under protest with effect from 25-7-1997, as the assessee felt that the department may object to clearance of the goods at ‘nil’ rate of duty. The Assistant Commissioner, Central Excise, Guntur Division, vide order dated 14-10-1998, rejected the revised classification under Ch. S.H. No. 0801.00 and classified the product under Ch. S.H. No. 2107.00. Aggrieved by the same, the respondent filed an appeal before the Commissioner (appeals) who, by his order 6-5-2004, set aside the order of the primary authority. The respondent paid duty under protest from 25-7-1997 to 10-5-2004 and stopped payment of duty thereafter with effect from 11-5-2004, on the basis of the appellate order. Aggrieved by the appellate order, the revenue appealed to the CESTAT, which allowed the appeal and restored the order of the primary authority. The respondent preferred an appeal to this court against the CESTAT’s final order dated 12-4-2005 [2005 (87) E.L.T. 106 (Tri.-Bang.)], which was dismissed on 15-9-2005 in C.E.A. No. 20 of 2005. The respondent thereupon preferred an appeal to the Supreme Court, which reversed the judgment of the High Court and upheld the classification under Ch. S.H. No. 0801.00 vide judgement dated 19-3-2007 reported in 2007 (210) E.L.T. 171 (S.C.).

After a review petition filed by the revenue before the Supreme Court was also dismissed on 2-4-2008, the assessee filed a refund claim on 7-5-2008 for Rs. 32,03,97,583/- comprising the amount paid through cash (PLA) and another amount paid through credit account. Thereafter, the assessee filed a revised refund claim on 12-5-2008 for Rs. 32,29,59,831/-.

The revenue issued show cause notice dated 5-8-2008 proposing to reject the refund claim and eventually, the Deputy Commissioner, Central Excise, Guntur, vide order dated 29-4-2010 held that the assessee were eligible for the refund under the provisions of section 11B of the act but were not entitled for refund since it was not proved that the assessee had passed on the duty burden to the buyers. Consequently, the Deputy Commissioner ordered the amount to be credited to the Consumer Welfare Fund.

Aggrieved over the denial of refund in specie, the respondent assessee filed an appeal before the Commissioner of Appeals, who allowed the appeal by the order dated 6-8-2010 holding (a) that assessee did pass on the incidence of the duty to the buyers/ consignment agents and therefore they are eligible for refund, which has been paid by them through PLA; (b) that the duty paid through credit account is not eligible for refund as the goods in question were held to be non-dutiable; and (c) that the question of payment of interest does not arise at this stage as duty is not paid in three months. The appeal was allowed on several grounds including that the duty was paid under protest; that the price remained same through out the period i.e. before introduction of the levy, during the payment of duty and after stopping the payment of duty; the assessee has shown the amount of excise duty payable under the head ‘expenditure’ in the profit and loss account; and had furnished Chartered Accountant’s Certificate based on the records maintained by them, which certified that the total wholesale price to the Agent/ Dealer had not significantly varied before or after the introduction of excise duty in 1994-95.

Aggrieved thereby, the revenue filed an appeal before the CESTAT, Bangalore, which was dismissed by the tribunal.

Reasoning of judgment:- As both the Commissioner of Appeals and the CESTAT have upheld the order of refund on the ground that there is no variation in the price of the product both before and after the period the duty was paid by the assessee; and the respondent assessee had produced a detailed Chartered Accountant’s certificate before adjudicating the authority; and in view of the fact that the revenue failed to marshal any countervailing evidence to counteract the material produced by the assessee to disclose the passing of the duty liability to the consumer, the respondent assessee is liable for refund.

It s fairly admitted by the learned counsel for the appellant herein that in absence of material / evidence on record to establish the passing on of the burden of duty to the consumer, the assessee is entitled for refund of duty paid under protest or paid even though warranted by law. What the learned counsel would contend is that the substantive evidence with regard to the claim of passing of the liability of duty to consumer or the consignment agent are the invoices in respect of the transactions and not inferences drawn from the price not having charged before and after the payment of duty; or the certificate of the Chartered Accountant.

In our considered view, the Commissioner (Appeal) and the CESTAT in the order impugned have considered the material on record and if there is some evidence on the basis of which the primary and appellate authorities have based their conclusions, then the fact that better evidence ought to have been marshaled by the assessee and absence of the substantive evidence of invoices, was not considered, would not constitute a substantial question of law warranting consideration by this court under section 35G of the Act, in an appeal.

Decision:- The appeal is dismissed.

Comment:- The analogy of the case is that at the first instance the burden to prove that there was no unjust enrichment lies on the assessee but once the said burden has been discharged by the assessee based on documentary evidences, then the onus shifts on the department to rebut the evidences produced by the assessee. As in the present case, the revenue department failed to prove contrary to the evidences that the burden of duty was passed on to the ultimate customers, the appeal filed by the revenue was dismissed.

Prepared by: Monika Tak

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PJ/Case Law/2014-15/2356

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