Unjust enrichment - non-passing of incidence of duty whether proved on issue of debit notes afterwards?

PJ/Case laws/2012-13/1064

Case: COMMISSIONER OF CENTRAL EXICSE, LUDHIANA V/S ORIENTAL TEXTILE PROCESSING COMPANY (P) LTD.

Citation: 2012 (276) E.L.T. 257 (TRI. – DELHI)

Issue: - Unjust enrichment- Whether issue of debit notes afterwards will discharge the burden of non passing of incidence of duty?

Brief Fact:- The appellant issued the invoices to their customers and buyers in which duty was included and later on the issued the debit notes to those customers. Such procedure is not permissible under law and thus department disregarded such procedure. The fact involved was that mere issuance of the credit notes or debit notes subsequent to the collection of the duty incidents in the terms of the invoices issued at the time of the sale of the goods do not amount to discharging the burden which is required to be discharged by the assessee. It amounted to unjust enrichment. A show cause notice dated 28-02-2003 was issued by deputy commissioner demanding refund of Rs 1,71,919 by cheque and deemed credit not availed at the time of clearance and Rs 44,922 by cheque of the amount of AED excess paid to the respondent.

The Adjudicating Authority has dropped the proceedings and ordered refund of Rs. 1, 71, 919/- by cheque and deemed credit not availed at the time of clearance and Rs. 44, 922/- by cheque of the amount of AED excess paid by respondent.

In appeal, the Commissioner (A) upheld the Original order and dismissed the appeal.

Appellant’s Contention: - Revenue contended that respondent had not established that the duty element was not passed over to the customers. Relying on judgment in Sangam Processors (Bhilwara) Ltd v/s CCE, Jaipur [1994 (71) ELT 989 (Tribunal), they submitted that records clearly disclosed that the procedure of recovering the duty from the customers by including the duty in the invoices and later on issuing debit notes to them is not a valid procedure in the eye of law. Mere issuances of debit notes to the customers would not relive the assessee from his liability to pay duty.

Reasoning of Judgment: -The Tribunal perused the order of the Adjudicating Authority and noted that it clearly disclosed that duty element was included in the price of the goods cleared on invoices to the buyers was never disputed by respondent. Rather it was specifically admitted and it was sought to be contended that subsequent to issuance of such invoices and payment having been received in terms of amount disclosed in invoices that the buyers issued debit notes in relation to duty elements.

The Tribunal perused the judgment given in Sangam Processors (Bhilwara) Ltd v/s CCE, Jaipur which was on the similar issue. It was also noted that appeal was filed against a comnnected matter and was dismissed by the Apex Court in Rajasthan Processing (India) Ltd v/s Collector [1994 (70) ELT A182 as well as in Rajasthan Spinning & Weaving Ltd v/s Collector [1999 (112) ELT A115 (SC).

The Tribunal held that once the law having been clearly laid down that mere issuance of credit notes or debit notes subsequent to the collection of duty incidents in terms of the invoices issued at the time of sale of goods do not amount to discharging the burden which is required to be discharged by the assessee, to come out of the principle of unjust enrichment applicable in such cases, merely because the buyers of the respondent had discharged their burden in that regard. It was held that the revenue are justified in contending that consequent failure on respondent’s part to establish the duty incident has not been passed over to the customers, the Authorities below erred in dropping the proceedings. Impugned orders not sustainable and set aside with consequential relief.

Decision: -Appeal allowed.

Comment:- When the duty has been charged in the invoice and payment is also received from customers then it clearly shows that the duty incidence has been passed on to the customer. But issue of debit note will not change this position. The concept of unjust enrichment is applicable in instant case.

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PJ/Case laws/2012-13/1064

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