Whether Duty is payable on the goods absorbed by the assessee and shown as expenditure in p & L A/c and had not been passed on to the customer?

PJ/Case Laws/2011-12/1423

Case:Commissioner of C. Ex., Coimbatore v/s. Flow Tech Power

Citation:2006 (202) E.L.T. 404 (Mad.)

Issue: - Refund - Chartered Accountant’s certificate and profit and loss account conform that duty paid on impugned goods had been absorbed by assessee - No substantial question of law arises for consideration of High Court.

Brief Facts: -Respondent-assessee was engaged in the manufacture of components for Drip/Sprinkler Irrigation System falling under heading 84.24 and PVC/HDPE/LDPE/LLDPE pipes and tubes falling under heading 39.19 of the Central Excise Act. They cleared the goods without payment of duty claiming benefit of exemption under Notification No. 46/94 dated 1-3-94 with the Commissioner of Central Excise. During factory visit, Revenue found that PVC/HDPE/LDPE pipes manufactured by respondent were also cleared by them in the guise of parts of Drips/Sprinkler Irrigation System, on which they availed the benefit of the said notification claiming classification under Chapter Heading 84.24 of the erstwhile Central Excise Tariff Act, 1944.

Show Cause notice was issued and the Commissioner passed Order dated 26-8-96 holding that the pipes removed from the factory could not be treated as an input for the network that was fabricated outside the factory, i.e. Drip/Sprinkler irrigation system, as the pipe itself is an excisable product classifiable under Specific Heading 3917.00 of the erstwhile Central Excise Tariff Act, 1944 and are dutiable. So, the exemption under Notification Nos. 46/94 and 52/95 was available only if the goods were classifiable under Chapter Heading 3917 of the erstwhile Central Excise Tariff Act, 1944. Hence, the Commissioner confirmed the demand and imposed a penalty of Rs. 1,00,000/- and further allowed Modvat Credit admissible to the respondent.

In appeal before the Tribunal, respondent contended that the items in question manufactured were also classifiable under 84.24 and they had rightly granted exemption under the said notification and the said items were not Tubes and Pipes and other plastics for classification under Heading 3917.00.

The Tribunal in its Order dated 5-9-2000 [2001 (130) E.L.T. 541 (Tri. - Chennai)] allowed the appeal.

Consequently, the assessee filed a refund claim on 2-3-2001 for Rs. 24,47,444/- by way of cash and Rs. 71,70,360/- by way of credit in RG 23A Part II Account on the ground that the Tribunal in its order had held that the pipes used with other components in Drip/Sprinkler Irrigation System should be classified under 84.24 only and the parts of the system also under 84.24 and that they are paying duty under protest vide their letter No. 1768/94-95 dated 14-3-95 which was duly acknowledged by the Department. Since there was difference in the working of duty amount claimed, the respondent vide their letter No. 141 dated 5-12-2001, filed a Revised Refund Claim for an amount of Rs. 25,58,795/- as PLA payment and Rs. 64,72,809/- as RG 23A Part II payment. The respondent was issued a Show Cause Notice dated 26-4-2002 asking them why the refund claim should not be rejected under section 11B of the Central Excise Act, 1944.

The Assistant Commissioner vide Order dated 21-8-2003 rejected the refund claim by holding that the letter of the protest was not filed under Rule 233B, their claim is time barred. The Adjudicating Authority rejected the refund claim as time bar only, but did not go into the other grounds mentioned regarding the unjust enrichment and captive consumption. Since the order was a non-speaking order, the Assistant Commissioner filed an appeal for modification of Order dated 21-8-2003 under Section 35E (2) of the Central Excise Act, 1944 which is pending before the Commissioner (Appeals). Thus the question of unjust enrichment is yet to be decided by the Commissioner (Appeals) in the Appeal filed by the Department.

In the mean time, respondent-assessee also filed appeal before the Commissioner (A). The said appeal was allowed and it was held that the respondent was eligible for refund of duty paid as it was under protest. It was further held that the respondent had discharged the burden of proving that the incidence of duty in respect of the impugned goods was not passed on to their customers.

Aggrieved by the decision of Commissioner (Appeals), Revenue filed appeal before the Tribunal. The Tribunal passed Order dated 3-3-2005 upholding the order of the Commissioner (Appeals) and held that the duty was paid under protest and hence question of time bar would not arise. The Tribunal further held that duty burden had not been passed on to the customers and hence there was no unjust enrichment.

Against the said order, Revenue is in appeal before the High Court.

Appellant’s Contention: -Revenue submitted that the Lower Authorities had failed to take into consideration that the respondent had not followed the procedure contemplated under Section 233B of the erstwhile Central Excise Rules, 1944 and hence, the assessee did not pay the duty under protest. Hence the claim by the respondent for refund was clearly barred by limitation. Further, it was submitted that the authorities had merely relied upon the Certificate issued by the Chartered Accountant and the Profit and Loss Account filed by the assessee and they have not conducted any independent verification.

Reasoning of Judgement: -The High Court noted the that there was a factual finding by the Authorities Below that the duty had been paid under protest and the question of time bar would not arise. In respect of unjust enrichment, the facts reveal that the price was a composite one fixed by the Ministry of Agriculture. The duty had been absorbed by the assessee and it was submitted that the Chartered Accountant’s Certificate dated 8-7-2002 and the profit and loss account, also confirm that the duty paid on the impugned goods had been absorbed by the assessee and had been shown as expenditure in profit and loss account and had not been passed on to the customer.

It was held that there was no error in the order of the Tribunal.

Decision: -Miscellaneous Appeal dismissed.

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