Excise Refund could be granted only to a person who had paid the duty

M/s. SRF Limited Vs Customs, Excise and Gold Control Appellate Tribunal (Madras High Court)

Conclusion: Refund could be granted only to a person who had paid the duty and not to anyone else and if the ultimate consumer could not be identified, the amount would be retained in the fund. Therefore, the subsequent issuance of credit note by assessee was of little avail as the incidence for the excise duty was deemed to have been passed on by the assessee to its buyer and therefore not entitled for filing an application for refund under Section 11B merely because they subsequently came to know that the rate of duty was NIL and credit notes were said to have been issued to the buyer.

Held: Assessee was a 100% Export Oriented Unit [EOU] manufacturing cotton yarn. They filed an application for refund on the ground that it had paid excess excise duty. It initially passed on the duty incidence to its customers and later returned the excess duty amount to its buyers which was supported by a certificate issued by the Chartered Accountant. The refund claim was rejected by the original authority on the ground that assessee did not submit either the credit notes or the Chartered Accountant’s certificate at the time of filing the refund application. CIT (Appeals) allowed the appeal taking note of the certificate issued by the Chartered Accountant and the credit notes and held that there was no reason to doubt the genuineness of the documents produced. This order was affirmed by the Tribunal and later confirmed by the High Court of Bombay. It was held that it was not disputed by assessee that the amount of duty of excise had been passed on to its customers. The verification to be done by Department, to enquire about the ultimate buyer who had actually paid the duty was not a futile exercise as refund could be granted only to a person who had paid the duty and not to anyone else and if the ultimate consumer could not be identified, the amount would be retained in the fund. This was more so because the word “buyer” in clause (e) to proviso to Section 11B(2) of the Act cannot be restricted to the first buyer from the manufacturer. The basis for the claim of refund was on account of the fact that on or after 31.05.1990 the rate of duty was NIL. For the period between 31.05.1990 and 06.07.1990 assessee paid additional duty of excise and had passed on the incidence of duty to its customers at the time of issue invoices/gate passes. Therefore, the subsequent issuance of credit note was of little avail as the incidence for the excise duty was deemed to have been passed on by the assessee to its buyer and therefore not entitled for filing an application for refund under Section 11B of the Act merely because they subsequently came to know that the rate of duty was NIL and credit notes were said to have been issued to the buyer. Thus, Tribunal was right in affirming the order passed by the First Appellate Authority who confirmed the order passed by the adjudicating authority.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The petitioner, a public limited company engaged in the manufacture of industrial fabrics is aggrieved by the order dated 28.05.2003 passed by the Customs, Excise and Gold Control Appellate Tribunal in Final Order No.351-376/2003, in and by which the challenge to the order passed by the Commissioner of Customs and Central Excise (Appeals), Trichy dated 09.10.1997 was unsuccessful. The said order was passed by the first appellate authority confirming the order passed by the Assistant Commissioner, Central Excise Division, Trichy rejecting the refund claim made by the petitioner for refund of a sum of Rs.24,19,932.21.

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