Himachal Futuristic Communications Limited Vs Commissioner of Central Excise (CESTAT Chandigarh)
Introduction: In a recent verdict, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Chandigarh upheld the rejection of a refund claim lodged by M/s Himachal Futuristics Communications Limited. The telecom company had submitted a refund application under Section 27 of the Customs Act, 1962, citing they had paid duty on the software they supplied, which they believed was not chargeable.
Analysis: The contention of the appellant was that they had paid a duty on the software they supplied, for which no duty was payable, and had not recovered the same from the customers. However, the tribunal ruled that the duty paid, as reflected in the invoices, was a sufficient proof that the incidence of duty was passed on to the customers. They also noted that the CA certificate provided by the appellant did not adequately explain how the amount of duty paid was accounted for in their books of accounts. The tribunal further reasoned that the contracts/purchase orders indicated that the consideration paid by MTNL/BSNL was inclusive of taxes payable, meaning there was no concrete evidence that the duty paid by the appellant was not reimbursed by their customers.
Conclusion: The CESTAT Chandigarh, in assessing the legal and factual aspects of the case, upheld the decision of the lower authorities, rejecting the refund claim filed by Himachal Futuristics Communications Limited. The decision emphasizes the significance of correctly accounting for the duty paid in financial records and of demonstrating that such a duty, once paid, has not been passed on to customers when seeking a refund under the Customs Act, 1962.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
M/s Himachal Futuristics Communications Limited, the appellants, have supplied Telecom equipment to MTNL/BSNL against purchase orders during the period 26.06.2001 to 12.07.2001; they filed a refund application for Rs.67,74,866/- on 17.06.2002 on the ground that they have supplied the said equipment along with software which was not chargeable to duty; since they paid duty which is not payable and have not recovered the same from customers, they are eligible for refund under Section 27 of Customs Act, 1962. A show cause notice dated 10.09.2022 was issued seeking to reject the refund claim. Order-in-Original dated 19.04.2006 was passed by Lower Authority holding that the duty was correctly paid as the value of software was correctly included in the assessable value and that the appellants could not prove that the incidence of duty was borne by them and was not passed off. On an appeal filed by the appellant, the First Appellate Authority vide Order dated 10.01.2007 remanded the matter to Lower Authority with a direction to verify the nature of software and the issue of unjust enrichment. In the remand proceedings, the Original Authority vide Order dated 19.03.2009 held that the value of the software is not includable in the assessable value of hardware. However, the appellants did not cross the bar of unjust enrichment. Accordingly, the Original Authority rejected the refund claim. The First Appellate Authority vide the impugned order dated 02.02.2010, on an appeal filed by the appellant, upheld the Order-inOriginal. Hence, this appeal.
2. Shri Surjeet Bhadu, learned Counsel for the appellants reiterates the grounds of appeal and submits that the sole ground of rejection of the appeal was that the Chartered Accountant’s Certificate produced by the appellants only say that they have paid Excise Duty on the software and recovered the total value of software and not recovered any amount over and above the value of software as indicated in the certificate; the said certificate does not explain how the amount of duty paid has been accounted for in their books of accounts. He submits that the learned Commissioner has not denied the genuineness of the CA Certificate. He relies upon the following case laws:
