Case Law Details
Span Divergent Limited Vs Commissioner of Central Excise (CESTAT Ahmedabad)
CESTAT Ahmedabad held that the appellant has failed to discharge its burden of proving that burden of duty has not been passed on to the customer. Accordingly, since incidence of the duty has been passed on to the buyers therefore, the refund is hit by the principles of unjust enrichment.
Facts- The appellant are engaged in the manufacture of Diagnostic Reagents which includes products PPD 5Tu/10Tu, Packaging 5 ml, Tuberculin PPD Lyophilize 10 Tu/0.1 ml Packing 500 Tu, etc.
The dispute arose regarding classification of goods described as “Tuberculin PPD. It is a matter of record that the appellant had filed a classification list in the year 1993 declaring that the impugned goods namely Tuberculin PPD are classifiable under CETH 30.02 and chargeable to nil rate of central excise duty. The classification of Tuberculin PPD under CETH 30.02 was not accepted by the authorities and first adjudication order dated 13.05.1994 was passed by the jurisdictional Assistant Commissioner deciding that the classification of the impugned product is under CETH 3005.90 and chargeable to central excise duty with the rate of 15% ad valorem.
Post Tribunal order, the appellants started paying duty under protest. However, in remand proceedings, the Assistant Commissioner held that the product Tuberculin PPD are classifiable under 30.02. The appellant accordingly, filed a refund claim u/s. 11B of the Central Excise Act, 1944 claiming refund of duty which was paid under protest.
The refund claim filed by the appellant was sanctioned by Deputy Commissioner however the entire amount was credit to the Consumer Welfare Fund as per the provision of Section 11B(2) of the Central Excise Act, 1944.
Conclusion- Held that the principles of unjust enrichment in this case is clearly applicable and the appellant has failed to discharge its burden of proving that burden of duty has not been passed on to the customer. We hold that since incidence of the duty has been passed on to the buyers therefore, the refund is hit by the principles of unjust enrichment.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the matter are that the appellant are engaged in the manufacture of Diagnostic Reagents which includes products PPD 5Tu/10Tu, Packaging 5 ml, Tuberculin PPD Lyophilize 10 Tu/0.1 ml Packing 500 Tu, etc. The appellant have two modes of sale 1) where the products are directly sold to the customer and 2) through the transfer of the finished product to their depots and sale of goods from thereafter.
2. The dispute arose regarding classification of goods described as “Tuberculin PPD. It is a matter of record that the appellant had filed a classification list in the year 1993 declaring that the impugned goods namely Tuberculin PPD are classifiable under CETH 30.02 and chargeable to nil rate of central excise duty. The classification of Tuberculin PPD under CETH 30.02 was not accepted by the authorities and first adjudication order dated 13.05.1994 was passed by the jurisdictional Assistant Commissioner deciding that the classification of the impugned product is under CETH 3005.90 and chargeable to central excise duty with the rate of 15% ad valorem.
2.1 The appellants preferred an appeal before the Commissioner (Appeals) against the order in original dated 13.05.1994 whereunder the classification of their product was decided under CETH 3005.90. The learned Commissioner (Appeals) vide his order dated 15.03.1996 held that impugned goods are cultures of micro organisms and they are not Diagnostic Reagents. The department feeling aggrieved by the order of the Commissioner (Appeals) dated 15.03.1996 filed an appeal before this Tribunal. This Tribunal vide its order dated 04.12.2001 upheld the Order-In-Original and decided that the impugned goods are rightly classifiable under CETH 3005.90 and chargeable to central excise duty. The appellants started paying duty under protest after the decision of this Tribunal and at the same time filed an appeal before the Hon’ble Supreme Court against the order dated 04.12.2001 of the CESTAT. The Hon’ble Supreme Court vide its order dated 30th April 2007 remanded the matter back to the original adjudicating authority with certain observations.
2.2 In view of the remand proceedings the Assistant Commissioner adjudicated the matter afresh vide Order-In-Original No. SRT-V/ADJ.-24/2007-08/CL dated 03.03.2008 and has held that product Tuberculin PPD are to be classified under sub heading 30.02 of Central Excise Tariff Act, 1985. This order of the Assistant Commissioner dated 03.03.2008 has attained finality as no appeal was preferred by the department against this order. The appellant accordingly, filed a refund claim under Section 11B of the Central Excise Act, 1944 claiming refund of Central excise duty of Rs. 71,16,156/- which was paid under protest during the period 2001 to 2008. The refund claim filed by the appellant was adjudicated by learned Deputy Commissioner vide its order dated SRT-V/ADJ-319/2010-Refund dated 19.11.2010. The learned adjudicating authority sanctioned refund claim of Rs. 71,16,156/- however the entire amount was credit to the Consumer Welfare Fund as per the provision of Section 11B(2) of the Central Excise Act, 1944 observing that burden of proof against the bar of unjust enrichment has not been successfully discharged by the appellant and as per his finding the excise duty element paid by the unit has been passed on to the customers and therefore, the doctrine of unjust enrichment is squarely applicable in this case.
2.3 The appellants preferred an appeal before the Commissioner (Appeals) against the order dated 19.11.2010 of the Deputy Commissioner. The learned Commissioner (Appeals) by the impugned order dated RKA/169/SRT-I/2011 dated 21.04.2011 allowed the refund of Rs. 11,95,478/- to the party for the balance amount the Order-In-Original was upheld. The appellants are before us against the above mentioned Order-In-Appeal dated 21.04.2011. It has been the contention of the learned advocate appearing on behalf of the appellant that it was wrong on the part of the Commissioner (Appeals) to hold that burden of the excise duty has been passed on to the consumers has been proved by the Department in this case, that the adjudicating authority failed to appreciate the statements of buyers furnished by the appellant where under it has been declared by the buyers that no excise duty has been charged from them.
3. The learned advocate also argued that Chartered Accountant after examining the books of account of the appellant have certified that excise duty has not been passed on to the buyers. It has been the contention of the learned advocate that price of the product has remained same for the period prior and post December 2001. The learned advocate has also relied upon the decision of this Tribunal in the case of M/S ALLIED CHEMICAL & PHARMACEUTICALS PVT. LIMITED vs. CCE&ST, JAIPUR-I –2019 (2) TMI 849–CESTAT and on the decision of the Hon’ble Bombay High Court in the case of CCE PUNE vs. SANDVIK ASIA LIMITED REPORTED AT 2015 (323) ELT 431 (BOM.)
3.1 The learned advocate has also submitted that no element of the unjust enrichment is present in this case as the burden of excise duty has not been passed on to the buyers of their product. It has further been submitted though the amount of excise duty payable on the product has been indicated on the invoice however, the same has not been recovered from their customers.
3.2 The learned advocate has tried to explain that prior to December 2001, the sale price of their product namely Tuberculin PPD was Rs.90. The goods were cleared by them to their customers after allowing a discount of Rs. 13.50 and thus in fact the product was sold at Rs.76.50/-. Since the product was classified by the appellant under sub heading no. 3002.00 where no excise duty was payable and goods were sold at Rs.76.50 paisa. After December 2001, when the appellants started paying duty under protest, the sale price of Tuberculin PPD remained Rs.90/-. The customer was offered same discount of Rs. 13.50 and ultimate price recovered from the customer remained Rs.76.50. However, in invoice the appellant indicated the amount of excise duty payable on such clearances in compliance with the central excise law. It has been the contention of the learned advocate that the price charged the appellant has remained Rs.76.50 both prior to December 2001 and post December 2001 and thus, it can be concluded that no additional amount on behalf of excise duty has been recovered by the appellant from their customers.
3.3 The learned advocate has also taken us to certificate issued by Chartered Accountant M/.s Y B Desai and Associates which says that ‘On such verification as well as on examination of explanations furnished to us and to the best of our knowledge in respect of sale of Tuberculin PPD during the period December 2001 to March 2008 the company had not collected excise duty paid by them under protest from their buyers as they have collected price of the goods from their buyers. We further certify that entire duty is paid, borne and absorbed by the company and the same has not been passed on to their buyer in any form. Thus on the basis of the Chartered Accountant certificate, the learned advocate has tried to convince the bench that central excise duty shown on the invoice has been borne by the appellant and therefore, the principle of unjust enrichment are not applicable to the facts of the present case.
3.4 The learned advocate has also drawn our attention to certain certificates issued by the buyers of the appellant wherein, it has been claimed that the excise duty shown on the invoice has not been collected by the appellant from their buyers.
4. We have also heard Shri Anand Kumar, learned Superintendent (AR) appearing on behalf of the revenue who has reiterates the findings as given in the Order-In-Original and Order-In-Appeal.
5. Having heard both the sides and after examination of the record in detail, we find that whether in the present case the refund of the duty is hit by principles of unjust enrichment or not can only be decided by deciding the facts of the matter on merit. In this regard, before proceeding further a few relevant parts of the Order-In-original need to be reproduced from the Order-In-Original dated 19.11.2010 :-
“13. The JRO vide his letter dated R-IV/Refund/Spam/2008-09 dated 20.10.08 submitted verification report and on scrutiny of it, it is observed that the unit had paid duty under protest at the time of clearance of the product Tuberculin PPD, and mentioned on the body of the C Ex Invoice “EXCISE DUTY PAID @ 16% NOT RECOVERED FROM CUSTOMER”. In this connection, the unit vide letter dt. 07.10.2008 submitted the ledger to the Range Superintendent for the customer to whom the above product was cleared, it is noticed that the unit had recovered full amount of the invoice including the Central Excise duty paid on product Tuberculin PPD.
14. I further note that the Range Officer, vide his letter dt. 13.03.2009, while replying for para-5 of the submission of claimant, reported that “No relevant documents were enclosed, hence no comments”. I observe that the said para-5 was related to the bar of unjust enrichment, which the claimant claim that their claim is not hit by it as they have not passed on the incidence to their customers but the duty incidence has been borne by them. The Range Officer was requested to comply further on the said aspect from the relevant invoices/documents after collecting the same from the claimant.
15. The Range Officer, vide his letter dt. 06.05.2010, reported that – “On scrutiny of the same it is noticed that in some invoices, the sales made from the consignment agents / depot duty have been recovered from the Customers and in some invoices duty have not been recovered from the Customers. Assessee is eligible for refund of duties only where they have not recovered duty from the customers.” Invoice-wise details of clearances made by the unit and subsequent sales from the consignment agents/depots are shown in “Annexures” from the period from 2001-02 to 2007- 08. Based on the conclusion that the sale price is less than the price on which duty is paid i.e. stock transfer price which is not acceptable as less sale price can not be the evident that burden of duty has not been passed on to customers, this has been discussed in following paras.
18. I have also gone through the Profit and Loss Accounts & Balance Sheet of the company for the relevant period i.e. 2002-03 to 2008-09, submitted by Shri K.K. Goriwala during personal hearing and found that the entire duty has been shown in debit side of “Profit & Loss Account” as expenditure during entire period of 2002- 03 to 2008-09 and not shown as “Receivable from Govt.” in the balance sheet for the said period, if the claimant had intention not to pass an Central Excise duty to their customers this amount would have been shown as “Receivable” in the balance sheet and merely writing on the body of the C. Ex. Invoices that the Central Excise Duty has not been passed on to the Customers, does not sufficed. It has been held by the Hon’ble CESTAT in the case of M/s. Rajasthan Spg. & Wvg. Mills Ltd. v/s Commissioner of Central Excise, Jaipur-II 2006 (194) E.L.T. 254 (Tr. Del)” that Establishment charge paid for deputing Central Excise Officers for overseeing export of goods – Establishment changes are expenses which are debited to profit and loss account and appropriated to sale price of product. They may not be collected from customers, but loaded on value of goods without quoting specially – appellants to satisfy adjudicating authority that they have not claimed amount from customers and they have not charged amount in profit and loss account as expense. No balance sheet or any other document produced to show that amount not accounted in profit and loss account and not recovered from customers – product chargeable to specific rate of duty does not mean that price not including the amount – Refund barred by “Unjust Enrichment”. Thus once the amount is charged as expenditure in Profit & Loss Account and not shown as “receivable” in the balance sheet it is deemed that burden of duty has been passed on to the customers. In the present case the party has charged the duty amount as expenditure in the Profit & Loss Account of relevant period and thus passed on the burden of duty to the customers. The case laws submitted by the party are not relevant / applicable in this case as the facts are not similar.
19. I also find that party has submitted the Chartered Accountant Certificate dated 08.12.2008 issued by M/s. Y.B. Desai & Associates, Chartered Accountants stating that burden of duty has not been passed by M/s. Span Diagnostics and has been borne by the unit. The said C.A. certificate has been found without taking into account the fact that the assessee has charged the duty amount as expenditure in their P&L account and also the party has received the entire sale amount from their customers including the duty therefore the certificate produced by the party is not acceptable and not admissible as proof against unjust enrichment. It has been held by the Hon’ble CESTAT (para-2) in the case of M/s. Charu Home Products Pvt. Ltd. v/s C.C. (Imports) Nhava Sheva 2009 (244) ELT 465 (Tr. Mumbai) that “Chartered Accountant Certificate has to be based on accounts and accounting practices/ principles – These should be discernible from certificate itself In absence there of, certificate not admissible as proof against “Unjust Enrichment”. Thus, in view of the above Chartered Accountant Certificate submitted by the party is not acceptable.”
From the above, it can be seen that facts of the appellant have been examined in detail and a report has been given by jurisdictional range office which shows that any majority of cases the burden of duty has been passed to the buyers of the product. It has also been verified and established from the scrutiny of annual profit and loss accounts of the appellant that excise duty paid by them has not been shown in the annual accounts for the financial year beginning from 2002-03 to 2008-09 as a amount receivable from the Government which means that the excise duty paid by the appellant has been included as a part of expenditure for the product.
6. It will be relevant to have a glance at the sale invoice of the party under which goods have been sold to their buyers. A scanned copy of a invoice is as follows:-
From the scrutiny of the above mentioned invoice, it can be seen that excise duty has been charged in the invoice from the buyers of their product. We are of the view that since the annual accounts of the company are nothing but total of such invoice and once the amount which have been shown on the invoice as excise duty which is the part of the value of the product, same has to be recovered from the buyer as the principles of accounting and is rightly been done. Thus, as per the report submitted by the jurisdictional range officer after examining the appellant’s books of accounts for the relevant period, wherein it has been reported that the appellant have shown excise duty in their invoice while clearing the goods from the factory as per ledger in majority cases the invoice value including excise duty has been recovered from the customers. This fact clearly shows that duty was paid by the appellant even though under protest has become an integral part of the total sales value and therefore the excise duty so paid by the appellant was collected from their customers.
7. As mentioned above, for the purpose of deciding whether element of unjust enrichment are present in a particular case or not, the only fact need to be ascertained is whether the duty paid by the assessee irrespective of under protest or otherwise was passed on to any other person. From the facts as mentioned in the preceding paragraphs, it can easily be ascertained that incidence of central excise duty has clearly been passed on to the buyers of the appellant’s product. In view of above facts, we are of the view that the appellant has passed on the burden of the excise duty to their customers and therefore they are hit by provisions of unjust enrichment. Before parting we also rely on the Hon’ble Supreme Court’s decision in case of MAFATLAL INDUSTRIES LTD.-1997 (89) E.L.T. 247 (S.C.).
8. In view of the above facts, we are of the view that the appellant has passed on the burden of the excise duty to their customers and therefore they are hit by principles of unjust enrichment. Before parting we also rely on the Hon’ble Supreme Court’s decision in case of MAFATLAL INDUSTRIES LTD. 1997 (84) ELT 247 (SC). We also rely upon the decision of this Tribunal in the case of CCE, Rajkot vs. EAGLE CORPORATION PVT. LIMITED vide final Order No. A/11198/2018 dated 05.04.2018 :-
“7. We find that similar issue has been considered by this Tribunal in identical set of circumstances/ arguments in M/s Rajdhani Travels & Ors case (supra). Referring to and relying upon the judgement of the Tribunal in the case of Hindustan Petroleum Corporation Ltd. Vs. CCE, Mumbai-II 2016-TIOL-658-CESTAT-MUM, it has been concluded that once the refund amount has been shown as an expenditure in the books of accounts, accordingly it enters into the cost of the service, then inevitably the burden of tax is passed on to customers/others, and consequently hit by the principles of unjust enrichment. The principle laid down in Hindustan Petroleum Corporation Limited case (supra) reads as follows:-
“4.1 The appellants have relied on the C.A. certificate on which no findings have been given by the lower authorities. The Chartered Accountant has given his observations as under:-
“On examination and verification of the audited books of accounts, financial statements, records and TR-6 challans as maintained and produced by ULAI for the purpose of our review and verification and based on the information furnished to us, we certify that ULAI has not recovered the amount of Service Tax (Incl. cess) and interest paid as shown in the above table from its customers or any other person.”
It is seen that C.A. has made a blind observation regarding the non recovery of Service Tax and interest from the customers or any other person. If the said amount has not been recovered from anybody then the same should appeal somewhere in the Balance-sheet as amount receivable from Govt. The fact that it has been shown against expenditure itself indicates that the said amount has been passed on to other customers. The appellants have relied on the decision of Hon’ble High Court of Madras in the case of Flow Tech Power – 2006 (202) ELT 404. It is seen that in the said case, the duty was paid under protest. Moreover the Hon’ble High Court relied on the fact that the price was fixed by Ministry of Agriculture. We find that these facts are clearly distinguishable and therefore, the decision in the case of Flow Tech Power (supra) cannot be applied to the instant case. In this regard, it is seen that learned C.A. has relied on the decision of the Tribunal in the case of Cummins India (supra), Ved Textile Pvt. Ltd. and BHP Engineers (supra) to assert that even in the circumstances where the amount claimed to be refund is adjusted against the expenditure, the same can be claimed as refund and is not hit by bar of unjust enrichment.”
4.2 Learned C.A. had argued that no evidence of any change in the price of service offered by them before and after such absorption of this refund amount against expenditure has been shown to prove that the burden of Service Tax has been passed on to other customers. To counter this argument, learned AR has relied on the decision of Allied Photographics India Ltd. – 2004 (166) ELT 3 (SC) = 2004-TIOL-27-SC-CX, wherein Hon’ble Apex Court has observed as follows:-
“18. Before concluding, we may state that uniformity in price before and after the assessment does not lead to the inevitable conclusion that incidence of duty has not been passed on to the buyer as such uniformity may be due to various factors. Hence, even on merits, the respondent has failed to make out a case for refund. Since relevant factors stated above have not been examined by the authorities below, we do not find merit in the contention of the respondent that this Court should not interfere under Article 136 of the Constitution in view of the concurrent finding of fact.
In view of this, the argument of learned C.A. does not hold much water.”
4.3 In this regard, learned AR has relied on the decision of the Tribunal in the case of HPCL – 2015 (317) ELT 379 = 2014-TIOL-658-CESTAT-MUM, where in para 6.7 following has been observed:-
”6.7 In the present case, it is an admitted position that the refund amount due was not reflected in the books of account of HPCL as claims receivable. This implies that the duty paid was shown as current expenditure and formed part of the Profit and Loss account of the assessee. Thus, if the claimant himself has treated the refund amount due as expenditure and not as “claims receivable”, the claimant cannot said to have passed the test of unjust enrichment. This is the settled position in law. The appellant has also contended that the appellant’s goods are sold at prices determined by the Govt. and therefore, it should be presumed that the appellant has borne the incidence. Similar argument has been negated by the Hon’ble Apex Court in Allied Photographic India Ltd. [2004 (166) ELT 3 (SC)] =2004-TIOL-27-SC-CX, wherein it was held that “uniformity in price before and after the assessment does not lead to the inevitable conclusion that incidence of duty has not been passed on to the buyer as such uniformity may be due to various factors”. Therefore, in the present case, the appellant HPCL has failed to cross the bar of unjust enrichment also and hence they are not eligible to claim the refund.” 4.4 Hon’ble Apex Court in the case of Solar Pesticide (supra) has examined the issue of unjust enrichment and observed as follows:-
“20. We are of the opinion that the aforesaid observations would be applicable in the case of captive consumption as well. To claim refund of duty it is immaterial whether the goods imported are used by the importer himself and the duty thereon passed on to the purchaser of the finished product or that the imported goods are sold as such with the incidence of tax being passed on to the buyer. In either case the principle of unjust enrichment will apply and the person responsible for paying the import duty would not be entitled to get the refund because of the plain language of Section 27 of the Act. Having passed on the burden of tax to another person, directly or indirectly, it would clearly be a case of unjust enrichment if the importer/seller is then able to get refund of the duty paid from the Government notwithstanding the incidence of tax having already been passed on to the purchaser.”
4.5 In view of above, we find that the appellant has discharged this amount as expenditure in Profit and Loss account that the burden of tax has been passed on to others. It is further seen that the payment has been made from time to time in the regular case as mentioned in para 4 hereinabove. It is obvious that at the material time, for the period of 5 years duty was not paid under protest and the same was being charged against expenditure means that the Service Tax amount was recovered from their customer. It is further seen that the C.A. certificate does not hold that the said amount has not been charged to expenditure Moreover the reasons for holding that the amount has not been recovered from others is blind statement without any reasoning or arguments.
8. We do not find any reason to deviate from the aforesaid finding/conclusion of the Tribunal and we have no hesitation in applying the said principle to the facts and circumstances of the present case, which are similar in nature to the aforesaid case. In our considered view, the judgments referred to by the Ld. Chartered Accountant for the Appellant is not applicable to the facts and circumstances of the present case, inasmuch as, the service tax claimed as refund, in those cases, has not been shown/booked in the balance sheet as an expenditure and entered into the cost of the service/goods. In other words, the facts and circumstances involved in the said cases are on a different plank. Therefore, the refund amount of Rs.2,07,92,047/- is hit by the principle of unjust enrichment, and accordingly, the finding of the Ld. Commissioner(Appeals) on this issue is set aside.“
In view of the above, the judgment of Hon’ble Supreme Court in case of MAFATLAL INDUSTRIES LIMITED (supra) shall prevail over the judgment cited by the appellant.
9. In view of the above discussion and considering the overall facts and circumstances of this matter, the principles of unjust enrichment in this case is clearly applicable and the appellant has failed to discharge its burden of proving that burden of duty has not been passed on to the customer. We hold that since incidence of the duty has been passed on to the buyers therefore, the refund is hit by the principles of unjust enrichment.
10. In view of above, we hold that we do not find any legal lacuna in the impugned Order-in-Appeal and hold that appeal is without any merit and accordingly the same is dismissed.
(Pronounced in the open court on 13.06.2023)
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