Refund under GST Act for Post Supply Discount Given

MRF Ltd. vs Collector Of Central Excise,  on 12 March, 1997

The duty is chargeable at the rate and price when the commodity is cleared at the factory gate and not on the price reduced at a subsequent date. Besides the subsequent fluctuation in the prices of the commodity can have no relevance whatsoever so far as the liability to pay excise duty is concerned. That being so, even if we assume that the roll back in the price was occasioned on account of the directive issued by the Central Government, that by itself, without anything more, would not entitle the appellant to claim a refund on the price differential unless it is shown that there was some agreement in this behalf with the Government and the latter had agreed to refund the excise duty to the extent of the reduced price.

Government Of India And Others/ v. Madras Rubber Factory Ltd. And Others

1. Trade Discounts.—

Discounts allowed in the Trade (by whatever name such discount is described) should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreements or under terms of sale or by established practice, the allowance and the nature of the discount being known at or prior to the removal of the goods. Such Trade Discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price.

2. TAC/Warranty discount.

The question is whether the claim, put forward as TAC/Warranty discount is a trade discount within the meaning of Section 4(4) (d) (ii)? We think not. It is only a claim for refund by the buyer for the manufacturing defect in the product sold by the assessee, which is being honored by the assessee in a manner acceptable to both the parties. In a given case, a buyer may well insist that he must be reimbursed in cash and not in kind. In such a case, the assessee cannot certainly refuse such a claim; it would have to pay cash. The nature and character of the amount so being refunded is certainly not a trade discount contemplated by Section 4(4)(d)(ii), whether the claim is honored by paying cash or by deducting it from the price of the new product. As rightly pointed out by Bhagwati, C.J in the order dated 20-12-1986, “what is really relevant is the nature of the transaction” (SCC p. 760, para 8). The learned Chief Justice pointed out further that “the warranty is not a discount on the product already sold, but relates to the goods which are being subsequently sold to the same customers. It cannot be strictly called as discount

3.One per cent Turnover Discount

The assessee’s case in this behalf is this: this is a discount granted to all dealers operating under Recurring Credit Scheme (RCS) with effect from 1-4-1980. The discount is being given on a half-yearly basis depending upon the volume of purchases made by each such dealer. The discount is being granted by issuing credit notes to dealers and though the said discount is not shown on the face of each invoice, it is known to all the dealers. The discount cannot indeed be shown in the invoice for the simple reason that the discount is known only at the end of the half year. This is a discount which is known and understood at the time of removal of the goods though it is quantified later. Such system of grant of discounts is not uncommon in the trade and therefore allowed as a deduction from the value.

4. Year Ending Discount and Prompt Payment Discount

“Year ending discount” is really a bonus given by the supplier to its dealers. This discount is payable only where the payments are actually received within forty-five days from the date of the invoice. Under this scheme, it appears a declaration is to be received dealer-wise and thereafter provision is to be made at the head office for the bonus. This discount was allowed by the assessee not out of any extra commercial considerations but that they were meant only to boost the sales. Such a system of grant of discount is prevalent in normal trade practice and the only difference may be that it is granted, either at the end of the year and or at the time of actual sales. Held: Discounted is allowable as a deduction from the value.

“Prompt payment discount” was treated at par with the yearend discount and was allowed it on the same reasoning as is applicable to the year ending discount.

Commissioner Of Central Excise, Madras Versus M/S Addison & Co. Ltd.

Refund: it was held by this Court in Union of India Vs Bombay Tyre International Pvt. Ltd. 1983 that trade discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price. If the turnover discount is known to the dealer even at the time of clearance then the Assessee is entitled for filing a claim for refund on the basis of credit notes raised by him towards turnover discount.

Unjust enrichment – incidence of duty was originally passed on to the buyer – Held that:- there is no material brought on record to show that the buyer to whom the incidence of duty was passed on by the Assessee did not pass it on to any other person. There is a statutory presumption under Section 12-B of the Act that the duty has been passed on to the ultimate consumer. It is clear from the facts of the instant case that the duty which was originally paid by the Assessee was passed on. The refund claimed by the Assessee is for an amount which is part of the excise duty paid earlier and passed on. The Assessee who did not bear the burden of the duty, though entitled to claim deduction, is not entitled for a refund as he would be unjustly enriched.

Refund claim – job-work – the excise duty paid originally at the rate of 8.8 per cent was passed on from the Assessee-processor (Job Worker) to the owner of the fabric and later to the customers. Refund not allowed.

Refund claim – excess excise duty paid at the rate of 18.11 per cent instead of 9.20 per cent – Assessee initially passed on the duty incidence to its customers. Later the Assessee returned the excess duty amount to its buyers which was evidenced by a certificate issued by the Chartered Accountant – Held that: – except for a factual dispute about the genuineness of the certificate issued by the Chartered Accountant and the credit notes raised by the Assessee regarding the return of the excess duty paid by the Assessee, there is no dispute in this case of the duty being passed on to any other person by the buyer. As it is clear that the Assessee has borne the burden of duty, it cannot be said that it is not entitled for the refund of the excess duty paid.

Commnr. Of Central Excise, Chennai-III Versus Grasim Industries

Refund claim – doctrine of unjust enrichment – Capital goods – Captive consumption – Whether the doctrine of unjust enrichment is applicable in respect of raw material imported and consumed in the manufacture of a final product – Held that:- principle of unjust enrichment is applicable even when the goods are used for captive consumption. – if a particular material is used for manufacture of a final product, that has to be treated as the cost of the product. Insofar as cost of production is concerned, it may include capital goods which are a part of fixed cost as well as raw material which are a part of variable cost.

Both are the components which come into costing of a particular product. Therefore it cannot be said that the principle laid down by the Court in Solar Pesticides would not extend to capital goods which are used in the manufacture of a product and have gone into the costing of the goods. In order to come out of the applicability of the doctrine of unjust enrichment, it therefor becomes necessary for the assessee to demonstrate that in the costing of the particular product, the cost of capital goods was not taken into consideration.

Sahakari Khand Udyog Mandal Ltd. Versus Commissioner Of C. Ex. & Cus.

Whether the doctrine of ‘unjust enrichment’ is based on equity.

Held that:- In our opinion, irrespective of applicability of Section 11B of the Act, the doctrine of ‘unjust enrichment’ can be invoked to deny the benefit to which a person is not otherwise entitled. Section 11B of the Act or similar provision merely gives legislative recognition to this doctrine. That, however, does not mean that in absence of statutory provision, a person can claim or retain undue benefit. Before claiming a relief of refund, it is necessary for the petitioner/appellant to show that he has paid the amount for which relief is sought, he has not passed on the burden on consumers and if such relief is not granted, he would suffer loss.

If the cash discounts, quantity discounts, and other trade discounts in question were known and understood at the time of removal in form of price circulars, price lists, discount policy, circulated among the dealers their deduction from the assessable value would have to be allowed in view the Apex Courts judgment in the case of Union of India Vs. M/s. Madras Rubber Factory even if the same were quantified, subsequently, subject to the conditions that the same had actually been passed on to the buyers. The Chartered Accountants also certified that the appellant had not passed on the excise duty corresponding to the credit notes issued by them later on to their customers on account of various discounts.

No Unjust Enrichment

Commissioner Of C. Ex., Bangalore-I Versus Om Pharmaceuticals Ltd.

Doctrine of Unjust Enrichment – It is clear that the assessee has not passed on the duty liability to the customers though initially he had passed on the liability, he has returned the said duty collected from the buyer – Therefore, he is entitled to get back the duty, which he has paid, which in law he was not liable to pay as held by the original authority – Therefore, the Tribunal was justified under the facts of this case in upholding that the Doctrine of Unjust Enrichment is not attracted to the facts of this case.

Commissioner Of Central Excise, Belgaum Commissionerate Versus Jineshwar Malleable & Alloys

Application for refund of the excess amount of duty paid under the mistaken notion that the actual duty to be paid was 12.8% whereas, in fact, quantum of excess duty liable to be paid by the assessee was only 9.6%. Further, excess duty paid has been collected and credited to the consignee and the entire burden of duty has been borne by the assessee and has not been passed on to the consignee.

Refund allowed – Decided in favor of the assessee.

I hold that provisions of unjust enrichment are not applicable to the present case since the duty of excise claimed to be excess paid in the instant appeal has been credited back to the buyers account by the appellant by way of issuing the credit notes. However, the adjudicating authority shall allow the refund of duty, as admissible, after due verification of all the credit notes and relevant accounting ledgers to ascertain that burden of duty has not been passed on by the appellant to their customers.

The discount policy also was available and was known to the customers at the time of clearance of their final product. The discounts stand actually given when a particular customer attains that goal of quantum of purchase. In such a scenario the Revenue cannot question the assessee, as to why, the discounts stand given to a particular customer.

Esprit Switchgear Pvt. Ltd. Versus Commissioner Of C. Ex., Mumbai-II

According to law, as amended, the assessee is required to show the excise duty element separately and credit the excise duty so collected to the Government. The burden is also cast on them to establish that the duty so collected has not been passed on to the consumer. There is no dispute that the item is consumer product and the duty element is not indicated separately in the invoices. Merely because they have maintained the same cum duty price, it cannot be concluded that they have borne the higher duty incidence without passing it on to the consumer. It can only raise a presumption, but refund cannot be granted on such presumption.

M/S Ahmedabad Packaging Industries Ltd. Versus Commissioner Of Central Excise, Ahmedabad

Held that: – Consequent to the principle laid down by the Hon’ble Supreme Court in the case of UOI Vs. Solar Pesticides (P) Ltd. -2000 SUPREME COURT OF INDIA], observing that the principle of Unjust enrichment is applicable to refund of duty on goods captively consumed, this Tribunal remanded the matter to the Adjudicating Authority with the liberty to the appellant to produce evidences to establish that the incidence of duty has not been passed on to others.

M/S. Aspire Exports Pvt. Ltd, Versus Commissioner Of Central Excise, Mumbai-IV

Refund claim – unjust enrichment – case of appellant is that since the transaction is of job work and not of sale there is no question of passing of incidence of duty to the principal – Held that: – duty was deposited during investigation with reference to removal of goods manufactured by appellant on job work basis – the goods were undisputedly dutiable therefore payment made by the appellant is differential duty therefore it cannot be said that amount paid by the appellant is deposit and not the duty.

Unjust enrichment is very much applicable in the present case.

Unjust enrichment – submission of the appellant is that since the goods were cleared to their own unit which amounts to captive consumption there is no sale of the goods, hence the incidence of duty paid in excess was not passed on – Held that: – even in respect of captive consumption, unjust enrichment provision is applicable as held by Hon’ble Supreme Court in case of Union of India vs. Solar Pesticides Pvt. Ltd. [2000 (2) TMI 237 – SUPREME COURT OF INDIA] – it is obvious that when the goods are sold all the cost of raw material including taxes, duties thereof is considered for arriving at the cost of final product.

Since the appellant and the recipient unit are under the same umbrella of one company, balance sheet of company consist of final sale transaction takes place by all the units therefore whether there is sale between appellant and their own recipient unit or otherwise that cannot be sole factor to decide that there is no unjust enrichment – the factual matrix has to be ascertained that whether excess duty paid by the appellant was absorbed in the value of the Pan Masala and Gutkha, only thereafter it can be established that whether the incidence of duty has been passed on to any other person or otherwise.

M/S. Uttar Haryana Bijli Vitran Nigam Limited Versus Commissioner Of Central Excise & St, Panchkula

Refund claim – unjust enrichment – Held that: – the only product sold and for which the consideration received by the appellant was electricity. Admittedly, the tariff of such electricity was fixed by the State authorities. The appellant had no flexibility in this regard. As such, the question of passing on the duty burden suffered in the workshop, on the goods which were captively consumed in the repair of transformers, which were again consumed in the distribution of electricity, does not arise.

Mann And Hummel Filters Pvt Ltd Versus C.C.,C.E. & S. T-Commissioner Of Central Tax, Bangalore North, West Commissionerate

Refund claim – any amount deposited during the investigation will be in the nature of pre-deposit made by the assessee and principle of unjust enrichment will not be applicable in such cases

Commissioner Of Central Tax, Medchal – Gst Versus M/S Saraca Laboratories Ltd.

Refund claim – unjust enrichment – case of Revenue is that the ground of unjust enrichment having not been considered by the First Appellate Authority in it is correct prospective – Held that: – the First Appellate Authority has come to a correct conclusion as to satisfaction of unjust enrichment by the respondent herein – the Chartered Accountant has categorically stated that the respondent (assessee) has been carrying on an amount of ₹ 6,80,974/- in the balance sheet under the “excise duty receivable” – the First Appellate Authority was correct in holding that the respondent herein has satisfied the condition of there is no unjust enrichment – refund allowed

Swastika Suitings Ltd. Versus Commissioner Of Central Excise, Jaipur-II

Refund of excess duty paid – rejection on the ground of unjust enrichment – Held that: – affidavit issued by the buyer of the goods indicates that they have not paid the excess duty claimed by the appellant in its invoice – the Chartered Accountant has also issued the certificate, certifying that the incidence of duty has not been passed on by the appellant to any other person and the incidence of such amount has been borne by it – the doctrine of unjust enrichment is not applicable – refund allowed –

Mahanagar Gas Ltd. Versus Commissioner Of Central Excise, Mumbai-II

Refund claim – unjust enrichment – Held that: – discount though passed on after removal of the goods but the same was known as per the agreement between appellant and OMCs, therefore discount was deductible from the assessable value – the excise duty paid on such discount was paid in excess which is prima facie liable to be refunded to the appellant.

Mahanagar Gas Ltd. Versus Commissioner Of Central Excise, Mumbai

Price variation clause – Held that: – the trade discount was not known prior to the clearance and thus at the time of clearance, the assessable value can only be ascertained on the basis of trade discount which was known to the buyer – Variation on the transaction value on a subsequent date cannot result in re-determination of assessable value – refund cannot be allowed.

Aplab Ltd Versus Commissioner Of Central Excise, Mumbai-III

Recredit/refund – Re-credit of amount of duty paid in excess through PLA – it was alleged that amount wrongly restored as credit without proper authority – Held that: – identical issue decided in the case of M/s. Pushp Enterprises Versus Commissioner of Central Excise Jaipur I [2015 (10) TMI 1651 – CESTAT DELHI], where it was held that suo moto credit can be taken if duty is paid twice as excess duty paid is not a duty and same is deposit – appeal allowed – decided in favor of appellant.

M/S Indo Alusys Industries Ltd. Versus Cce & St, Alwar

When there is price variation clause, the actual price of goods cannot be ascertained at the time of clearance and in a case where the actual price comes out to be higher than the value on which goods has been cleared then, the Revenue asked for duty on the extra value of the goods. Therefore, on the principle of equity, if any excess duty has been paid by appellant, the Revenue is required to refund to the assessee the excess duty.

The appellant is entitled for refund claim as they have not recovered the said price alongwith duty from the buyers of the goods – appeal allowed.

Mrs. Padma Raghavan Sri Vigneswara Textile Printers Versus Assistant Commissioner Of Central Excise, Commissioner Of Central Excise And Customs (Appeals)

Refund claim – unjust enrichment – Held that: – holding that since this was duty paid on demand, there was no question of the petitioner passing on the duty burden to any consumer, and therefore, the petitioner was entitled to refund in its entirety – petition allowed – decided in favor of petitioner.

Unjust enrichment – refund claim – in the case of UOI Vs. A.K. Spintex 2008 –Raj. it was held that the presumption under Section 12-B is a rebuttable presumption and once the assessee produces evidence in support of his claim of having not passed on the incidence of duty whose refund is claimed to the customers, the burden of proof would shift to the Department to prove that the claim of the assessee is false – rejection of refund claim on the ground of doctrine of unjust enrichment is not legal and proper.

CEAT Ltd. Versus Commissioner Of Central Excise, Mumbai

Unjust enrichment – Held that:- It is the amount of proforma credit which otherwise duty paid by the appellant, it cannot be said it is a pre-deposit. For the reason that for filing appeal in the Supreme Court no need of any pre-deposit, therefore, the amount paid by the appellant cannot be considered as pre deposit. In the absence of statutory provisions, a person cannot claim or retain undue benefit.

In the present case the refund is governed by Section 11B, therefore, the provisions of unjust enrichment is clearly applicable. Even in the case of suo moto re-credit though in principle, the appellant is entitled but subject to test of unjust enrichment.

Commr. Of Central Excise-Iv, Kolkata & Others Versus M/S. Madura Coats Ltd.

Held that: – there was no question of assessee having recovered the excess amount from the consumers. because, the duty payable was under Heading XXXX of the classification where under only basic excise duty was payable. In view of the above, it is obvious that the assessee did not recover any duty from the consumers under Heading No. YYYY. Accordingly, whatever amount was recovered from the assessee by the appellants, could not have been required to be refunded to the consumers – Following decision in Commissioner of Central Excise, Hyderabad vs I.T.C.Ltd. 2004 – SUPREME COURT OF INDIA] – Decided against Revenue.

Denial of refund claim – Unjust enrichment – Held that:- Tribunal was not concerned with the treatment given to the amount and as deposited in the Assessee’s profit and loss account. It is immaterial and irrelevant for the Tribunal and equally for us as to what the Assessee terms this amount in his Books of Account. Even if it is shown on the ‘expense side’ that does not mean that the presumption that the burden has been passed to the consumer can be raised. – principle in this decision is the same which is to be found and applied by this Court in the case of Suvidhe Ltd. v/s Union of India, reported in 1996 High Court Of Judicature At Bombay.

The Commissioner of Central Excise, Coimbatore versus M/S. Pricol Ltd., the Customs, Excise & Service Tax Appellate Tribunal

Denial of refund claim – Unjust enrichment – Held that: – as is evident from the records, it is not a case of refund of duty. It is a pre-deposit made under protest at the time of investigation, as has been recorded in the original proceedings itself. In this regard, it has to be noticed it has been the consistent view taken by the Courts that any amount, that is deposited during the pendency of adjudication proceedings or investigation is in the nature of deposit made under protest and, therefore, the principles of unjust enrichment does not apply. – Refund allowed – Decided against the revenue.

M/S. ICMC Corporation Ltd. Versus The Customs, Excise And Service Tax Appellate Tribunal

Held that: – assessee originally availed the Cenvat Credit on service tax for discharging its liability. However, for sound reasons, it reversed the credit. Strictly speaking, in this process, there is only an account entry reversal and factually there is no outflow of funds from the assessee to result in filing application claiming refund of duty – it was not a case of refund of duty and that the assessee was not to comply with the provisions of Section 11B of the Act.

Arviva Industries (India) Ltd. Versus Union Of India

Refund claimed – Unjust enrichment – There is no question of applying the principles of unjust enrichment because, the company has not imported the goods under the advance licenses – Goods were imported duty free by the persons to whom the advance licenses were sold – Since the predecessor company had not imported the goods duty free, the question of passing on the duty element to the customers did not arise at all. Since the amount in question did not belong to the consumer the said amount could not be directed to be credited to the Consumer Welfare Fund.

Commissioner Of Central Tax, Medchal – Gst Versus M/S Saraca Laboratories Ltd.

Refund claim – unjust enrichment – case of Revenue is that the ground of unjust enrichment having not been considered by the First Appellate Authority in it is correct prospective – Held that: – the First Appellate Authority has come to a correct conclusion as to satisfaction of unjust enrichment by the respondent herein – the Chartered Accountant has categorically stated that the respondent (assessee) has been carrying on an amount of ₹ 6,80,974/- in the balance sheet under the “excise duty receivable” – the First Appellate Authority was correct in holding that the respondent herein has satisfied the condition of there is no unjust enrichment – refund allowed

Swastika Suitings Ltd. Versus Commissioner Of Central Excise, Jaipur-II

Refund of excess duty paid – rejection on the ground of unjust enrichment – Held that: – affidavit issued by the buyer of the goods indicates that they have not paid the excess duty claimed by the appellant in its invoice – the Chartered Accountant has also issued the certificate, certifying that the incidence of duty has not been passed on by the appellant to any other person and the incidence of such amount has been borne by it – the doctrine of unjust enrichment is not applicable – refund allowed.