Case Law Details
Chowgule Brothers Private Limited Vs C.C.E. Kutch (Gandhidham) (CESTAT Ahmedabad)
CESTAT held unjust-enrichment does not exist in the case where the assessee initially charged duty / service tax and subsequently issued the credit note for the same.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The issue involved is that whether the refund of the appellant is hit by mischief of unjust-enrichment as per Section 11 B (1) of Central Excise Act, 1944.
2. Shri. Jigar Shah, learned Counsel appearing on behalf of the appellant submits that the sole basis of crediting the refund in Consumer Welfare Fund given by the Commissioner (Appeals) relying on the decision of the Hon’ble Supreme Court in the case of CCE Vs. Addison & Co. Ltd -2016-VIL-49-SC-CE . He submits that though the appellant have initially charged the service tax to the customers but subsequently returned the same by issuing the credit note, therefore, there is no unjust-enrichment on the part of the appellant. He further submits that even though the appellant have initially charged service tax to the customer, the same was not further passed on by the said customers to any other person. He placed reliance on the following judgments:-
- CCE Vs. Addison & Co. Ltd -2016-VIL-49-SC-CE
- Jai Crop Ltd Vs. CCE – 2016 –VIL-834-CESTAT-MUM-CE
- Larsen & Tourbo Limited Vs. CCE – 2020- VIL- 133- CESTAT-AHM-ST
- Shayam Steel Industries Ltd Vs. CGST – 2021- VIL- 419- ESTAT-KOL-CE
- Gail (India) Ltd Vs. CCE – 2016 (46) STR 698 (T)
3. Shri. Rajesh k Agarwal, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order.
4. I have carefully considered the submission made by both sides and perused the records. The limited issue before me is to decide that in spite of issuing the credit note by the appellant to their customers towards the service tax which was initially charged whether the unjust-enrichment exists or otherwise. I find that there is no dispute that the appellant have initially charged service tax to the customer. Subsequently, the same was reversed by issuing the credit note to the customers, therefore, the incidence of the service tax paid by the appellant was not passed on this issue has been considered in the following judgments:-
- In the case of Addison & Co. Ltd.(Supra), the learned counsel has strongly relied upon the following paras which are reproduced below:-
“14. We have considered the submissions made by the Counsel carefully and examined the material on record. The questions that arise for consideration in this case are whether the Assessee is entitled for a refund and whether there would be unjust enrichment if the said refund is allowed. It was held by the Special Bench of CEGAT, New Delhi by its judgment dated 17-3-1994 in Collector of Central Excise, Madras v. Addison & Co. Ltd. [1994 (73) E.L.T. 331 (Tribunal)] that the turnover discount is not an admissible abatement on the ground that the quantum of discount was not known prior to the removable of the goods. In an appeal filed by the respondent-Assessee, this Court by its judgment dated 11-3-1997 in Addison & Co. Ltd. v. Collector of Central Excise, Madras (supra) held that the turnover discount is an admissible deduction. This Court approved the normal practice under which discounts are given and held that the discount is known to the dealer at the time of purchase. The Additional Solicitor General submitted that any credit note that was raised post clearance will not be taken into account for the purpose of a refund by the Department. We do not agree with the said submission as it was held by this Court in Union of India v. Bombay Tyre International (supra) 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. It is the submission of the Assessee that the turnover discount is known to the dealer even at the time of clearance which has also been upheld by this Court. It is clear from the above that the Assessee is entitled for filing a claim for refund on the basis of credit notes raised by him towards turnover discount.
21. That a consumer can make an application for refund is clear from paras 98 and 99 of the judgment of this Court in Mafatlal Industries (supra). We are bound by the said findings of a Larger Bench of this Court. 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. Another submission which remains to be considered is the requirement of verification to be done for the purpose of finding out who ultimately bore the burden of excise duty. It might be difficult to identify who had actually borne the burden but such verification would definitely assist the Revenue in finding out whether the manufacturer or buyer who makes an application for refund are being unjustly enriched. If it is not possible to identify the person/persons who have borne the duty, the amount of excise duty collected in excess will remain in the fund which will be utilized for the benefit of the consumers as provided in Section 12D.
35. The respondent-Assessee is a 100 per cent Export Oriented Unit (EOU) manufacturing cotton yarn. The respondent filed an application for refund of an amount of Rs. 2,00,827/- on 14-8-2002 on the ground that it had paid excess excise duty at the rate of 18.11 per cent instead of 9.20 per cent. The 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 on 2-8-2002. The refund claim was rejected by the Deputy Commissioner of Central Excise, Kolhapur Division vide an order dated 24-9-2002 on the ground that the Assessee did not submit either the credit notes or the Chartered Accountant‘s certificate at the time of filing the refund application. Not satisfied with the genuineness of the documents the Deputy Commissioner rejected the refund claim. The Commissioner (Appeals), Central Excise, Pune allowed the appeal filed by the Assessee by taking note of the certificate issued by the Chartered Accountant and the credit notes dated 29-7-2002. The Appellate Authority accepted the Assessee‘s contentions and held that there was no reason to doubt the genuineness of the documents produced. The Appellate Authority allowed the appeal of the Assessee and the said order was confirmed by the Customs, Excise and Service Tax Appellate Tribunal vide judgment and order dated 6-10-2005. The said order of Central Excise and Service Tax Appellate Tribunal was further confirmed by the High Court of Judicature at Bombay in Customs Excise Appeal No. 100 of 2008 filed by the Revenue. The Revenue has filed the above Civil Appeal challenging the validity of the judgment of the High Court in Central Excise Appeal No. 100 of 2008.
36. 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. In view of the facts of this case being different from Civil Appeal No. 7906 of 2002, the appeal preferred by the Revenue is dismissed.”
- This issue has already been considered by this tribunal in the case of Jai Crop Ltd (Supra) wherein the Tribunal has passed the following order.
7. We have carefully considered the submissions made by both the sides. We find that the learned Commissioner (Appeals) in principal held that sales tax even though paid subsequently, the same is a permissible deduction. Accordingly, excise duty attributed to the said sales tax amount is refundable. However, he held that since the full invoice value was recovered by the appellant from the buyer, incidence of duty stand passed on. Accordingly, refund should be credited to Consumer Welfare Fund. This finding of the Commissioner (Appeals) is based on certain decision of this Tribunal that even if the credit note was subsequently issued, once the invoice was raised for full value the incidence of duty stands passed on and hence subsequent credit note will not alter the position. We find that as per the judgment of Larger Bench of the Supreme Court in the case of Addison & Co Ltd. (supra) wherein it was held that if the credit note is issued in respect of duty already paid to the buyer, the incidence of such duty does not stand passed on to any other person. Therefore, following the ratio of the Supreme Court judgment, the order of the Commissioner (Appeals) ordering credit of refund into Consumer Welfare Fund is not proper. In the present case, undisputedly the appellant has issued credit note in respect of duty attributed to sales tax amount. Therefore, incidence of the same has not been passed on to any other person. Accordingly, refund is not hit by mischief of unjust enrichment. The appellant is entitled for the refund.
In the case of L & T also the identical issue has been considered wherein the following observation was made.
“4. Heard both sides and perused the record. I find that appellant, though initially recovered the amount of service tax on the service which was exempted as per Section 102 of Finance Act, 2016 but subsequently the amount of service tax was returned and certificate to this effect was produced by the learned Counsel, however, this is subsequent development. The said certificate was not produced before the Adjudicating Authority. However, the same was produced before the Commissioner (Appeals) but from the findings of Commissioner (Appeals), I observe that said certificate was not considered. I find that as per the judgment of Hon‟ble Supreme Court in the case of Addison & Co. Limited (supra), even though initially the amount was passed on but if the same is subsequently reversed by returning the amount of refund to the service provider, it was held that the incidence has not been passed on. Therefore, in the present case also, even though initially the amount of service tax was recovered but subsequently it was returned. The incidence prima-facie was not passed on. However, this being the factual aspect, needs to be verified by the Adjudicating Authority. As regards the submission of learned Authorised Representative, I agree with the learned Authorised Representative as regards the element of Cenvat credit. Since the appellant themselves have claimed the exemption and on that basis they are not entitled for Cenvat credit. Since they have already availed Cenvat credit, the same should be reduced from the total amount of refund Rs. 16,14,654/-.
5. In view of above discussion, the impugned order is set-aside and the appeal is allowed by way of remand for passing a fresh order.”
From the above judgments it can be seen that the facts and transaction involved in the present case are identical to the judgments cited above wherein it was held that unjust-enrichment does not exist in the case where the assessee initially charged duty / service tax and subsequently issued the credit note for the same. Following the above decisions and considering the facts of the present case, I am of the view that the appellant’s refund claim does not fall under the clutch of unjust-enrichment.
5. Accordingly, the appellant is entitled for the refund claim, hence, the impugned order is set aside. Appeal is allowed.
(Pronounced in the open court on 16.03.2023 )
