2007 (5) TMI 473 - AT - Customs

Summary

Issues: Denial of refund of excess customs duty paid on capital goods, determination of whether the amount should be credited to the Consumer Welfare Fund or paid to the appellant.

The judgment by the Appellate Tribunal CESTAT, New Delhi dealt with the denial of refund of excess customs duty paid on capital goods. The main issue was whether the appellant provided sufficient evidence to prove that the excess duty amount had not been passed on through product prices. The impugned order was passed following a remand by the Tribunal for verification. The order noted that the excess duty paid had not been taken into account while determining the value of the machines in the books of accounts. However, the appellant failed to produce evidence to prove that the excess duty had not been passed on through product prices. As a result, the doctrine of unjust enrichment was found applicable, and the amount was credited to the Consumer Welfare Fund as per the Customs Act, 1962.

The contention raised by the appellant's counsel was that the excess duty amount, kept separate as a receivable current asset, did not form part of the fixed cost included in the product price. The counsel argued that since the excess duty was not considered in the fixed cost, it could not have been passed on through product prices. Additionally, it was highlighted that the gem stones manufactured by the appellant were exported at market-driven prices, not based on costing. Reference was made to a previous case where a similar situation led to the Tribunal ruling in favor of the assessee.

On the other hand, the Respondent argued that the appellant needed to establish separately that the excess duty amount was not included in the product price. Since this was not proven, the denial of the refund was justified. However, both parties agreed that the excess duty amount was not part of the capital cost of the appellant, indicating that it was not passed on through product prices.

Ultimately, the Tribunal found in favor of the appellant, stating that the verification had shown that the excess duty had not been passed on through product prices. The decision was supported by the precedent set in a previous case. Consequently, the appeals were allowed, granting consequential relief to the appellant.