2009 (2) TMI 675 - AT - Central Excise

Refund claim - denial on the ground of Unjust enrichment - Credit notes issued post clearance - incidence of duty -

Issues Involved:
1. Whether the lower authorities were correct in allowing the refund claims and crediting them to the Consumer Welfare Fund on the ground of unjust enrichment.
2. Whether the issuance of post-clearance credit notes amounts to non-passing of the incidence of duty to the customers.

Issue-Wise Detailed Analysis:

1. Unjust Enrichment and Refund Claims:
The primary issue in these appeals is whether the lower authorities were correct in allowing the refund claims filed by the appellant and crediting them to the Consumer Welfare Fund on the ground that the appellant has not passed the test of unjust enrichment as envisaged under Section 11B of the Central Excise Act, 1944. The appellant contended that the issuance of credit notes post-clearance should be considered as non-passing of the incidence of duty to the customers. The learned Commissioner (Appeals) concluded that the appellant had not passed the test of unjust enrichment even by issuance of credit notes. The Commissioner noted that the statutory provision does not support the view that unjust enrichment occurs once the initial clearance on payment of duty occurs with a corresponding realization from downstream. It is common business practice to issue debit and credit notes and make adjustments towards amounts already paid.

2. Issuance of Post-Clearance Credit Notes:
The appellant argued that the issue is settled by the Divisional Bench of the Hon'ble High Court of Rajasthan in the case of Union of India v. A.K. Spintex Ltd., where it was held that the issuance of debit and credit notes between the assessee and its immediate purchaser means that the incidence of duty has not been passed on to the purchaser. The learned SDR, however, urged that the issue is settled in favor of the Revenue in the case of S. Kumar's Ltd. v. CCE, Indore, where it was held that issuing credit notes post-clearance does not amount to non-passing of the incidence of duty to the customers.

The Tribunal's Larger Bench ruling in the case of S. Kumar's Ltd. v. Commissioner of Central Excise, Indore, established that the dismissal of the appeal in Sangam Processors (Bhilwara) Ltd. v. CCE by the Supreme Court is a binding precedent, and the issuance of credit notes post-clearance does not help the appellant in proving non-passing of the incidence of duty.

Judgment Analysis:
The Hon'ble High Court of Rajasthan in the case of A.K. Spintex Ltd. addressed the issue of whether the issuance of debit and credit notes post-clearance entitles the assessee to claim a refund. The High Court held that once the debit and credit notes are issued and effected, it cannot be assumed that the incidence of the burden of excise duty has been passed on to the purchaser. The burden of proof under Section 12B is rebuttable, and if the assessee leads reliable evidence showing that the burden has not been passed on, the presumption under Section 12B stands rebutted.

The High Court further noted that passing on the burden of excise duty to the next purchaser cannot be left in the realm of presumption. If the assessee can show that the burden is not passed on or has been appropriately reversed, the claim for a refund cannot be denied. The High Court dismissed the revenue's contention that allowing such mechanisms would open flood gates for pilferage of revenue, stating that the revenue can lead evidence in rebuttal if false or fictitious debit and credit notes are issued.

Conclusion:
The Tribunal, following the judgment of the Hon'ble High Court of Rajasthan in A.K. Spintex Ltd., allowed all the appeals with consequential relief, if any, holding that the issuance of debit and credit notes post-clearance does not necessarily imply that the incidence of duty has been passed on to the customers. The appeals were allowed, and the operative portion of the order was pronounced in open court on the conclusion of the hearing.

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