2009 (8) TMI 1017 - AT - Central Excise

Summary

Issues:
Refund claim rejection based on passing of duty incidence to customers.

Analysis:
The appeal was filed against the rejection of a refund claim of Rs. 91,386 on the grounds that the appellant failed to prove that the duty incidence had not been passed on to any other person. The appellants had cleared biscuits with a declared MRP of Rs. 660 instead of Rs. 600 due to a data entry error, resulting in the wrong discharge of duty liability. The Commissioner (Appeals) noted that wholesale prices were not affected by the amount of central excise duty paid, and customers were unaware of the duty amount as prices were inclusive of duty and varied across states. The Commissioner found that the duty incidence had likely been passed on to customers due to lack of transparency in invoices and varying wholesale prices charged by the appellants.

The main argument presented was that a previous decision by the Commissioner (Appeals) had accepted the refund due to a clerical error in the computer system. However, the Department argued that as per Section 12D of the Central Excise Act, unless proven otherwise, the duty paid is deemed to have been passed on to buyers. Reference was made to a Supreme Court decision supporting this position. The Tribunal observed that the excess duty payment was a result of a mistake in entering the MRP in the computer system. It was noted that the Department had not appealed the previous order where a refund was allowed in a similar situation. The Tribunal found that the wholesale prices were not influenced by the duty amount paid, and the excess duty payment was a genuine error. The case law cited by the Department regarding captive consumption was deemed inapplicable to the current scenario.

In conclusion, the Tribunal set aside the earlier order and allowed the appeal, granting consequential relief to the appellant. The decision was made based on the finding that the duty refund should not be denied in a situation where the duty overpayment was a result of a genuine mistake and where the duty incidence had not been passed on to customers.