2011 (6) TMI 492 - AT - Service Tax

Refund claims - DR submits that the refund claims are payable in cash to the assessees subject to fulfilling the condition that they have not passed on the burden of excise duty to the consumers - order allowing the refund claims is set aside and the Department s appeals are allowed

Summary

Issues:
1. Refund claims rejection by original authority.
2. Burden of excise duty transfer to buyers.
3. Unjust enrichment in inter unit transactions.
4. Evidence requirement to prove duty burden not passed on.
5. Date of clearances and duty payment substantiation.

Analysis:

1. The appeals arose from a common order passed by the Commissioner (Appeals) of Customs and Central Excise, Bhopal, setting aside the original authority's rejection of refund claims. The main issue was whether the respondents, a 100% EOU manufacturing yarn, were required to pay AED under the Textile and Textile Article Act. The Tribunal remanded the matter to the Commissioner (Appeals) to consider the refund claims regarding unjust enrichment and limitation. The Commissioner (Appeals) held that duty burden was not transferred to buyers in one case and that unjust enrichment did not arise in inter unit transactions in another case.

2. The burden of proving that the duty burden was not passed on to consumers rested on the assessee. The Commissioner (Appeals) erred in holding that unjust enrichment did not arise in inter unit transfers. The Tribunal clarified that unjust enrichment had to be determined based on subsequent sales by the recipient unit of the product or final product manufactured using transfer materials. Lack of evidence regarding the duty burden to the ultimate customer rendered the Commissioner's order improper.

3. In a case where the Commissioner (Appeals) allowed the refund claim after finding that duty was paid much after clearances, no evidence was presented regarding the actual clearance dates of the product. The claim that duty amount deposited was not passed on to customers lacked substantiation. Consequently, the refund claim approval in this case was deemed unjustified.

4. Ultimately, the Tribunal found that both claims failed the test of unjust enrichment. Therefore, the impugned order allowing the refund claims was set aside, and the Department's appeals were allowed. The Cross Objections by the respondents were also disposed of accordingly.