2014 (2) TMI 879 - AT - Customs

Denial of refund claim - Burden of proof - Refund claim for differential amount of Customs duty paid - Classification of goods determined in favour of assessee - Unjust enrichment - whether in the peculiar facts and circumstances of the case, the refund claim is hit by the doctrine of unjust enrichment or not - Held that - both price of good supplied by the AVA, US and the price at which the goods are being sold in India are determined by supplier abroad. Respondent has to practically act in all spheres as per the direction of AVA, USA. Again this factor alone cannot lead to a conclusion that burden of duty has not been passed on to the final buyer of the goods - it is clear that cost of import including the import duty etc. is being considered as the cost of material by the respondent. Learned Counsel for the Revenue has also drawn our attention to the balance sheet as on 31 st March 2003, 31 st March 2004 and 31 st March 2005 wherein in the expenditure side respondent has shown the cost of goods old. Further schedule No. 14 of the said Balance Sheet, details how the cost of goods sold is calculated. It is seen from the said calculation that CIF value, Customs duty, Clearing and another incidental charges are considered as cost of goods sold. The disputed duty amount is insignificant in the over all scheme of pricing. In fact, post sale, respondent claims to pay 43% bonus to the distributors above certain level. It is perhaps for such reasons that wholesale prices were not changed and the disputed duty was considered as the cost of material sold. These goods are being sold as multilevel marketing. We also note that the dispute continued for more than three years and no prudent business man/organization would continue to bear incidence of higher duty without passing the same to the buyer of the goods. We are therefore of the view that respondents have failed to prove that incidence of duty disputed has not been passed on to the buyer of such goods - since no separate duty has been indicated in the invoices it has to be assumed that total burden of Customs duty has been passed on to the buyer of goods - In any case, whether the burden of duty has been passed to the buyer of goods is a matter to be examined in facts of each case, and observation in one case will be of little help in other cases until and unless all the facts are exactly same - respondent have not discharged the burden that they have not passed on the full incidence of duty to the buyer of such goods - Decided in favour of Revenue.

Issues Involved:
1. Classification of imported Aloe Vera products.
2. Refund claim for customs duty.
3. Application of the doctrine of unjust enrichment.

Issue-Wise Detailed Analysis:

1. Classification of Imported Aloe Vera Products:
The respondents imported Aloe Vera products and sought classification under Customs Tariff Heading 2009 as Fruit Juices & Vegetable Juices. The Revenue classified them under Heading 2106 as Food Preparation. The Tribunal, in an earlier order, decided in favor of the respondents, classifying the products under Heading 2009. This classification was reaffirmed by the Commissioner (Appeals) in subsequent appeals, including the classification of a new product, Aloe Bits N Peaches, under the same heading.

2. Refund Claim for Customs Duty:
Following the Tribunal's decision on classification, the respondents filed refund claims for the differential customs duty paid. The Deputy Commissioner initially held that the refund was due but directed the amount to be credited to the Consumer Welfare Fund due to the bar of unjust enrichment. The respondents appealed, and the Commissioner (Appeals) allowed the refund claims, leading the Revenue to appeal against these orders.

3. Application of the Doctrine of Unjust Enrichment:
The core issue was whether the refund claims were hit by the doctrine of unjust enrichment. The respondents argued that the MRP of the goods remained unchanged during the dispute period, indicating that the duty burden was not passed on to customers. They supported this with certificates from statutory auditors. However, the Tribunal noted that stability in price does not conclusively prove that the duty burden was not passed on, citing precedents where such stability could be due to various factors.

The Tribunal also emphasized that Chartered Accountant certificates alone are not decisive evidence against unjust enrichment. The Tribunal referred to several cases where such certificates were considered corroborative but not conclusive evidence. Additionally, the Tribunal pointed out that the respondents did not indicate the amount of duty on the sales invoices as required under Section 28C of the Customs Act, 1962, which creates a presumption under Section 28D that the duty burden has been passed on to the customers.

The Tribunal examined the respondents' balance sheets and found that the customs duty was accounted for as part of the cost of goods sold, further indicating that the duty burden was considered part of the material cost. The Tribunal concluded that the respondents failed to prove that the duty burden was not passed on to the buyers, as required to rebut the presumption under Section 28D.

Conclusion:
The Tribunal held that the respondents did not discharge the burden of proving that the incidence of duty was not passed on to the buyers. Consequently, both appeals by the Revenue were allowed, and the refund claims were denied based on the doctrine of unjust enrichment.

Judgment:
Both appeals were allowed, and the refund claims were denied. The judgment was pronounced in court on 2.1.2014.

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