2008 (11) TMI 89 - HC - Central Excise

Refund excess duty paid - price of goods reduced on issuance of debit notes and credit notes in such cases incidence of duty cannot be assumed as passed on to customer refund not deniable on ground of unjust enrichment

Summary

Issues:
Challenge to Tribunal's order on refund of excise duty where duty incidence passed on to customers initially but reversed back by issuance of debit and credit notes.

Analysis:
1. The appeal challenged the Tribunal's order allowing a refund claim of excise duty. The controversy arose when the assessee processed man-made fabrics and received grey unprocessed fabric from suppliers. The issue was regarding the amendment in deemed CENVAT Credit rates from 45% to 50% effective from 11.6.2001. The customers were initially charged 55% duty instead of 50%, protested, and issued debit notes to the assessee for the differential amount. The assessee claimed a refund of Rs. 61,146, arguing that the duty was not passed on to customers as they issued credit notes immediately. The revenue rejected the refund application citing unjust enrichment. The Tribunal allowed the appeal, emphasizing that the duty incidence was not passed on to customers as confirmed by the issuance of credit notes.

2. The revenue relied on legal precedents to argue that only the ultimate customer can claim a refund if the duty incidence is passed on to them. The assessee contended that the issuance of debit and credit notes reversed the burden of excise duty back to them. The High Court observed that the revenue's argument was based on a misconception as there was no dispute that the credit notes were issued by the assessee to customers. The Court analyzed the legal provisions and held that once debit and credit notes were exchanged, the burden of excise duty cannot be assumed to be passed on to the purchaser.

3. The Court further discussed Section 12B, highlighting that it places the burden of proof on the assessee but is rebuttable. The burden shifts to the revenue if the assessee provides evidence like debit and credit notes to show that the duty burden was not passed on. The Court upheld the principle that only the ultimate person bearing the burden can claim a refund. In this case, since the burden was not passed on to customers, the assessee was entitled to the refund. The Court dismissed the appeal, emphasizing that the issuance of debit and credit notes does not automatically imply passing on the duty burden.

4. The revenue's argument that allowing refunds based on debit and credit notes would lead to revenue pilferage was rejected by the Court. The Court emphasized that if the evidence provided by the assessee is reliable and not rebutted by the revenue, the presumption under Section 12B is effectively rebutted. The Court concluded that in this case, the Tribunal was not erroneous in allowing the refund claim as the burden of excise duty was not passed on to customers. The appeal was dismissed in favor of the assessee.