2007 (10) TMI 196 - HC - Customs

Imported capital goods for floriculture project on payment of custom duty- no material on record to suggest that the duty element has been passed on to the consumer - sale price of the final product of the assessee matches with the price of other sellers in the market who are using non duty paid identical imported CG it is held that the duty element cannot be said to have been passed depreciation was not written back so no benefit derived by claming depreciation

Summary

Issues:
Whether the Tribunal was justified in holding that the assessee is entitled to a refund of customs duty paid on capital goods, despite the Deputy Commissioner directing the amount to be credited to the Consumer Welfare Fund due to the duty being passed on to consumers indirectly.

Analysis:
The respondent-assessee imported capital goods and became entitled to a refund of excess duty paid on the goods. The Deputy Commissioner of Customs sanctioned the refund but directed it to be credited to the Consumer Welfare Fund, alleging that the duty element had been passed on to consumers indirectly. The Commissioner of Customs (A) later held that there was no evidence of duty being passed on and allowed the refund to the assessee. The Tribunal dismissed the revenue's appeal and upheld the order for refund, leading to the current appeal by the revenue.

The revenue contended that the depreciation claimed by the assessee on the imported capital goods indicated that the duty element had been considered in the pricing of final products. Citing the decision in the case of M/s. Solar Pesticides Pvt. Ltd., the revenue argued that the principle of unjust enrichment applies to capital goods as well. However, the Commissioner (A) and the Tribunal found no evidence of duty being passed on to consumers, especially considering the pricing parity with non-duty paid goods in the market.

The Court acknowledged the principle of unjust enrichment but noted that the findings of the Commissioner (A) and the Tribunal indicated no passing on of duty to consumers. The assessee's reversal of depreciation and exemption from income tax as a 100% EOU supported the conclusion that no benefit was derived from the depreciation claimed earlier. The Court considered the Tribunal's decision a factual finding with no legal question arising, leading to the dismissal of the revenue's appeal.