2023 (7) TMI 476 - AT - Central Excise

Refund claim - value of the software is includable in the assessable value of hardware or not - denial on the sole ground that the Chartered Accountant s Certificate produced by the appellants - whether the appellants' claim for refund of duty paid is hit by the bar of unjust enrichment? - HELD THAT - On going through the contracts/purchase orders, it is seen that the same are for a value which is inclusive of Excise duty, Sales Tax, Fright/Insurance/ Packing/Forwarding, Documentation, Training charges, Octroi and any other charges; this indicates that the consideration paid by MTNL/BSNL is inclusive of taxes payable; in the schedule the value of software, for each of the hardware items, is indicted per unit and the total price thereof. However, in respect of the purchase order dated 12/02/2001 indicates under bill of material that the Excise Duty and Sales Tax payable for software, as at Row no. 1.3b and 1.5b, to be 0%. However, there is no indication whatsoever to show that such duty paid by the appellants was not reimbursed by their customers. The duty and the value are shown under Invoice no. 340 dated 12/12/2001. In addition to these, no other record or evidence has been produced by the appellants. To substantiate their claim of not passing on the incidence of duty under the circumstances, it is found that there is considerable force in the argument of the Revenue that the invoice issued under statutory provisions does not indicate that the incidence of duty has not been passed on. CESTAT, New Delhi in the case of INTERACH BUILDING PRODUCTS (P) LTD. VERSUS COMMR. OF C. EX., GHAZIABAD 2005 (1) TMI 208 - CESTAT, NEW DELHI held that When they were paying the duty under protest, it is difficult to accept that they did not charge duty from their customers. They in fact indicated the duty separately in their invoices while clearing the goods with an intention to make it known to their customers/buyers, the duty involved on the cleared goods and requiring them to pay the same. There are no merit in the appeal filed by the appellants. In the result, the appeal is dismissed.

Summary

Issues involved:
The issues involved in the judgment are the eligibility for refund under Section 27 of the Customs Act, 1962, the nature of software supplied along with hardware equipment, the bar of unjust enrichment, and the passing on of the incidence of duty to customers.

Eligibility for Refund under Section 27 of the Customs Act, 1962:
The appellant, a supplier of Telecom equipment, filed a refund application for duty paid on software supplied to MTNL/BSNL. The Lower Authority held that duty was correctly paid as the value of software was included in the assessable value. The First Appellate Authority remanded the matter to verify the nature of software and unjust enrichment. The Original Authority held that the value of software is not includable in the assessable value but found the appellant did not cross the bar of unjust enrichment. The First Appellate Authority upheld the rejection of the refund claim, leading to the current appeal.

Bar of Unjust Enrichment:
The main issue addressed in the case was whether the appellant's claim for refund of duty paid is hit by the bar of unjust enrichment. The appellant claimed they paid duty on software supplied along with hardware, while the Department argued that duty paid was reflected in the invoices, indicating the incidence of duty passed on to customers. The First Appellate Authority discarded the Chartered Accountant certificate for lack of proof on how the duty amount was accounted for in the books of accounts. The contracts/purchase orders showed inclusive consideration, but no evidence was provided to show duty paid was not reimbursed by customers.

Passing on the Incidence of Duty to Customers:
The invoices issued by the appellant indicated separate duty amounts, leading to the inference that duty was passed on to customers. The Supreme Court precedent highlighted the significance of showing duty separately in invoices, implying the passing on of duty to buyers. The lack of evidence to prove that duty incidence was not passed on, coupled with the invoice details, supported the Revenue's argument. The appeal was dismissed based on these findings.