2001 (11) TMI 78 - SC - Central Excise

Whether refund claimed by the appellant should not be credited to the consumer welfare fund in terms of Section 11B read with Section 12C? Held that - As the present is not a case of an unconstitutional levy as contemplated by the nine judges' bench decision. That is where a provision of the Act under which tax is levied is struck down as unconstitutional for transgressing constitutional limitations. It is this class of cases where the claim for refund was held to be outside the purview of the Act which for sake of convenience it was called as 'unconstitutional levy' in Mafatlal Industries case 1996 (12) TMI 50 - SUPREME COURT OF INDIA . Secondly, assuming it to be a case of unconstitutional levy still the appellant would not be entitled to refund in terms of law settled by the Mafatlal Industries, case. Even in that eventuality it has to be established that incidence of duty has not been passed on to others. It has been held that whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the requirement that the burden of duty has not been passed on to others. It was not submitted before us that this requirement had been fulfilled by the appellant. Thus looking from any angle, the appellant is not entitled to refund. Appeal dismissed.

Summary

Issues:
1. Classification of RF solution as 'goods' under the Central Excises and Salt Act, 1944.
2. Refund claim under Section 11B of the Act.
3. Applicability of Sections 12B and 12C post-amendment.
4. Challenge to the order directing credit to the consumer welfare fund.
5. Entitlement to refund based on the Mafatlal Industries case.

Analysis:

1. The appellant, a manufacturer of industrial fabrics, claimed that RF solutions are not 'goods' under the Central Excises and Salt Act, 1944, and thus not subject to central excise duty. The Tribunal had earlier held that no duty was leviable on RF solutions. However, the Supreme Court found it difficult to accept the contention that the appellant was entitled to a refund based on this classification. The Court clarified that even if it was considered an unconstitutional levy, the appellant would not be entitled to a refund unless it could establish that the duty incidence had not been passed on to others.

2. Following the Tribunal's decision, the appellant filed a refund claim under Section 11B of the Act seeking reimbursement of the duty paid under protest. However, subsequent amendments to Section 11B, along with the insertion of Sections 12B and 12C, posed challenges to the refund claim. The amended provisions required the appellant to prove that the duty had not been passed on to the customer, failing which a refund could not be granted.

3. The respondent issued a show cause notice directing the amount claimed for refund to be credited to the consumer welfare fund under Section 12C. Despite the appellant's challenge to this order in the High Court, the appeal was dismissed. The Court emphasized that the appellant needed to demonstrate that the duty incidence had not been transferred to others to be eligible for a refund, as per the amended provisions.

4. The appellant contended that their case fell outside the Act's provisions, citing the Mafatlal Industries case. However, the Court clarified that the present scenario did not align with the circumstances of an unconstitutional levy as discussed in the Mafatlal Industries case. Even if it were considered as such, the appellant would still need to prove that the duty burden had not been shifted to others to qualify for a refund. The Court ultimately dismissed the appeal, stating that the appellant was not entitled to a refund based on the established legal principles.

5. In conclusion, the Court dismissed the appeal, highlighting that the appellant failed to meet the criteria for a refund under the amended provisions of the Act. The judgment emphasized that the burden of proving that the duty incidence had not been passed on to others was crucial in determining the eligibility for a refund.