2003 (4) TMI 103 - SC - Central Excise

Whether process of cold rolling of steel strips from hot rolled strips does not amount to manufacture of a new excisable commodity? Whether they had not passed on the burden of duty to their customers/ Held that - Remitted the matters to the Assistant Commissioner to consider the question as to whether the respondents have passed on the burden of duty of excise to their buyers, which question has to be considered in the light of the provisions of Section 11B of the Act, it is only appropriate that the Assistant Commissioner concerned should first record a finding on that question. If the finding is against the respondents, their claim applications shall have to be rejected. This, of course, is subject to the order that may be passed in appeal by the appellate authority and ultimately by the Tribunal. Only if it is ultimately found that the respondents have not passed on the burden of excise duty to their buyers, the other questions which we have remitted to the Tribunal may require consideration. We, therefore, direct that in the first instance those appeals shall stand remitted to the concerned Assistant Commissioners to hear the parties and decide only the question of unjust enrichment having regard to the provisions of Section 11B of the Act. It will be open to the respondents to challenge the finding if it goes against them before the appellate authority and/or before the Tribunal. If no appeal is preferred against an adverse finding by the Assistant Commissioner, that will be an end of the matter and no further consideration by the Tribunal will be necessary. However, if it is ultimately found that the respondents have not passed on the burden of excise duty to their buyers then the Tribunal will consider the other questions, which we have remitted to it for its consideration and the Tribunal shall thereafter dispose of the matters in accordance with law. To enable the Tribunal/ Commissioner to pass fresh orders, we set aside the impugned judgments and orders of the Tribunal in all the appeals, as also the Order of the Commissioner in Civil Appeal.

Issues Involved:
1. Whether the process of cold rolling of steel strips from hot rolled strips amounts to the manufacture of a new excisable commodity.
2. Whether the show cause notice issued was defective.
3. Whether the burden of excise duty was passed on to the buyers, invoking the principle of unjust enrichment.

Issue-wise Detailed Analysis:

1. Whether the process of cold rolling of steel strips from hot rolled strips amounts to the manufacture of a new excisable commodity:

The core issue in these appeals is whether the cold rolling of steel strips from hot rolled strips constitutes the manufacture of a new excisable commodity. The Tribunal had previously held that the revenue failed to demonstrate that the process of cold rolling amounted to the manufacture of a new excisable commodity. The Tribunal based its decision on the absence of evidence from the department to support the claim that the process of cold rolling transformed the hot rolled strips into a new product subject to excise duty. The Tribunal's decision was influenced by the Supreme Court's earlier ruling in the case of Steel Strips Ltd., which held that the process did not result in a new excisable product.

The Assistant Commissioner had earlier concluded that cold rolled strips are distinct from hot rolled strips, based on the classification under separate sub-headings in the amended Central Excise Tariff. The Assistant Commissioner also noted differences in the properties and prices of the strips post-cold rolling. However, it was unclear whether this conclusion was based on evidence presented by the department or the Assistant Commissioner's personal knowledge or authoritative publications.

The Supreme Court observed that the burden of proof lies with the department to show that the process of manufacture resulted in a commercially distinct commodity. The matter was remitted to the Tribunal and the Commissioner of Excise (Appeals) to consider and record findings on whether the department had provided evidence to support the claim that cold rolled strips are a result of a manufacturing process.

2. Whether the show cause notice issued was defective:

The respondents contended that the show cause notice was defective because it did not explicitly state that the process undertaken by the respondents resulted in the manufacture of a new product. The notice only mentioned that the two items were classified under separate sub-headings. The Supreme Court noted that this aspect had not been adequately considered by the authorities and remitted the matter for fresh consideration.

3. Whether the burden of excise duty was passed on to the buyers, invoking the principle of unjust enrichment:

In C.A. No. 7165 of 2000 and C.A. Nos. 7706-7711 of 2002, the question arose when the respondent filed applications for a refund of excess excise duty paid. The Tribunal remitted the matter to the Assistant Commissioner to determine whether the respondents had passed on the burden of duty to their customers, as required by Section 11B of the Central Excise and Salt Act, 1944. The Assistant Commissioner had previously rejected the refund claim, citing that the respondents had passed on the duty burden to their buyers, thus invoking the principle of unjust enrichment.

The Supreme Court directed that the Assistant Commissioner should first record a finding on the issue of unjust enrichment. If the finding is against the respondents, their claim applications should be rejected. This decision is subject to appeal by the respondents before the appellate authority and the Tribunal. If it is ultimately found that the respondents have not passed on the burden of excise duty to their buyers, the Tribunal will then consider the other questions remitted to it.

Conclusion:

The appeals were disposed of by remitting the matters to the Tribunal and the Commissioner of Excise (Appeals) to consider and record findings on the specified questions based on the material on record. The Assistant Commissioner was directed to first determine the issue of unjust enrichment. The Supreme Court set aside the impugned judgments and orders of the Tribunal and the Commissioner, directing fresh consideration in accordance with the law. No order as to costs was made.

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