2010 (2) TMI 439 - AT - Central Excise

Refund- Unjust enrichment - the appellants were engaged in the manufacture of Processed Manmade Fabrics classifiable under Chapter 54 and 55 of the Schedule to the Central excise Tariff Act, 1985. Duty paid on 115% of cost of production for job work. Refund claimed after department clarification taking different basis for assessable value. Part goods cleared to sister concern/dealers. Onus discharged by appellant as burden of duty proved as not passed. Onus shifted to department but not discharged. Held that - burden to be presumed as not passed on to consumer when burden not passed to dealer. Unjust enrichment not applicable.

Summary

Issues Involved:
1. Refund of excise duty and the bar of unjust enrichment.
2. Passing of duty burden to the ultimate consumer.
3. Documentary evidence and burden of proof under Section 12B of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Refund of Excise Duty and the Bar of Unjust Enrichment:

The appellants filed a refund claim for excise duty paid on processed fabrics, which was initially sanctioned by the adjudicating authority. However, the refund was directed to be credited to the Consumer Welfare Fund due to the bar of unjust enrichment. The appellants contested this decision, arguing that the duty burden was not passed on to the consumers.

The Tribunal examined the refund claim in two parts: Rs. 31,83,519/- related to clearances to M/s. Sangam Suitings Ltd., a sister concern, and Rs. 67,19,061/- related to clearances to other dealers. For the amount related to the sister concern, the Tribunal found that the appellants had provided sufficient evidence to show that the duty burden was not passed on. However, for the amount related to other dealers, the Tribunal upheld the decision to credit the refund to the Consumer Welfare Fund, as the appellants failed to prove that the duty burden was not passed on.

2. Passing of Duty Burden to the Ultimate Consumer:

The appellants argued that they had either not collected the duty amount from the dealers or had refunded it through credit and debit notes. The Tribunal noted that the law does not require proving that the burden was not passed on to the ultimate consumer but rather to the dealers. The Tribunal emphasized that once it is established that the duty burden was not passed on to the dealers, the burden of proof shifts to the department to show otherwise.

In the case of the sister concern, the Tribunal found that the appellants had successfully demonstrated that the duty burden was not passed on, as evidenced by the letters from M/s. Sangam Suitings Ltd. and the corresponding financial documents. However, for the amount related to other dealers, the Tribunal found that the appellants had initially passed on the duty burden and later refunded it, which did not satisfy the requirement to prove non-passing of the burden.

3. Documentary Evidence and Burden of Proof under Section 12B:

Section 12B of the Central Excise Act, 1944, presumes that the duty burden is passed on to the buyer unless proven otherwise by the claimant. The Tribunal highlighted that the appellants had provided documentary evidence, such as letters, credit notes, and balance sheets, to support their claim that the duty burden was not passed on to the dealers.

The Tribunal referred to the decision in the case of UOI v. A.K. Spintex Ltd., where it was held that the issuance of debit and credit notes could rebut the presumption under Section 12B if not disputed by the revenue. The Tribunal found that the evidence provided by the appellants in relation to the sister concern was sufficient to rebut the presumption, but the evidence related to other dealers was not.

The Tribunal also referred to the decision in Mafatlal Industries Ltd., which stated that the presumption under Section 12B is rebuttable and that the burden shifts to the revenue once the claimant provides sufficient evidence. In this case, the Tribunal concluded that the appellants had discharged their burden for the amount related to the sister concern but not for the amount related to other dealers.

Conclusion:

The appeal was partly allowed. The Tribunal directed the refund of Rs. 31,83,519/- along with interest to the appellants, as they had successfully proven that the duty burden was not passed on. However, the claim for Rs. 67,19,061/- was dismissed, and the amount was directed to be credited to the Consumer Welfare Fund, as the appellants failed to prove non-passing of the duty burden. The appeal was disposed of accordingly.