1998 (3) TMI 363 - AT - Central Excise

Summary

Issues:
Appeal against Commissioner (Appeals) allowing refund of countervailing duty on melting scrap used in manufacturing iron and steel products. Interpretation of Section 28D regarding passing on duty to buyers. Conflict of opinions between High Courts on passing on duty to buyers when goods are used in manufacturing.

Analysis:
The appeal was filed by the Revenue against the Commissioner (Appeals) decision to grant a refund of countervailing duty on melting scrap used in manufacturing iron and steel products. The original authority had denied the refund, citing unjust enrichment as the duty paid on the scrap was believed to have been passed on to the buyers of the final products. The lower appellate authority, however, relied on judgments from the Bombay High Court to support the refund. The Revenue, represented by Shri A.M. Tilak, argued that a recent judgment from the Division Bench of the Madras High Court favored their position. This Madras High Court judgment stated that duty paid on inputs used directly in manufacturing new products is passed on to customers indirectly through the sale of finished goods. The Revenue highlighted the pending Supreme Court decision on this issue, indicating that no immediate resolution was expected.

In response, the appellant relied on judgments from the Bombay High Court and Calcutta High Court to support their position. The appellant pointed out that no judgment from the Delhi High Court on this matter was available. Additionally, the appellant mentioned that the Supreme Court had dismissed the Revenue's Special Leave Petition (SLP) against the Bombay High Court judgment in a related case, indicating a preference for the Bombay High Court's interpretation. The presiding judge, after considering the arguments from both sides, noted that the weight of authoritative opinion favored the assessees rather than the Revenue. The judge analyzed Section 28D, which presumes that duty incidence is passed on to buyers unless proven otherwise. The judge emphasized that this presumption applies only when the goods on which duty was paid are sold to buyers as they are, not when they are used in manufacturing other goods.

Consequently, the judge dismissed the Revenue's appeal, upholding the lower appellate authority's decision to grant the refund of countervailing duty on the melting scrap used in manufacturing iron and steel products. The judgment clarified the interpretation of Section 28D and emphasized the importance of the goods being sold as they are to trigger the presumption of passing on duty to buyers.