1998 (10) TMI 222 - AT - Central Excise

Summary

Issues:
1. Duty liability on hard and soft waste cleared to Domestic Tariff Area (DTA) by a 100% EOU.
2. Refund claim for duty paid on soft waste.
3. Burden of proof on passing the duty incidence to buyers.
4. Justification for rejecting the refund claim.

Analysis:
1. The case involved a 100% EOU manufacturing cotton yarn, generating hard and soft waste cleared to the DTA without duty payment. A show cause notice was issued for duty recovery. The Commissioner confirmed a demand for hard waste but dropped it for soft waste. The respondents filed a refund claim for duty paid on soft waste. The Assistant Commissioner rejected the claim, stating the duty incidence was passed on to buyers. The Commissioner (Appeals) set aside the order and remanded the case for refund sanction, requiring reversal of Modvat credit and proof of non-passing of duty incidence to buyers.

2. The issue of passing the duty burden to buyers was contested. The DR argued that once duty burden is passed at clearance, subsequent debit notes are irrelevant. The Advocate contended that buyers did not pay the duty element, as shown in invoices and ledgers. The Tribunal examined invoices, debit notes, and ledgers, finding that the respondents had not passed on the duty incidence, as buyers raised debit notes for the duty element, which remained outstanding. The respondents successfully rebutted the presumption of passing on duty incidence.

3. The Tribunal considered the Mafatlal Industries case, stating the presumption of passing duty is rebuttable. It noted that no other spinning mill paid duty on soft waste except the respondents, supporting the non-passing of duty incidence. The delay in issuing debit notes was explained. The Tribunal rejected the DR's reliance on another case, as the facts in the present case showed the respondents did not pass on the duty burden, unlike the situation in the cited case.

4. The Tribunal upheld the lower appellate authority's decision, finding that the refund claim was not barred by unjust enrichment. It concluded that the respondents had not passed on the excise duty burden to buyers, supporting the refund claim. The rejection of the appeal was based on the established evidence that the duty incidence was not transferred to the buyers, as demonstrated by the invoices, debit notes, and ledgers.

This detailed analysis of the judgment highlights the duty liability, refund claim, burden of proof on passing duty incidence, and the justification for rejecting the refund claim in the case before the Appellate Tribunal CEGAT, New Delhi.