CREDIT OF REFUND CLAIMS TO CONSUMER WELFARE FUND

[Dr. Sanjiv Agarwal]

Statutory Provisions

Section 12C of the Central Excise Act, 1944 provides as follows:

(1) There shall be established by the Central Government a fund, to be called the Consumer

Welfare Fund.

(2) There shall be credited to the Fund, in such manner as may be prescribed -

1. the amount of duty of excise referred to in sub-section (2) of section 11B or subsection (2) of section 11C or sub-section (2) of section 11D;
2. the amount of duty of customs referred to in sub-section (2) of section 27 or subsection of section 28A, or sub-section (2) of section 28B of the Customs Act, 1962;
3. any income from investment of the amount credited to the Fund and any other monies received by the Central Government for the purposes of this Fund.
4. the surplus amount referred to in sub-section (6) of section 73A of the Finance Act, 1994.

Credit to Fund / Refund

Consumer Welfare Fund has been set up as provided under section 12C of Central Excise Act, 1944. Refund of excise or customs duty or service tax, after it is sanctioned by adjudicating authority, will normally be transferred to ‘Consumer Welfare Fund’ and will not be refunded to Assessee subject to the specified conditions. This section applies to Service Tax also. Accordingly, the amount specified under Section 73A (6) can only be transferred to Consumer Welfare Fund.

Under the proviso of Rule 3 of the Consumer Welfare Fund Rules, 1992, any amount having been credited to the fund is to be paid from the fund as ordered or directed as payable to any claimant by orders of the appellate authority or court. However, refund amount is never credited to the Consumer Welfare Fund whenever refund amount is sanctioned but ordered to be credited to the Fund by the lower authority. Consequently, refund amount is never paid from the Consumer Welfare Fund whenever the party gets relief from the appellate authority or court. In fact, no such transaction takes place as per the accounting procedure.

Any person claiming refund of any duty of excise and interest thereon will be allowed such refund under section 11B of the Central Excise Act, 1944 if the refund claim is supported by the sufficient documentary proof and not covered under unjust enrichment.

Judicial Pronouncements

In Dabur India Ltd. v. CCE, Ghaziabad 2008 (4) TMI 112 - CESTAT NEW DELHI, where extra duty burden was not passed by the assessee but borne by themselves, it was held that the amount of refund was not credited to the consumer welfare fund.

In Global Ventures v. CC, Tuticorin 2009 (12) TMI 807 - CESTAT CHENNAI, where certificate from Chartered Accountant certified that the assessee has not passed the burden of duty to their customers, it was held that the credit of the refund amount was not transferred to the Consumer Welfare Fund.

In OM Pharmaceuticals Ltd. v. CCE, Bangalore 2008 (7) TMI 660 - CESTAT, CHENNAI, where amount was paid under protest by the assessee at the time of clearance of goods which was collected by assessee from buyer and when goods were held to be non-excisable, such amount was recovered by buyer by raising debit note on assessee as per understanding between the parties, it was held that there is no unjust enrichment and as such, refund amount could not be credited to Consumer Welfare Fund.

In CCE, Chandigarh v. Vardhman Industries Ltd. 2005 (8) TMI 543 - CESTAT, NEW DELHI, where cross appeals to Commissioner (Appeals) was filed against the order passed by adjudicating authority in which refund was allowed to the respondent on the ground that burden of duties had not been passed to customers, it was held that refund was rightly allowed to the assessee because principle of unjust enrichment is not applicable in this case and amount cannot be transferred to Consumer Welfare Fund.

In Diffusion Engineers Ltd. v. CCE, Nagpur 2006 (7) TMI 470 - CESTAT, MUMBAI,  where Department failed to produced any evidence to prove that the assessee passed on incidence of duty to any other person, it was held that refund claim was not hit by unjust enrichment and as such, amount of refund could not be credited to Consumer Welfare Fund.

In CCE, Chandigarh v. Goetze India Ltd. 2004 (9) TMI 552 - CESTAT, NEW DELHI, where assessee after calculating discount amount on actual turnover, issued credit notes to buyers and correctness of same remained unchallenged by Department, it was held that incidence of duty was not passed on to buyers, therefore, amount was not creditable to Consumer Welfare Fund.

In Siddhi Vinayak Steel v. CC, Mumbai 2014 (10) TMI 689 - CESTAT MUMBAI, where disputed amount of duty deposited in pursuance of High Court order which was shown as receivable from Custom Department in the books of assessee and also supported by CA Certificate which was not challenged by Department, it was held that refund was to be made to the assessee not to consumer welfare fund.

In J.K. White Cement Ltd. v. CCE, Jaipur-I 2004 (4) TMI 501 - CESTAT, NEW DELHI, where unjust enrichment was not considered by Commissioner (Appeals), it was held that amount of excise duty not to be transferred to Consumer Welfare Fund under Section 11B of Central Excise Act, 1944

In CCE, Mumbai-I v. Inga Laboratories Pvt Ltd. 1997 (3) TMI 218 - CEGAT, MUMBAI, where incidence of duty not passed on to customers, it was held that refund if sanctioned would go to the Consumer Welfare Fund and not to the assessee. But that would be a consequence not of this appeal but because of subsequent changes in the law.

In CCE, Daman v. Biochem Pharmaceuticals 2006 (1) TMI 272 - CESTAT, MUMBAI, where Duty was paid to Central Excise Department which was not being legally entitled to recover the duty from assessee under mistake, whereas such duty was in fact payable to State Excise Department and duty liability to State Excise Department already stood discharged by assessee, it was held that the question of principle of unjust enrichment did not arise. Hence, amount of refund could not be ordered to be deposited in Consumer Welfare Fund.

In CCE v. IPCA Laboratories 2004 (10) TMI 194 - CESTAT, NEW DELHI, the Tribunal did not accept the contention of the Revenue that the refund claims of the respondents were hit by the principle of unjust enrichment since the respondents had produced the C.A. certificate which revealed that the incidence of duty was not passed on by them to the buyers. The Assessee had given the quantity discount to its buyers without charging even any price in respect thereof, at the time of sale of the goods to them, from the depot. Since the correctness of the C.A. certificate remained unchallenged by the revenue, the impugned order passed by the Commissioner (Appeals) was held to be perfectly valid and the same was upheld. The appeals of the revenue, were, therefore dismissed.

In L & T Sargent & Lundy Limited v. CCE 2001 (8) TMI 4 - CEGAT (MUMBAI), it was held that the refund claim was admissible because the incidence of tax passed on to the customers was subsequently returned by issuing credit notes.

In Khetalal Ratansi Patel v. CCE, Nagpur 2014 (12) TMI 983 - CESTAT MUMBAI, where refund claim was allowed under Notification No. 102/2007-Cus. but the same was credited to Consumer Welfare Fund on ground that assessee failed to show that burden of duty had not been passed on, it was held that assessee had produced the necessary C.A. certificate along with the cost sheet as required under the clarificatory C.B.E.C. Circular No. 16/2008-Cus., dated 13-10-2008 and the C.A. certificate showed that amount of refund was shown in account books as amount due as a refund of Additional Customs Duty. Also, assessee had specified on the sale invoices that credit of Additional Duty of Customs was not available. Thus, refund was to be allowed to assessee.

In Madura Coats Pvt. Ltd. v. Union of India 2015 (1) TMI 1045 - KARNATAKA HIGH COURT, where there was unjust enrichment and refund amount was credited to the Consumer Welfare Fund, it was held that if Cestat concludes that assessee did not get unjust enrichment, the Revenue has to refund the amount to it along with interest at the rate of 12% p.a. from the date of deposit up to the date of payment.