THE PURCHASE OF GOODS IS NOT ENTITLED TO CLAIM REFUND OF DUTY MADE UNDER PROTECT BY THE MANUFCTURER

[Mr. M. GOVINDARAJAN]

Claim of refund

Section 11B(1) of Central Excise Act, 1944 provides that any person claiming refund of any duty of excise may make an application for refund of duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, before the expiry of six months from the relevant date in such form and manner as may be prescribed.  The application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty had not been passed on by him to any other person.

The limitation of six months shall not apply where any duty has been paid under protest.

Section 11B (2) of the Act provides that if, on receipt of application for refund, the Assistant Commissioner or the Deputy Commissioner is satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund, be paid to the applicant is such amount is related to-

(a)   rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(b)   unspent advance deposits lying in balance in the applicant's account current maintained with the Commissioner of Central Excise;

(c)   refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act;

(d)   the duty of excise and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;

(e)   the duty of excise borne by the buyer, if he had not been passed on the incidence of such duty to any other person;

(f)   the duty of excise and interest, if any, paid on such duty borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify.

No notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of duty and interest, if any, paid on such duty has not been passed on by the persons concerned to any other person.

Section 11B (3) provides that notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made there under or any other law for the time being in force, no refund shall be made except as provided in sub-section (2).

Relevant date

The explanation to section 11B(5) defines the expression ‘relevant date’ as-

 (a)    in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods,-

(i)    if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India, or

(ii)   if the goods are exported by land, the date on which such goods pass the frontier, or

(iii)    if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India;

(b)   in the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory, the date of entry into the factory for the purposes aforesaid;

(c)    in the case of goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been removed from such factory for export out of India, the date of entry into the factory;

(d)    in a case where a manufacturer is required to pay a sum, for a certain period, on the basis of the rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction;

(e)   in the case of a person, other than the manufacturer, the date of purchase of the goods by such person;

(ea)  in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of section 5A, the date of issue of such order;

(eb) in case where duty of excise is paid provisionally under this Act or the rules made there under,   the date of adjustment of duty after the final assessment thereof;

(ec)  in case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court, the date of such judgment, decree, order or direction.

(f)    in any other case, the date of payment of duty.

Issue

The issue to be discussed in this article is whether the purchaser is entitled to claim the refund of duty paid by the manufacturer under protest with reference to decided case laws.

Case laws

In ‘Commissioner of Central Excise, Mumbai – II v. Allied Photographic India Limited’ – 2004 (3) TMI 63 - SUPREME COURT OF INDIA the Supreme Court held that Section 11B (3)    stated that no refund shall be made except in terms of section 11B (2) which conferred a right on the buyer to claim refund in cases where he proved that he had not passed on the duty to any other person.  The entire scheme of section 11B showed the difference between the rights of a manufacturer to claim refund and the right of the buyer to claim refund as separate and distinct.  Moreover, under section 4 of the Act every payment by the manufacturer whether under protest or under provisional assessment was on his own account.  The accounts of the manufacturer are different from the accounts of a buyer.  Consequently there is  no merit in the argument advanced on behalf of the respondent that the buyer was entitled to claim refund on account payment made under protest by the manufacturer without complying with section 11B of the Act.

In ‘Western Coalfields Limited v. Commissioner of Central Excise, Trichy/Madurai’ – 2019 (2) TMI 1243 - SUPREME COURT the appellant is a public sector undertaking engaged in coal mining.  No central excise duty is payable on coal.   Fenner India, the manufacturer cleared the finished goods, viz., feneplsat PVC integrated conveyor beltings classifying the same under heading 3920.12 of the Central Excise Tariff Act, 1985 as suggested by the Department and paid the duty under protest.  The Supreme Court held that the conveyor beltings would be classifiable under the heading 3922.90 for the period from December 1986 to February 1987 and under sub heading 3926.90 for the period from 10.02.1987 to June 1987 and also for the later period.   Fenner India has not claimed the refund of duty paid under protest.

The appellant is the buyer of the conveyor belts from Fenner India Limited.  The appellant filed application for claim of refund on 20.12.1996 for the period from 20.07.1988 to 15.01.1994 on the premise that the payment was made towards central excise duty by the manufacturer under protest due to the pending classification of PVC impregnated conveyor beltings dispute in the Court of law and after issue of classification has been settled by the Supreme Court in favor of the manufacturer, the central excise duty collected should be refunded by the excise department.  There is no bar in claiming of refund and the limitation of six months shall not apply where duty has been paid under protest.

In response to the refund claim, the Department issued a show cause notice holding that since the appellant did not pay any duty and therefore he is precluded from making any application under Section 11B of the Act.  The application for refund was rejected by the Authority on the ground of limitation and also on the ground of unjust enrichment.  The Appellate Authority rejected the appeal on limitation and also the Tribunal.  The appellant filed the present appeal against the order of the Tribunal.

The appellant submitted the following before the Supreme Court-

• Since the manufacturer of the conveyor beltings had paid duty under protest, the restriction of limitation of six months may not apply to the refund claim filed by the appellant buyer.
• The only relevant question would be as to whether excise duty for which refund claim is made has been paid under protest or not and if the answer is in affirmative, the protest made by the manufacturer at the time of duty has to be taken into consideration even to determine whether the buyer has filed the refund claim within the time.
• When the duty paid by the manufacturer is permitted to be claimed by the buyer who ultimately bears the burden, protest made by such manufacturer at the time of paying the central excise duty for which the buyer can also apply for the refund and bar of limitation of six months may not apply to the buyer claiming refund of excise duty paid by the manufacturer under protest.

The Department submitted the following before the Supreme Court-

• Although the buyer can move an application for refund of central excise duty provided the same is borne by the buyer had not passed on the incidence of such duty to any other person and the application is submitted for seeking refund of such duty within a period of six months from the date of purchase of goods.
• The appeal filed is beyond the period of limitation.
• The right of the manufacturer and the right of buyer are separate and distinct and undisputedly the application was filed after
• The Tribunal rightly rejected the appeal filed by the appellant.

The Supreme Court observed that although the buyer can also apply for refund provided the duty of excise is borne by the buyer and he had not passed on the incidence of such duty to any other person as referred to under section 11B (2)(e) and the application has been moved within the period of six months from the date of purchase of goods by such person in terms of section 11B(5)(B)(e) of the Act.  The appellant has filed the claim refund after the limitation period.  The Supreme Court held that the purchaser of the goods was not entitled to claim refund of duty made under protest by the manufacturer without complying the mandate of section 11B of the Act.