2013 (12) TMI 1299 - AT - Customs

Mis declaration of goods - Goods declared as spare parts - Notification No. 29/99-Cus dated 28.2.99 - Whether the duty paid by the assessee at the time of import of goods stand collected by them from their buyers so as to make themselves unjustly enriched - Held that - importer was entitled to the benefit of notification and was entitled to duty free clearance. However, they paid the duty under protest for clearance of the goods. The claim for refund of duty paid by the appellant under protest stand rejected by the lower authorities on the ground of unjust enrichment - Merely because the importers, in the table produced before the Commissioner (Appeals) has shown the landed cost of CD pick up lense unit as Rs. 109.49 which is inclusive of higher duty paid by them, does not mean that customs duty paid by them at the time of clearance of said pick up lense unit makes an integral component of their final product, which stand sold at the price lower than the manufacturing cost which stands arrived at by then by including the higher landed cost of the imported goods. The appellants have only tried to establish that after the higher duty paid cost of CD pick up lense is added in the manufacturing cost, the same comes to Rs.123/- which is admittedly higher than the unit sale price of the goods - If that be so, the differential duty paid on the imported goods i.e. CD pick up lense unit cannot be said to have been collected by the assessee from their customers - appellant has not recovered said amount from their customers and as such, the refund is not hit by provisions of unjust enrichment - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for concessional duty under Notification No. 29/99-Cus.
2. Entitlement to refund of duty paid under protest.
3. Application of the principle of unjust enrichment.
4. Validity of Chartered Accountant's certificate as evidence.
5. Analysis of sales price relative to manufacturing cost.
6. Interpretation of Sections 27, 28C, and 28D of the Customs Act, 1962.
7. Precedent cases and their applicability.

Detailed Analysis:

1. Eligibility for Concessional Duty under Notification No. 29/99-Cus:
The appellant imported items declared as "CD" pick up Sense Unit and a part of CD Deck apparatus, claiming eligibility for a concessional rate of duty under the Customs (Import of goods at concessional rate of duty for manufacture of excisable goods) Rules, 1996, read with Notification No. 29/99-Cus dated 28.2.99. The Revenue contended that the items were complete CD Deck mechanisms, not parts, and thus not eligible for the concessional duty. The adjudicating authority initially held against the appellant, but this decision was overturned by the Commissioner (Appeals), who ruled in favor of the appellant.

2. Entitlement to Refund of Duty Paid Under Protest:
Following the favorable ruling by the Commissioner (Appeals), the appellant filed for a refund of Rs. 35,91,820/- paid under protest. The Tribunal upheld the appellant's entitlement to the exemption and duty-free clearance, confirming that the duty was indeed paid under protest.

3. Application of the Principle of Unjust Enrichment:
The core issue was whether the refund claim was barred by the principle of unjust enrichment. The lower authorities rejected the refund on the grounds that the appellant had not demonstrated that the extra duty was not passed on to customers. The appellant argued that the selling price of their final product during the relevant period was lower than the manufacturing cost, thus negating the possibility of passing on the duty.

4. Validity of Chartered Accountant's Certificate as Evidence:
The appellant presented a Chartered Accountant's certificate stating that the higher duty paid was not recovered from customers, as the selling price was lower than the manufacturing cost. The Tribunal noted that the lower authorities did not provide valid reasons to reject this certificate. However, one judge disagreed, citing a lack of detailed batch costing sheets and questioning the certificate's conclusiveness.

5. Analysis of Sales Price Relative to Manufacturing Cost:
The appellant demonstrated that the average selling price of their final product decreased during the period when higher duties were paid, supporting their claim that the duty was not passed on to customers. The Tribunal found that the lower selling price indicated that the higher duty was not included in the final product's price.

6. Interpretation of Sections 27, 28C, and 28D of the Customs Act, 1962:
Section 27 mandates that the importer must prove that the duty incidence was not passed on to the buyer to claim a refund. Sections 28C and 28D create a presumption that the duty has been passed on unless proven otherwise. The Tribunal examined these provisions in light of the evidence presented.

7. Precedent Cases and Their Applicability:
The Tribunal considered several precedent cases, including:
- Infar India Ltd. vs. Commissioner of Customs, New Delhi: Emphasized the importance of Chartered Accountant certificates in proving that duty was not passed on.
- CCE vs. Manjunath Food and Packaging P. Ltd.: Held that duty paid under protest negates unjust enrichment.
- Living Media India Ltd.: Stated that when manufacturing costs exceed retail prices, unjust enrichment does not apply.
- Union of India vs. Solar Pesticide Pvt. Ltd.: Clarified that the burden of proof lies on the importer to show that the duty was not passed on.

Separate Judgments:
Judgment by Member (Judicial):
The Member (Judicial) concluded that the appellant had not recovered the extra duty from their customers, supported by the Chartered Accountant's certificate and the lower selling price of the final product. The refund was not barred by unjust enrichment, and the appeal was allowed with consequential relief.

Judgment by Member (Technical):
The Member (Technical) disagreed, emphasizing the lack of detailed evidence and batch costing sheets. The Member held that the appellant did not meet the burden of proof under Section 27 and that the refund would result in unjust enrichment. The appeal was rejected.

Conclusion:
Due to the difference of opinion between the Members, the matter was referred to the Hon'ble President CESTAT for the appointment of a third Member to resolve whether the refund claim is hit by unjust enrichment as per Section 27 of the Customs Act.