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TMI Blog2001 (8) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... ough synthetic gem stones which is fully exempt from duty under Notification No. 8/96, dated 23-7-1996. They are also manufacturing Aluminium Oxide and Oxygen gas which were captively consumed in the manufacture of rough synthetic gem stones. The said refund claim pertained to Aluminium Oxide and oxygen gas used by them captively in the manufacture of rough synthetic gem stones. By the above impugned order the lower authority sanctioned the refund claim for Rs. 5,06,521/- but credited the same to the Consumer Welfare Fund on the ground of unjust enrichment in terms of Section 11B(2) and Section 12C of the Central Excise Act, 1944. The appellants contended before the lower appellate authority that the duty paid on the captively consumed goods viz. Aluminium Oxide and Oxygen gas had not been collected from the buyers but borne by the appellants who had used the above items in the manufacture of final products since there had been no buyer for these goods, i.e. Aluminium Oxide and Oxygen gas. When the goods had not been sold, the question of passing on the incidence of excise duty to any other party does not arise. The appellants contended that the doctrine of unjust enrichment would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Swiss Synthetic Gem Mfg. Co. Ltd.) the position is that when customs duty paid becomes a part of the cost of the manufacture of new item, it goes without saying that customs duty paid is indirectly passed on to the customer or buyer, inasmuch as the customs duty paid on the raw material or imported goods is included in the price of the finished production. No manufacturer will be charitable enough to exclude customs duty paid on the raw material in the value of the finished product. Further the Bombay High Court is of the view that the importer or the person, who paid the duty of customs or excise is entitled for refund of duty so paid, if he had directly passed on the incidence of such duty to any other person. We are, however, not persuaded to share such an opinion. The reason is rather obvious. What is contemplated in Section 27(1)(a) of the Act, is relatable to passing on the burden of duty to any other person for the determination of the question of refund claim. 4. Relying on the above judgment of the Madras High Court, the lower authority credited the said refund claim to the Consumer Welfare Fund. This is the latest judgment available on the subject and the Hon ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22) E.L.T. 114 (Tri.)]; (iv) Swaraj Mazda Ltd. v. CC, Kandla [2000 (122) E.L.T. 164 (Tri.)]; and (v) Hero Honda Motors Ltd. v. CC, New Delhi [2000 (126) E.L.T. 1014 (Tri.)]; 5. The ld. DR reiterated the departmental contention and submitted that the Commissioner (Appeals) have clearly proved through his findings as extracted supra, that it could hardly be believed that the appellants had themselves borne the duty of excise paid on Aluminium Oxide and Oxygen gas and the same was not loaded in the price of their final product Rough Synthetic Gem Stone. Therefore, the Commissioner has held that the appellants have failed to produce any evidence that they had not passed on the incidence of Excise duty to any other person by upholding the decision of the lower authority for crediting the amount of said refund to the Consumer Welfare Fund. He contended that the order of the Commissioner (Appeals) therefore, requires to be confirmed. 6. I have gone through the case records. The appellants had contended before the lower appellate authority as well as before me that the duty paid on captively consumed goods viz., aluminium oxide and Oxygen gas, have not been collected from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther remarked that no manufacturer would be charitable enough to exclude Customs duty paid on the raw material in the value of the finished product. The Hon ble Madras High Court also observed that the Bombay High Court was of the view that the importer or the person who paid the duty of customs or excise was entitled for refund of duty so paid, if he had directly borne the incidence and not passed on the incidence of such duty to any other person. The Hon ble Madras High Court also observed that they are not persuaded to share such an opinion. The reason was rather obvious. What was contemplated in Section 27 of the Act is relatable to passing on the burden of duty on any other person for determination of the question of refund claim Therefore, the Hon ble High Court, Madras had disagreed with the views expressed by the Bombay High Court in the case of Solar Pesticides Pvt. Ltd. In view of the above findings of the Hon ble Madras High Court, it can hardly be believed that the appellants have themselves borne the duty of excise paid on aluminium oxide and oxygen gas and the same was not loaded in the price of their final product, i.e. rough synthetic gem stones. The appellants hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limits. Octroi had been collected on the said goods even though there was no use or consump tion within the Municipal limits. This Court held that the amount of octroi paid was refundable. In this context, a contention had been raised on behalf of the Corporation that refund could not be given because there was a possibility of undue enrichment of the claimant. This Court did not accept this conten tion and came to the conclusion that octroi was a duty on the entry of raw ma terial which was payable by the producer or manufacturer. It was not the duty on going out of the finished products in respect of which the duty might have been charged or added to the costs passed on to the consumers. This Court then concluded that in such a situation, no question of undue enrichment can possibly arise in this case . This decision is thus clearly not applicable in the present case where the question of unjust enrichment does arise. While referring to the case of Mafatlal in paras 19 20, the Hon ble Supreme Court has held that even though in Mafatlal case the question with regard to captive consumption was left open, but the observation contained under para 108 at page 631 and the obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly en riched. 20. We are of the opinion that the aforesaid observations would be applicable in the case of captive consumption as well. To claim refund of duty it is immaterial whether the goods imported are used by the importer himself and the duty thereon passed on to the purchaser of the finished product or that the imported goods are sold as such with the incidence of tax being passed on to the buyer. In either case the principle of unjust enrichment will apply and the person responsible for paying the import duty would not be entitled to get the refund because of the plain language of Section 27 of the Act. Having passed on the burden of tax to another person, directly or indirectly, it would clearly be a case of unjust enrichment if the importer/seller is then able to get refund of the duty paid from the Government notwithstanding the incidence of tax having already been passed on to the purchaser. Therefore, it can be seen that to claim refund of duty, it is immaterial whether the goods imported are used by the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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