9911796707
TMI Blog2000 (12) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... PCTR) to the ultimate buyers and therefore, in view of the provisions contained in Section 12B of the Central Excises and Customs (Amendment) Act, 1991 (Act 40 of 1991), the presumption that full incidence of duty of excise paid under this Act shall be deemed to have been passed on to the buyers of such goods shall be applicable unless the contrary is proved by them. He therefore, held that the refund claims filed by the appellants-assessee on the differential duty paid by them under protest during the period from 1-3-1986 to 31-12-1986 stand hit by the amended Section 11B of the Central Excises and Customs (Amendment) Act, 1991 (Act 40 of 1991). He, therefore, held that the amount of Rs. 3,52,03,339.03 (Three Crores, Fifty two lakhs, three thousand three hundred thirty nine and paise three only) which was the differential duty involved on account of re-classification of the product PCTR and duty paid by them during the said period i.e. 1-3-1986 to 31-12-1989 was not refundable to them as the same was hit by the doctrine of unjust enrichment in terms of the Customs and Central Excises (Amendment) Act, 1991 (Act 40 of 1991). He, therefore, ordered that the undisbursed amount of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tread as per Notification No. 47/76-CE, dt. 9-3-1976 as amended by the exemption is allowed to vulcanized rubber products, non-curing for tyres as per the Notification said above. In this regard please refer to your letter No. E/A/1.04/KJ, dated 29-10-1984 in which you have stated while giving write-up of pre-tread in price 1…….." Rubber Compound is extruded in the shape of long flat strip and cut into the right length. These extruded strips are then moulded and cured to right dimensions with bottom plain and top with pattern. As such, the Pre-Tread manufactured in your factory is a cured, vulcanised rubber products and so you are not entitled to avail exemption as per Notification No. 47/86 accordingly. It is seen that you have been claiming the said Pre-Tread under NIL rate of duty. Hence you are hereby requested to clear the Pre-tread on payment of duty at the rate of 40% ad valorem with immediate effect. The above-said classification list are also returned herewith for making necessary correction to this effect and return the same to this office. Even if you are not agreeable to this reference, you are requested to pay duty under Protest until the matter is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad--Payment of duty "Under Protest" Excise duty on Pre-tread under Chapter 40-Rule 233B" and they informed the Assistant Collector that they desired to pay duty under protest on pre-tread under Chapter 40 under main heading 40.08 and sub-heading 4008.21 on the following grounds : (a) They had filed Classification list 2/85-86 for pre-tread, claiming exemption from duty under Notification No. 47/76, dated 9-3-1976 as amended by Notification Nos. 193/80 and 78/86, dated 10-2-1986. (b) The Supdt. of Central Excise, Arkonam Range vide his letter OC No. 1190/86, dated 27-6-1986 has returned their Classification List stating that they were not entitled to avail exemptions as per Notifications cited. He has also requested them to pay duty under protest if they were not agreeable to his decision. (c) As they were not agreeable to his reference they have decided to pay duty under protest. They also informed that they shall be making endorsement on all the copies of gate passes. PLA and RT-12 returns in terms of sub-rule (4) of Rule 233B of the CE Rules, 1944. The protest letter dated 1-7-1986 filed by M/s. MRF Ltd. is extracted herein below: MRF Limited, Arkonam-Thiruthani Road, lchip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in order to maintain universal practice throughout the country under the harmonised Chapter heading No. 4008.21. During 11/89 the department decided to have classification of the PCTR under sub-heading 4016.99 on the ground that the goods in question emerge at the initial stages in the form of plate, sheets or strips as per the definition of plate, sheets, strips given under Note 9 of Chapter 40. Thereafter, the goods are moulded, edges are rounded and the shape of the cross-section becomes trapezoid. As a result the goods do not finally remain plates, sheets or strips as defined in Chapter Note 9 of Chapter 40. The elaborate processes carried out on the goods by the appellants could not be called mere 'surface working' as per Note 9 of Chapter 40. As a result the goods could not be classified under sub-heading 4008.21 but it would merit classification under sub-heading 4016.99 and consequently, there would be no question of extending the benefit of Notification No. 47/76 dated 9-3-1996 (sic) as amended on such goods. This position was further confirmed by the Govt. of India by their clarification issued on 10-11-1989. 5. Based on the above classification, the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re as per the then Assistant Collector vide his order dated 7-10-1991 they claimed only the differential duty involved on account of re-classification by the department and the present refund claim represents only Rs. 3.52 crores. Furthermore, it was ascertained that the percentage of Modvat credit taken/availed by M/s. MRF Ltd. on the said product worked out above was only 30% of the total duty payable. Thereby this percentage would have automatically merged in the duty apportioned by the appellants-assessee while re-working their claim towards payment of duty under Chapter 4017.00/4016.99. The appellants-assessee did not claim refund of full duty on the PCTR under chapter 4008.21 since they had worked out the duty liability involved on the subject PCTR for the period from 1-3-1986 to 31-2-1989 under chapters 4017.00 and 4016.99 as per the direction given by the then Assistant Collector vide his order dated 7-10-1991. Thereafter they filed revised refund claims as detailed above. Therefore, on merits, it was not disputed that their claim for an amount of Rs. 3.52 crores arose which was the difference of excess duty paid by them under protest @ 40% and actually payable @ 15% with e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the duty was paid under protest with effect from 1-7-1986 in terms of Rule 233B of the CE Rules, 1944 vide their protest letter dated 1-7-1986 which was acknowledged by the department on 1-7-1986 itself. Therefore, the question of time-limit applicability did not arise in their case. 9. The correctness of the claim was also duly verified at all levels and found to agree with the figures in the refund claim. Therefore the refund claim of Rs. 3,52,03,339.93 (Rupees Three Crores, fifty two lakhs, three thousand, three hundred thirty-nine and paise ninety-three only), passed this scrutiny both on merits as well as on time bar and there was no dispute on these two points. 10. In order to verify whether the said refund claim would attract the provisions of amended Section 11B, of the CE Act, 1944 for invoking the principles of unjust enrichment, M/s. MRF Ltd. (the appellants herein) were called upon to re-submit their claim in the prescribed format under Rule 173S of the CE Rules, 1944 which was inserted with effect from 20-9-1991. Accordingly they re-submitted their refund claim on 5-6-1992 in the prescribed format with the declaration to the effect that "duty for whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the intimation C. No. IV/10/65/90 RF (PF), dt. 5-6-1992, fixing the hearing on 16-6-1992, received in the office of MRF Ltd. on 10-6-1992, I produce and affirm as correct the relevant PCTR cost sheet for March, 1986 actuals, and will produce the supporting papers which are all available at the office/unit and are being gathered. The practice of MRF has been and is to prepare at each unit including the Arkonam unit, Budget cost and actual cost for each product under each product group. Material for this is also available and will be produced. Since the new tariff was to be introduced from 1-3-1986, actual cost for each product including PCTR inter alia for Arkonam unit had to be determined and prepared. As will be apparent from the cost sheet for the Arkonam unit (marked and attached as Annexure 'A'), where PCTR was manufactured, excise duty was not taken to computation for determining the Price. This was because of advice already received from MRF's Corporate Manager Indirect Taxes that PCTR being a non-curing rubber product, fell under the terms of the exemption notification No. 47/76, dt. 9-3-1976. This has been subsequently recorded in Arkonam Plant Manager's letter dt. 1-7- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein below : BEFORE THE ASST. COLLECTOR OF CENTRAL EXCISE, MADRAS IX DIVISION, MADRAS 600 006 Further to my Affidavit dated 15th June, 1992, I produce copies of the following documents to support MRF's claim that excise duty was not passed on to consumers or any other person, namely : - (2) Consequent upon the Budget of 1986 revised classification lists were forwarded by MRF under cover of its letter dated 5-3-1986. The classification list No. 2/85-86, dated 5-3-1986 for the Arkonam factory showed inter alia "Pre Tread" (i.e. PCTR) under Chapter heading 40 and sub-heading 4008.21 -- but claiming that it was exempted from duty vide Notification No. 47/76, dated 9-3-1976 as amended by Sl. No. 127 of Notification No. 78/86, dated 10-2-1986. The copy of the letter along 4with the relevant classification list are hereto annexed and marked as Annexure 'C'. (3) This classification list was however returned by the Office of the Superintendent of Central Excise, Arkonam Range vide his letter dated 27-6-1986, in which MRF's claim of NIL rate of duty on pretread as per Notification No. 47/76, dated 9-3-1976 was not considered to be admissable. The third paragraph of the letter dated 27-6- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer Memos for the same period for transfer of PCTR from Arkonam factory to outside the factory. Photocopies of first and last such transfer memos for and during the period 1-3-1986 to 27-6-1986, as specimens, are annexed as Annexure 'H'. Thirty nos. of transfer memos which are in between will be produced at the time of hearing. (c) Invoices for clearances during the same period 1-3-1986 to 27-6-1986 also showed the selling price as Rs. 38/- per Kg. Invoice under date 19-3-1986 and Invoice dated 24-6-1986 as specimens are annexed as Annexure I and the invoices in between will be produced at the hearing. PCTR was cleared from 1-7-1986, (There were no clearances between 27th June and first July), after MRF's letter of 1-7-1986, already annexed as Annexure 'A' in the first Affidavit dated 15-3-1992. (7) Even after filing of fresh classification list as desired in the Supdt.'s letter dt. 27-6-1986, the selling price was the same. This is shown by a comparison of the same three sets of documents for the subsequent period (after 1-7-1986). (a) Duty paid Gate Passes for the subsequent period from 1-7-1986 to 8-3-1987 -- First and last Gate Passes as specimens are annexed as Ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to send them refund Cheque for Rs. 3.52 crores as per their letter dated 3rd August, 1992 as the department allegedly completed the verification of the invoice of PCTR in respect of the first period in the Affidavit which is from 1-3-1986 to 27-6-1986 on 20-7-1992, at their Headquarters. They also admitted certain variance from the net billing price of Rs. 38 Per kg which was claimed by them. In reply vide letter No. C-IV/10/55/90/RF (PF), dated 4-8-1992 the Assistant Collector pointed out that at the bottom of the price pertaining to 1-10-1985, there is an endorsement to the extent that "this list supersedes all the previous lists and the prices are subject to change without notice. Sales Tax Octroi and any other Tax applicable will be extra", as can be seen from page 8 of the Additional Paper book No. 2 filed. This letter is extracted hereunder. OFFICE OF THE ASSISTANT COLLECTOR OF CENTRAL EXCISE : MADRAS IX DVN. III FLOOR : SIRE MANSION : 621 MOUNT ROAD : MADRAS : 600006 C.NO. IV/10/65/90 RF (PF) August 4th, 1992 IMMEDIATE M/s. MRF Limited (Registered Office) 124 Greams Road Madras-600 006 (By R.P.A.D.) Gentlemen Sub : Refund Claim of M/s. MRF Limited, Itchiputhur fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conveniently by them. To illustrate more on the above aspect, it could be seen from the records that when a product rate is maintained to be the same prior to imposition of a duty and after starting the payment of duty on a particular period and in similar way in the cases where the duty is withdrawn on a particular period also the rate would be firmly maintained prior to and after without altering the price structure. If this would be the case, the question of not passing on the burden of duty element on the consumer does not arise. By mere saying that no extra amount had been collected from the customer on account of duty paid by the Company, over and above the invoice price would also leave with improper guidelines to the Department in accepting the Management contention. All these days the entire issue is rolling on with presumption basis. Now that a stage has come to take a final decision on the issue by the deciding authority. Therefore, it is requested to furnish the relevant documents if any, other than the documents (wherein to prove categorically that the burden of duty involved in the PCTR has not been passed on to the consumer at any stage) already produced. 3. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hone 8252777 Grams TRANQUIL Telex 041-7062 & 7230 MRF IN Fax 866562 03/DF-19/SI 21st August, 1992 The Asst. Collector of Central Excise, Madras IX Division, Sire Mansion, 621, Mount Road (Model School Lane), Madras 600 006. Dear Madam, 'C/Ex.--Precured Tread Rubber - Refund Claim preferred by MRF Limited. Ichiputhur 1. May we refer to your letter C. No. IV/10/65/90 RF (PF), dated 4th August, 1992. 2. In your first letter C. No. IV/10/65/90 R.F. (PF), dt. 5-6-1992, while fixing a date for hearing, you required MRF "to submit documentary evidence to prove that the incidence of duty has not been passed on to the customers". In pursuance of the said letter dt. 5-6-1992, MRF, vide their letter dt. 15-6-1992, submitted a brief explanatory Affidavit of Shri P.R. Anantharaman, Controller. In this Affidavit, Shri Anantharaman had given you (in Annexure "A"), complete split up of the Nett Billing Price of Rs. 38/- per Kg. which was the prevailing price of Precured Tread Rubber in March, 1986. The Affidavit categorically affirmed that in the PCTR price computation, excise duty was not taken into consideration because of the advice received from MRF's Corporate Manager Indire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer memos and Debit/Credit notes, which were brought from our factory at Arkonam and the 20 depots situated in the various parts of the country. This verification was completed and no discrepancy was found as is quite evident from your present letter dt. 4-8-1992 wherein you have not raised any objection or any discrepancy found in the said verification. On the contrary, your officers who attended the verification were convinced that PCTR was sold by MRF depots at Rs. 38/- per Kg. throughout the period from 1-3-1986 to 27-6-1987 when MRF did not pay duty and the period from 1-7-1986 to 8-3-1987 when MRF paid duty under protest. 4. We have submitted to you 2 Affidavits together with Cost Sheets for PCTR, Gate Passes, Transfer Memos, Sales Invoices and Debit/Credit Notes, which are the documents for assessment and sale respectively, as contemplated in the new Section 12A. We are therefore surprised that in your letter dt. 4-8-1992, you have again called for documentary evidence. We now set out our reply to the three objections raised in your letter dt. 4-8-1992 : (i) Price Circulars containing remarks regarding Sales Tax, Octroi and Other Taxes. In para 2 of your letter dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided for in the Books of Accounts since this is not acknowledged by the company as a debt. Hence as a note. Year Page No. Heading S. No. Description 1985-86 22 Notes on the Balance Sheet & Profit and Loss Account 9 Excise Duty includes Rs. 673 lakhs relating to prior years. Reply :- Note No. 9 at page 22 of the Balance Sheet relates to the total excise duty paid by the Company as found at page 13 of the Profit and Loss Account. Note 9 was necessitated only since the total excise duty included the amount relating to previous years paid during the current year. Year Page No. Heading Sl. No. Description 1986-87 23 Notes on the Balance Sheet & Profit and Loss Account 6 Relates to payments made under protest for which appeals are pending before the Appeallate Authorities. Reply :- Note No. 6 at page 23 of the Balance Sheet relating to the year 1986-87 has to be read with "Advances for Sales Tax" under the Heading "Loans and Advances" appearing at page 17 of the Balance Sheet. This will clearly show that Note No. 6 mentioned in para 4 of your letter dt. 4-8-1992 relates to Sales Tax and not to excise duty. We shall feel grateful if you can sanction the refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day-to-day register or documents maintained to verify the actual Consumption of Raw Material or WIP in producing the Pre-Cured Tread Rubber. Again the assessee expressed their inability to produce such documents as the factory uses the same raw material and WIP for Pre-Cured Tread Rubber and various products like Tyres, Tubes etc. Hence, we finally decided to adopt the same ratio of raw material submitted by the accessee for calculating the cost of the product with necessary and suitable adjustments. Further we wanted to know the quantum of Modvat availed by the assessee on pre-cured Tread and hence we asked for the details. The assessee informed that since raw material and WIP are received from other factories, only such other factories take Modvat Credit, hence, Modvat details separately for pre-cured tread could not be furnished. Further it was informed by assessee that to avail Modvat credit there is no need for any one-to-one correlation. We feel though there is no necessity to have one-to-one correlation, the information is very vital to know the actual raw material cost. Finally, the assessee agreed orally on 17-12-1992 to furnish the total Modvat Credit availed by the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. We have received the Modvat particulars from M/s. MRF Ltd. on 8th January, 1993. The Modvat content on PCTR and its impact on our cost construction statement is tabulated below : Mar '86 Mar '87 Sept '87 Oct '88 Mar '89 July '89 Margin as per our pre report -0.67 +0.17 +0.63 +0.93 +0.84 +1.82 Add : Modvat Credit +2.06 +2.21 +2.35 +2.54 +2.71 +2.90 PROFIT +1.39 +2.38 +2.98 +3.47 +3.55 +4.72 Please note that the Profit Margin has increased gradually during the relevant periods after taking into consideration the Modvat credit availed. Hence the opinion expressed in our earlier reports remains unaltered".......... 16. In the meanwhile the appellants-assessee requested the Assistant Collector vide their letter dated 24-2-1993 to furnish the detailed working of PCTR which was arrived at by the AD (Cost) and the same was furnished which is reproduced below : OFFICE OF THE ASSISTANT COLLECTOR OF CENTRAL EXCISE: MADRAS IX DIVISION: III FLOOR: SIRE MANSION: 621, MOUNT ROAD: MADRAS C. No. IV/10/65/90-RF (PF-II) March 24th, 1993 To M/s. MRF Limited Greams Road Madras - 600 006 K/Attn : Shri S. Ignatius, Corporate Manager, Indirect Taxes. Sirs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless there is Government Control over the price. Hence, the weighted average price during relevant period is the appropriate method of determining the raw material price. To determine Labour Cost of a product, the Department needs the information like standard hours required to produce 1 kg of PCTR and the actual hours required to produce 1 kg of PCTR and also the wages and salaries paid to workers engaged in production of the subject product. But the assessee has expressed their inability to furnish all the relevant information as the Company has no definite production schedule for PCTR. It was also informed that depending upon the requirement of various items like Tyres, Tubes, PCTR, the production programme is altered on the same day. The Management was also not in a position to furnish the profit and loss account of the Arkonam Plant as Statement of Accounts are prepared for MRF Ltd., as a whole. Under the above circumstances, the Management cannot expect the Department to give a detailed Cost Sheet for PCTR. However, in order to maintain the principle of natural justice, the Department has estimated the cost of PCTR as on various dates with the available information on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnual Reports, Production details, Ratio of Major Raw Material content etc. These informations were provided vide our letter dt. 5th Nov. '92. You have given us vide your letter dt. 9th Feb. '93, a gist of the Report of the Asstt. Director (Cost). Orally requested the Asstt. Director (Cost) to visit our factory to have a first hand knowledge of the operation for better appreciation of the cost workings adopted. However, the Asstt. Director (Cost) has arrived at a certain cost, based on the broad information provided in the balance sheet. 3. Now we find that the Asstt. Director (Cost) has arrived at some cost based on the general information provided by us. We find that the working is hypothetical and far from the actuals. As you will agree that cost can be worked out only based on technical specifications. While providing the cost sheet along with the affidavit filed on 15-6-1992, we had stated that technical specifications used for cost working shall be made available for your inspection at any time. However, we are surprised that the Asstt. Director (Cost), instead of reckoning the specification contained in the cost sheet, has relied on the general information provided at your ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds maintained at Arkonam Plant or any other day-to-day register or documents maintained to verify the actual consumption of raw material or WIP in producing their pre-cured tread rubber. The appellants-assessee again expressed their inability to produce the said documents on the ground that as the factory uses the same raw material and WIP for pre-cured tread rubber and various products like tyres, tubes etc. they were not able to produce any record. 19. To verify whether the incidence of duty has been passed on to the actual customer or not, the AD (Cost) finally decided to adopt the same ratio of raw material as worked out by the assessee for calculating the cost of the product with necessary and suitable adjustments. Appellants-assessee was also advised by the AD (Cost) to intimate the quantum of Modvat credit availed by them on the PCTR and he was informed that since the raw material and WIP are received from other factories only such other factories take Modvat credit and hence Modvat details separately for pre-cured tread rubber could not be furnished. This information was vital to know the actual raw material cost and to understand whether the incidence of duty has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein below : "15. A personal hearing was granted to the assessee on 16-6-1992 and on the assessee's specific request it was postponed to 6-7-1992. In the meantime, Shri P.R. Anantharaman, Controller of the Company filed two affidavits one on 15-6-1992 and another on 2-7-1992 on the subject issue. In the first affidavit filed by the said Controller, it was stressed upon that the cost price of PCTR maintained during the subject period did not include the element of duty suffered on the product. To establish the above fact, he had stated the following : "I produce and affirm as correct the relevant PCTR cost sheet for March, 1986 actuals and will produce the supporting papers which are all available at the Office/Unit and are being gathered. The practice of MRF has been and is to prepare at each Unit including the Arkonam Unit, Budget Cost and actual cost for each product under each product group. Material for this is also available and will be produced. Since, the new Tariff was to be introduced from 1-3-1986, actual cost for each product including PCTR, inter alia, for Arakonam Unit had to be determined and prepared. As will be apparent from the cost sheet for the Arkonam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmitted by him that selling price of PCTR was subsequently revised due to increases in the prices of raw materials and overhead cost effected during the period from 1-3-1987 to 31-12-1989 and its break up were furnished as under : Period Cost Price of PCTR per kg reported to be as (Rs.) March, 1987 40 September, 1987 41 October, 1988 42 March, 1989 42.65 July, 1989 65.65 While concluding his statement in the last para of his letter dated 2-7-1992, it was stated that : "Thus, it is clear that the presumption raised under Section 12B is fully rebutted based on the documents produced herewith along with the documents produced with the affidavit dated 15-6-1992. The incidence of Excise Duty claimed and charged during the relevant period (without payment of which PCTR was not permitted to be cleared and hence was paid under protest) was not passed on to any other person/consumer." 17. On 6-7-1992, as proposed, a personal hearing was conducted. Shri F. S. Nariman, Advocate, Shri Ignatius, Corporate Manager (Indirect Taxes), Shri P.R. Anantharaman, Controller and other officials attended the personal hearing. They had reiterated their arguments putforth in their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee to depute our Officers for verification as most of the invoices for the period subsequent to 8-3-1987 till 31-12-1989 are also available - but being spread in different invoice books located at 42 different branches all over India, the entirety of all relevant invoices (which are still being collected), can be inspected. 19. On 10-7-1992, M/s. MRF Ltd. had enclosed a detailed note on the methodology adopted for the preparation of cost sheets to indicate clearly that Excise Duty did not and could not have entered into computation of Cost (Selling Price) covering the period from 1-3-1986 to 31-12-1989, but separately for the periods 3-86/3-87/9-87/10-88/3-89 and 7-89, which comprised fully with costing basis. In addition to the above to a query raised by me as to how: Query MRF has treated the claim representing Duty Refund on PCTR in their Accounts for the period 1st March, 1986 to 31st December, 1989? Reply : Quotation from the Tax Audit Report under Section 44AB of the Income-tax Act, certified by the tax auditors of the Company which is submitted to the income-tax authorities every year, is given below. QUOTE : "METHOD OF ACCOUNTING Method of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Officers, no disparity in the price was found other than certain minor variations noticed and subsequently clarified by the assessee during the period from 1-3-1986 to 8-3-1987, uniformly. 21. However, while they scrutinised some of the price circulars maintained by the assessee for the subject period, it was found at the bottom of the price list pertaining to 1-10-1985 an endorsement to the extent that "THIS LIST SUPERSEDES ALL PREVIOUS LISTS. THE ABOVE PRICES ARE SUBJECT TO CHANGE WITHOUT NOTICE. SALES TAX, OCTROI AND ANY OTHER TAX APPLICABLE WILL BE EXTRA." This testified to the fact that the Net Billing Price quoted in those price list relating to all Rubber Products was inclusive of Central Excise Duty. The PCTR figuring therein was one among them. From the above it implies, without saying that the Management uniformly maintained a standard in built price for all the products irrespective of the duty aspect throughout the period wherein, the provision for all elements has been provided at the time of forming the price structure of a product. Of course, all the products are sale uniformly at standard rates without bearing a significant entry on the excise duty eleme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending before the Appellate Authorities. As all the above points were required to be scrutinised in terms of the amended Section 11B of Central Excises and Salt Act and Act 40 of 1991, the Management has been issued a letter on 4-8-1992 calling for the information on the above 3 points. 24. A reply to the above was received from the assessee on 21-8-1992 wherein it was stated as below pointwise : (i) Price circulars containing remarks regarding sales tax, octroi and other taxes. "the "endorsement" contained in the price circulars, as pointed out by you, are usual terms mentioned in all price lists. In fact, the price list for tyres, though contains the same remarks, includes ADV tyres (similar to PCTR) where no excise is paid or recovered". (ii) Trial balance prepared from Arakonam Unit during the relevant period. "Since the practice of the Company is to account the sales without split up towards excise duty, if any, the Company's trial balance would not be relevant to ascertain whether excise duty is collected or not. The Arakonam Unit's trial balance being a unit level document, and entries therein being made before sales are effected, their trial balance also will not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that Note No. 6 mentioned in para 4 of your letter dated 4-8-1992 relates to sales tax and not to excise duty." 24. It may not be out of place to mention here that in the instant case a special care has been taken in gathering specific information issue-wise by covering all aspects which are connected in or in relation to the concept of unjust enrichment. As it could be seen from the information so far furnished by the assessee and as quoted in the foregoing paras that the assessees are firmly contending with at every stage that the Net Billing Price maintained by them during the subject period in respect of the product PCTR does not include the element of duty and whatever duty paid on the product was borne by them. On a careful reading of all the information hitherto quoted above, it is pertinent to note that the assessees are not in a position to give a clear-cut answer. Instead they narrated so many other factors as they did not possess such information by which they could prove with clear documentary evidence to the Department in particular the non-inclusion of duty aspect on the cost price of the product or not passing on the duty burden to the ultimate buyer. 25.&em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of their case. Accordingly reference was made to the appellants-assessee on 9-2-1993. The Assistant Collector has recorded their reply in paras 28 and 29 of his order dated 21-5-1993. In reply to the above the appellants-assessee sought for a detailed cost working of the AD (Cost) to enable them to furnish a final reply. In order to ensure the principles of natural justice, again a reference was made on 24-3-1993 to the appellants-assessee and as requested by them a detailed report of the AD (Cost) was communicated comprising therein the method adopted by the AD (Cost) and the elements considered in arriving at the decision in an elaborate manner. In reply to the above, the appellants vide their letter dated 3-5-1993 expressed their disagreement with the method arrived at by the Department on the cost of the product. However, they could not establish their stand with factual information except by quoting a simple example on the cost details of Natural Rubber/Synthetic Rubber by which alone the entire issue cannot be decided. The observation made by the Assistant Collector from paras 28 to 29 of the order and her findings in paras 30 to 47 are reproduced below : "28. In repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is further confirmed while the claim was in process at Cost Audit level. On receipt of additional information from the assessee as called for by this Office on the following : (i) Copy of Cost Audit Report year ending 30-9-1985, 30-9-1987, 31-3-1989 and 31-3-1991. (ii) Divisional Profit and Loss Account, Balance Sheet and trial balance for the period from 1-10-1985 to 31-3-1990. (iii) Annual Report for 1989-90. (iv) Ratio of major raw material content in one kg. of precured tread piece. (v) Total quantity of precured tread ordinary tread and other items manufactured/sold at Arakonam plant. (vi) Method adopted (i.e. details of technical evaluation) to apportion the manufacturing expenses to each product/unit. (vii) Details of Modvat credit availed on the said product during the relevant period. (viii) Copies of quarterly return filed in form RT-5 in respect of the raw materials used in the PCTR. (ix) Form IV Register maintained by them for the Raw Materials used in the PCTR. (x) Job cards relating to the said raw materials and along with the submissions already made by the assessee, reworked the cost construction statement as tabulated below : Mar'86 Mar'87 Sep'87 Oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and has re-worked the cost estimation with the documents produced by the assessee in spite of the inability expressed by the assessee to submit certain documents in order to maintain the principles of natural justice. The assessee informed that there is no documentary evidence to prove that the Company has used the raw materials in a specific ratio. Though the information was vital, the Assistant Director (Cost) has assumed the same ratio for cost estimation with reservations. Mere submission of technical specifications does not form the basis for cost estimation. It must be backed by proper records. However, the Assistant Director (Cost) has gone through all the available information meticulously to form an opinion and no general information was taken as the only basis for deciding the case. Further, there is nothing wrong in relying upon a few general information when such information are collected from authenticated documents. 36. The Assistant Director (Cost) informed the assessee that he would like to peruse the documents like RT-5 returns, Form-IV register, bill of materials, material request note, job card, stores ledger etc. But the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant period, those materials were imported by tyre manufacturers. The assessee cannot establish that imported raw materials were not used in PCTR manufacturing. The assessee would have used both indigenous and imported raw materials depending upon the market requirement for products and supply position of various raw materials. Hence, when the cost is averaged, inclusion of duty free imported material cost may not have any significant impact on the material cost. 40. A balance sheet with statement of accounts is an authoritative document and it is certified by independent Chartered Accountants. Using such authenticated information will not give hypothetical and distorted picture on the costs as submitted by the assessee. 41. A mere technical information of specification of raw material will not form the basis for determining the cost of a product. It has to be noted here that the Assistant Director (Cost) has arrived at the average cost of each type of major raw material and accordingly applied the rate on the quantum of raw material per kilogram of PCTR as declared by the assessee. It was not arbitrarily calculated on total average cost of all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emsp;It is very clearly proved from the above observations the assessees' contention to the extent that they had not passed on the duty paid under protest in respect of the product PCTR to the ultimate buyer factually and actually is not borne out by facts. And, they are not in a position to prove the above aspect with clear documentary evidence to the Department. 46. At this stage, I would like to reiterate the conditions stipulated under the section 12B of Act 40 of 1991 of Central Excises and Salt Act, 1944 which says "that EVERY PERSON WHO HAS PAID THE DUTY OF EXCISE UNDER THIS ACT SHALL UNLESS THE CONTRARY IS PROVED BY HIM, BE DEEMED TO HAVE PASSED ON THE FULL INCIDENCE OF SUCH DUTY TO THE BUYER OF SUCH GOODS". 47. Under the above stated circumstances, M/s. MRF Limited's claim for refund on the differential duty paid by them under protest during the period from 1-3-1986 to 31-12-1989 stands hit by the amended Sections 11B and 12B of Act 40 of 1991 of Central Excises and Salt Act, 1944. ORDER I, therefore, hold that the amount of Rs. 3,52,03,339.03 claimed by M/s. MRF Ltd. as the differential duty involved on account of reclassification of the produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduct into the market, when identical product is available at a cheaper price he would naturally out-down his margin of profit, and fix the price on par with the market price of identical product. In such cases, it can only be reasonably presumed that, the profit margin earned is less. Obviously, in this case, even after taking into account the element of excise, the appellant had clearly made profits consistently. Considering the nature of product, which is manufacture in a large scale by small-scale manufacturers, enjoying the exemption, and also taking into account that 'tread rubber' whether 'pre-cured' or 'uncured' is used for the same purpose of re-treading of wornout/bald tyres, there is every reason to presume that the appellant maintained the price structure without much changes, not with the intention of not passing on the incidence of duty but on account of market constraints. Even accepting the plea of the appellant for the sake of argument that the price did not vary much during the year 1986, prior to and after payment of duty, it would be relevant for the short period only, and will certainly not be of any relevance for the subsequent years. 5.5. It is fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by facts and figures as to how, the price charged by the appellant also contained the element of excise duty, and certain margin of profit, yet another relevant fact to decide the issue is that the impugned 'tread rubber' is used only for the purpose of re-treading bold tyres, and in terms of Central Excise Tariff Act, 1985, retreading of tyres is not a process of manufacture warranting fresh levy of duty. Therefore, users of the tread rubber are not likely to be Central Excise assessees who would not mind paying the duty and avail the duty so paid under the Modvat scheme. Therefore, I am of the considered view that mere non-increasing the price at that particular point of time cannot be regarded as sufficient proof to take the view that the incidence of duty had not been passed as claimed by the appellant. On the other hand the incidence of duty could be deemed to have been passed on the buyers under the facts and circumstances of this case. 6. Following the land mark judgment rendered by the Honourable Supreme Court, in the case of M/s. Jain Spinners Ltd., reported in 1992 (61) E.L.T. 321 (S.C.) not only the constitutional validity of amendment made to Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring rubber product, fall under the terms of the exemption Notification No. 47/76, dt. 9-3-1976. (b) A second Affidavit of Shri P.R. Anantharaman, Controller, MRF Ltd., was filed on 2-7-1992, containing :- (i) The first Classification List dt. 5-3-1986 in which MRF claimed Nil rate of duty. (ii) Letter dt. 27-6-1986 of the Superintendent of Central Excise directing MRF to pay duty at 40%. (iii) Revised Classification List dt. 1-7-1986 showing duty at 40% ad valorem on PCTR. (iv) MRF's price list dt. 1-7-1986 showing price of PCTR as Rs. 38/- per kg. (v) Three sets of documents to prove that when there was Nil rate of duty on PCTR during the period from 1-3-1986 to 30-6-1986, the price remained at Rs. 38/- per kg : (a) Gate passes from 15-3-1986 to 27-6-1986 showing Nil rate of duty. (b) Transfer memos showing Nil rate of duty for the same period. (c) Invoices for the same period showing price as Rs. 38/- per kg. (vi) Three sets of documents to prove that when duty was paid at 40% during the period from 1-7-1986 to 8-3-1987, the price remained the same at Rs. 38/- per kg. (a) Duty paid gate passes from 1-7-1986 to 8-3-1987. (b) Transfer memos for the same period. (c) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Asstt. Collector failed to rely upon the investigative reports submitted by her own officers after they had verified the gate passes, transfer memos and invoices in respect of the 2 periods, namely: 1-3-1986 to 27-6-1986 and from 1-7-1986 to 8-3-1987, which clearly proved that during the first period, when no duty was levied and paid, the price charged was Rs. 38/- per kg. of PCTR and during the second period, when duty was levied and paid at 40% ad valorem also, the price remained at Rs. 38/- per kg., which was the price charged. 5. The learned Asstt. Collector further failed to take into account the explanation and details furnished by the Controller, MRF Ltd. in response to the Department's queries submitted in the form of an Explanatory Note to Annexure "A". 6. The learned Asstt. Collector also failed to direct the Asstt. Director (Cost) to visit the Appellants' factory and inspect the technical specifications of the product, PCTR (Bill of materials) and other workings available at the appellants' office which was offered by the Controller, MRF. 7. The learned Asstt. Collector failed to appreciate a relevant fact, namely that the selling price was Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. the invoice, showing the selling price. The learned Asstt. Collector failed to comprehend the correct............ 11. In para 29 of the order dt. 21-5-1993, the learned Asstt. Collector stated that, "except by quoting a simple example on the cost details of natural rubber/synthetic rubber by which alone the entire issue cannot be decided", the appellants did not establish their stand that the method arrived at by the Deptt. on the cost of the product was erroneous. It is submitted that MRF never intended that the entire issue can be decided by the two examples given by the Controller of MRF vide his Note dt. 3-5-1993, forwarded to the Deptt. with the Appellants' letter dt. 3-5-1993. The purpose of showing the two examples was to point out that no one can adopt an overall average rate of a group of raw materials reflected in the balance sheet to arrive at the cost of a product, as illustrated by the two examples given. The learned Asstt. Collector arbitrarily disregarded the two examples given instead of following up the reasoning given behind the two examples and thereby came to an erroneous conclusion. 12. In para 32 of the order dt. 2-5-1993, the learned As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30-9-1985, 30-9-1987, 31-3-1989 and 31-3-1991, covered only tyers manufactured by the appellants and not the product, PCTR in respect of which no Cost Audit was conducted, neither any Cost Audit was required for the product PCTR. If Section 12B had been on the statute book for the relevant period of the refund claim, i.e. 1-3-1986 to 31-12-1989, MRF would have and could have maintained a separate Cost Audit, costing PCTR. 15. In para 36 of the order dt. 21-5-1993, the learned Asstt. Collector has mentioned erroneously that the Asstt. Director (Cost) informed the appellants to produce documents like RT-5 Returns, Form IV Register, bill of materials, material request note, job card, sales register etc. and the appellants informed that it was not possible to produce such documents as the Company has no definite production schedule for PCTR separately and work-in-process is received from various other units of the assessee. It was erroneous because the learned Asstt. Collector who is in charge of the factory is fully aware that the factory does not manufacture only the product PCTR, but it manufactures several other products like tyres of various sizes consisting of the ran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-grades) goes to any finished product depends on specification of each product, for e.g., butyl rubber is used only for tubes. In view of this, the appellants informed the learned Asstt. Collector that it is erroneous to apply the average material rate taken from the balance sheet which will distort the picture. In support of this, the appellants had given an example in their letter dt. 3-5-1993 to highlight the anomaly. That is why the appellants gave copies of suppliers' invoices for the raw materials that go into PCTR, along with the Explanatory Note to Annexure "A" in which also it was mentioned that specification sheets are available for inspection, submitted with letter dt. 28-7-1992 (marked as Annexure "F" Colly). 16. The learned Asstt. Collector did not apply her mind with reference to the findings given by the Asstt. Director (Cost) and blindly accepted his "findings" (so called) and repeated the same in her order. This is clear from para 38 of her order dt. 21-5-1993 where it is stated that : "When cost estimation is done for over a period of time, the weighted average cost of the relevant raw materials is the well accepted cost accounting principle rather than ado ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce was not increased when duty was imposed, this fact has been accepted as stated in para 42. 19. The statement made by the learned Asstt. Collector in para 43 of the order dt. 21-5-1993, namely that "proof of non-transfer of excise duty burden on customer lies in establishing that the total cost of the product plus profit margin is equal to selling price realised from customers", has not been backed by any statute nor any recognised principle. The appellants dispute the working of the Asstt. Director. The selling price is the only relevant factor which in turn is confirmed by the statutory provisions contained in Section 11B(1) and Section 12B. The workings given by the Asstt. Director on labour and overheads were erroneous and not acceptable to the appellants because the Appellants had clearly indicated how various overheads have been worked out in their cost sheet with reference to the figures reflected in the balance sheet, wherever applicable. How the Asstt. Director has worked out the expenses applicable to PCTR has not been clarified at all. To cite an example, the Asstt. Director has indicated that he has not included "Divisional trading expenses". What consists of Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , should normally be passed on to the buyers. 24. The learned Collector (Appeals) came to the wrong conclusion that the cost estimation conducted by the Asstt. Director (Cost) is based on authoritative documents because he failed to note the contention of the appellants that the learned Asstt. Director (Cost) did not even attempt to verify the evidence based on authoritative documents submitted by the appellants themselves. The learned Collector (Appeals) failed to appreciate the provisions of Section 3 of the Indian Evidence Act which provides that in order to "prove", it is only necessary that the court either believes it to exist or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists. On the other hand, the Collector (Appeals) erroneously concluded that the burden is deemed to have been passed on by the appellants which is contrary to law contained in Section 11B. 25. The appellants crave leave to file the same set of 2 Paper Books, namely Paper Book No. 1 and Paper Book No. 2, which were filed by them before the learned Collector (Appeals), Madras, before this Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat duty is deemed to have been collected under Section 11D is not available to the department in respect of the whole duty of 40%, since vide order dated 7-10-1991, it was held finally that they were required to pay duty at the rate of 15% and tax collected from them was far in excess than what was leviable and the department had invoked Section 11D wrongly. They had collected only Rs. 38/- per kg of PCTR and this cannot be representing central excise duty. Therefore, difference of 25% duty (difference between 40% and 15%) representing the price cannot be presumed to have been passed on to the customers as incidence of duty. The presumption that incidence of duty must have been passed on means and covers only 15% of duty which was required to have been imposed on them and not 25% which was the difference of duty (40% - 15%). The learned Sr. Counsel invited our attention to paras 3, 5 and 6 of Cimmco Ltd. v. CCE reported in 1999 (107) E.L.T. 246 and also the Single Member Bench decision in the case of Panihati Rubber Limited v. CCE, Calcutta reported in 2001 (127) E.L.T. 742. He also invited our attention to para 5.5. of the order-in-appeal and page 71 of the paper book No. 2 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n no evidence and totally in disregard of the evidence given by the assessee before the authorities. (g) Even if the presumption under Section 12B has not been rebutted, they can be proved under Section 12B with regard to full incidence of duty leviable on which admittedly was 15% under Tariff Heading 4008.91 whereas the assessee has paid duty @ 40%. He has therefore, submitted that the provision under Section 12B would apply to a case where duty of excise leviable and levied and it would have been passed on when there is no evidence or rebuttal. As regards Section 11D he submitted that this section would be applicable and limited to the extent of the amount which was collected as duty @ 15%. Even Section 11D would not apply and is therefore not invocable. (h) Appellants have never reported to the Central Excise authorities or to the buyers the difference between 15% and 40% represented duty of excise. Lastly the learned Sr. Counsel submitted that change of opinion from time to time by the department itself supports that no duty was payable on PCTR and refund amount was required to be paid to them either in cash or by way of deposit in the PLA. 25. Shri K. Veeraraghavan, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt submits that the submission of the appellant that Section 12A, 12B, 12C, 12D of Central Excise Act, 1944 are not to be applied retrospectively when there is no retrospective effect given in the said provision is unacceptable in law since Section 12A, 12B, 12C, 12D constitutes a particular purpose with reference to Sec. 11B and 11BB and hence the above said Sections are to be read together and not in isolation hence the question of retrospectivity will automatically apply to the provisions found in Section 12A, 12B, 12C, 12D and in fact the Apex Court has given retrospective effect to Sec 11B in its judgment Union of India v. Jain Spinners Ltd. reported in 1992 (61) E.L.T. 321 (S.C.) and the law laid down by the said judgment was approved by the land mark judgment of the Constitutional bench of the Apex Court in Mafatlal Industries Ltd. v. UOI reported in 1997 (89) E.L.T. 247 (S.C.) and hence as it stands the law of the land is clear in this respect and the averment contrary to the same by the appellant has no force in law. 3. The appellant's contention that affidavit filed by Shri P.R. Anantharaman, Controller, MRF Ltd. affirmed that excise duty was not taken int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h duty to the buyer of such goods. 7. The appellant's contention that there is no variation in the price and as such it has to be assumed or presumed that no duty was passed on to the buyer is again a fallacious submission since the constant or static pricing is nothing to do with the passing on duty and in fact the excise duty being an indirect tax the legislature in its wisdom introduced Sec. 12B in the statute the Central Excise Act, 1944 with the sole purpose of putting the entire burden only on the assessee to prove the fact that he has not passed on duty to the buyer and in case if he fails to prove the said fact the department has been given the power under the said proviso to invoke the deeming provision to presume that duty is passed on to the buyer by the assessee. 8. The respondent submits that the above checks and balances were introduced by the legislature since price components like material cost, labour, over heads, tax elements, profit elements are taken into account, where a clearance documents indicates a selling price, it is built up based on the above cost, profit and tax elements. By mere statements that the sale price was static over a period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inputs consumed and 2. Price per unit and when the appellant failed to maintain necessary record, the claim that the material was consumed in a particular ratio is a fact not proved. 10. The appellant has also not proved the overhead expenditure and merely quoting the published accounts of the company would be unacceptable in law since the overheads could be determined only on the basis of overheads attributable to the relevant product at various stages and appellant has not provided such facts to prove his case and the respondent has rightly followed the Basic Accounting principles to arrive at the finding in tune with law. 11. The appellants contention that a mere cost study in a multi product company is meaningless and selling price is the best areas to know whether duty was collected or not is unacceptable in law since in the appellant company all the final products are 'rubber based' and also they were complementary products and in such a special circumstance 'cost study' is a relevant fact to prove whether duty was passed on to the buyer or not. 12. The further averments of the appellant that they would have maintained the relevant record if Section 12A, 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "NIL" so that the buyer is clear that no excise duty has been charged on him. In the absence of such an indication, the price is the maximum sale price which includes all duty and tax elements. 14. The submission of the appellant that the expert opinion of the Assistant Director (costing) ought not have been sought for when they have produced balance sheet etc, is incorrect in law since the original authority felt that in the above matter the opinion of the expert in regard to the costing is necessary to adjudicate the case according to law and then only sought the expert opinion and the appellant instead of disproving the expert opinion by providing a contra expert opinion have only raised the plea that the original authority ought not to have sought the expert opinion of the Assistant Director (Costing) is a statement unsupportable in law. Further the adjudicating authority has followed the "procedural fairness" coupled with wednusbury principles by resorting to the expert opinion and instead of appreciating such a fairness of the original authority the appellants are making complaints on it which is contrary to the principles of law. 15. The appellant have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read Rubber (PCTR) is a consumer product and when the invoice indicates only sale price, it is always inclusive of the tax elements paid or anticipated to be paid. Hence the appellant cannot place an argument that the static price is exclusive of excise duty element. 17. The respondent submits that the original authority in para 34 of the order-in-original has only made certain observation regarding the constant price aspects and such as the appellant's contention that it was pointed towards them is incorrect. 18. The order-in-original passed by Assistant Collector gave a detailed statements for the relevant periods from March 86 to July 89 establishing the fact that the entire excise duty liability of 40% was collected by the appellant from the buyers and even after passing on the burden the appellant has made a reasonable profit margin even though there was no necessity to sell the goods on profit. It is also highlighted that when duty burden is taken into account a manufacturer considers the Modvat availments on inputs to determine the price of the product. Hence mere claim that the excise duty works out to 40% has no meaning unless the Modvat component is also taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he has given some facts and the departments is to act upon the supposition it exists since such an approach is clearly beyond the purview of the Section 12B of the Central Excise Act, 1944. 22. The respondent submits that both the original authority as well as the appellate authority rightly ruled that the appellant has not furnished required documentary evidences so as to prove that duty was not passed on to the buyer and hence the deeming presumption as found in Section 12B of the Central Excise Act, 1944 was invoked to reject the refund claim of the appellant and the appellate authority also affirms the order passed by the original authority taking into the facts and law involved in this case and Section 12B of the Central Excise Act, 1944 is the relevant and appropriate section in this case and it is a settled law that fiscal statute ought to be construed strictly without adding words to the statutes and in that sense it is a clear case where the appellant has not produced required documents to prove that duty was not passed on to the buyers and the department has incidentally taken the pains of looking into the submitted documents and made an exercise w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces rightly relied upon the expert opinion available with the department. He submitted that the AD (Cost) had sought supporting evidence and documents, but the appellants were not able to produce the same. Therefore the AD (Cost) was forced to go by the average cost when the information sought for was not produced by the assessees. The Assistant Director (Cost) had gone into the limited scope as to whether the incidence of duty has been passed on or not passed on and when the assessee could not prove that they had not passed on the burden of duty to the customers, the presumption under Section 12B of the CE Act, 1944 that the burden has been passed on to the customers irrespective of the fact whether the incidence of duty was passed or not, has been correctly invoked by the lower authorities. He further submitted that the Affidavits filed by the assessee was not supported by documentary evidence in spite of the opportunity given to them by the AD (Cost). He also referred to Rule 9B and Hon'ble Supreme Court judgment in the case of Mafatlal Industries as contained in para 95. He also invited our attention to para 99 of that judgment and submitted that the doctrine of unjust enrichm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, they manufacture a product called PCTR for re-soling and retreading of tyres. They sought for classification of the said PCTR under TSH No. 4008.21 and claimed the duty exemption vide Notification No. 47/76 dated 9-3-1976 as amended by Notification No. 193/80 and 78/86 dated 10-2-1986 under their classification List No. 2/85-86 which was filed consequent upon the changes effected during the Budget 1986 with effect from 1-3-1986. The department had accepted the classification of the subject goods under Chapter heading No. 4008.21 and denied them the benefit of Notification No. 47/76 dated 9-3-1976 as amended, and claimed by them on the ground that the stipulated conditions mentioned under this Notification have not been fulfilled by the assessee inasmuch as PCTR manufactured by them was found to be in the form of cured vulcanised rubber. Therefore, the assessees were instructed by the Supdt. of Central Excise, Arakonam Range vide his letter OC No. 1190/86 dated 27-6-1986 which is available at page No. 40 of the Additional Paper Book No. 1, to revise their classification list and to effect the clearances of the goods on payment of duty of 40% ad valorem which was applicable to he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n list 2/85-86 for pre-tread, claiming exemption from duty under Notification No. 47/76 dated 9-3-1976 as amended by Notification No. 193/80 and 78/86 dated 10-2-1986. (e) The Supdt. of Central Excise, Arakonam Range vide his letter OC No. 1190/86 dated 27-6-1986 has returned their Classification List stating that they were not entitled to avail exemptions as per Notifications cited. He has also requested them to pay duty under protest if they were not agreeable to his decision. (f) As they were not agreeable to his reference they have decided to pay duty under protest. They also informed that they shall be making endorsement on all the copies of gate passes, PLA and RT 12 returns in terms of sub-rule (4) of Rule 233B of the CE Rules, 1944. The protest letter dated 1-7-1986 filed by M/s. MRF Ltd. has been extracted above at page No. 8 & 9 under Para 3.1 of this order. 31. It would be seen from the correspondence between the Supdt. of Central Excise and the Appellants-assessee and the Assessee-appellants and the Assistant Collector that they were not paying any duty on the pre-tread and were claiming exemption under Notification No. 47/76 dated 9-3-1976 as amended by Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded Section 11B, of the CE Act, 1944 for invoking the principles of unjust enrichment, M/s MRF Ltd. were called upon to re-submit their claim in the prescribed format under Rule 173S of the CE Rules, 1944 which was inserted with effect from 20-9-1991. Accordingly they re-submitted their refund claim on 5-6-1992 in the prescribed format with the declaration to the effect that "duty for which refund application filed has not been charged/realised therein from any other person." Thus the refund claimed for Rs. 3,52,03,339.93 covering the period from 1-3-1986 to 31-12-1989 was filed before the Assistant Collector Ranipet Division. Consequently on the formation of the Madras IX Division and the Arakonam Range, attached to Madras IX Division, the refund records of M/s. MRF Ltd. were transferred by the erstwhile Division, to Madras IX Division on 23-5-1992. 36. This revised refund claim for Rs. 3.52 crores was submitted vide their letter No. E/A/ Refund/KJ/99 dated 9-11-1992 in reference to the letter C. No. IV/10/2/90 RF dated 25-11-1991 of the Assistant Collector Ranipet Division, Ranipet. They also enclosed with this letter dated 9-1-1992 a statement showing particulars of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s effect and give grounds for payment of the duty under protest. (2) On receipt of the said letter, the proper officer shall give an acknowledgement to it. (3) acknowledgement so given shall, subject to the provisions of sub-rule (4), be the proof that the assessee has paid the duty under protest from the day on which the letter of protest was delivered to the proper officer. (4) an endorsement "Duty paid under protest" shall be made on all copies of the gate-pass, the Application for Removal and Form R.T. 12 [or Form R.T. 13, as the case may be.] (5) In cases where the remedy of an appeal or revision is not available to the assessee against an order or decision which necessitated him to deposit the duty under protest, he may, within three months of the date of delivery of the letter of protest, give a detailed representation to the [Assistant Commissioner of Central Excise]. (6) In cases where the remedy of an appeal or revision is available to the assessee against an order or decision which necessitated him to deposit the duty under protest, he may file an appeal or revision within the period specified for filing such appeal or revision, as the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date when the direction of the proper officer is issued and communicated to the assessee : Provided further that the proper officer where he is satisfied that the self-assessment made by the assessee is not in order, he may direct him to resort to provisional assessment and on receipt of such directions the assessee shall comply with such directions.] (2) * * * * (3) The Commissioner may permit the assessee to enter into a general bond in the proper form with such surety or sufficient security in such amount or under such conditions as the Commissioner approves for assessment of any goods provisionally from time to time: Provided that, in the event of death, insolvency or insufficiency of the surety or where the amount of the bond is inadequate, the Commissioner may, in his discretion, demand a fresh bond and may, if the security furnished for a bond is not adequate, demand additional security. (4) The goods provisionally assessed under sub-rule (1) may be cleared for home consumption or export in the same manner as the goods which are not so assessed. (5) When the duty leviable on the goods is assessed finally in accordance with the provisions of these r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... burden of duty has not been passed on to the third party. Favourable orders cannot result in automatic refund and the claimant has to prove that burden of duty has not been passed to the third party. It has also been held that the person ultimately bearing the burden of duty can legitimately claim its refund, otherwise the amount has to be retained by the State. It is also held that if invoice is not separately showing the duty element, it does not mean that manufacturer is not passing on the incidence of duty to the customers nor does it flow there from that the manufacturer is absorbing duty himself. It has also been observed by the Hon'ble Apex Court in para 91 that ordinarily no manufacturer will sell his products at less than the cost price plus duty and if he does so he cannot survive in business. Only in case of distress sale such a thing is understandable. Distress sales are not normal feature and cannot therefore constitute a basis for judging the validity or reasonableness of a provision. Similarly no one will ordinarily pass on less excise duty than what is exigible and payable. It was further observed that a manufacturer may dip into his profits but would not further d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entary evidence that burden of duty has not been passed on to the third party. 40. The Collector (Appeals) while considering the case records as also the grounds urged by the appellants in their appeal as well as during the personal hearing has observed and held that the main plea of the appellants that during the entire impugned period, the price was not adjusted/enhanced and there was no variation to accommodate the excise duty and if element of excise duty was included the price should have been much higher, was examined by him thoroughly and he has recorded a detailed finding in para 5.4 to 6 of his order. The order passed by him has been extracted under para 22 of this order. The Collector (Appeals) in para 5.4 referred to the order passed by the Assistant Collector and the Assistant Collector in her order gave cost construction of the impugned product at each point of time during the subject period as to how the margin of profit had shown an increasing trend after taking into account the benefit of Modvat Credit enjoyed by the appellants. He has also observed that it was a common knowledge that the market price of any product was determined by various factors such as de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of excise duty to the customer lies in establishing that the total cost of the product plus profit margin is equal to selling price realised from customers and it does not lie on the argument that sale price was stable over a period of time. The Cost estimation done by the AD (Cost) is based on authoritative documents and generally the accepted accounting principles and not hypothetical. It has clearly been established by facts and figures as to how the price charged by the appellants contained element of excise duty. Another relevant factor to decide the issue is that the impugned tread rubber is used for the purpose of re-treading bald tyres and in terms of the Tariff Act, 1985 re-treading is not manufacture warranting a fresh levy of duty. Therefore, mere non increasing of price at that time particularly of the tyres cannot be a reason sufficient to take a view that incidence of duty has not been passed on to the consumers as claimed by the appellants. On the other hand the incidence of duty can be deemed to have been passed on to the consumers in the facts and circumstances of the this case. Following the land mark judgment rendered by the Hon'ble Supreme Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is at page 107 of the additional paper book No. 1 by which they had submitted revised statement along with Revised Refund claim showing particulars of duty paid, rate of duty payable and the amount of differential duty to be refunded to them for the procured tread rubber cleared during the period 1-3-1986 to 31-12-1989, would show that the rate per kg was Rs. 38/- from 1-3-1986 to 28-2-1987, Rs. 40/- per kg from 1-3-1987 to 14-9-1987, Rs. 41/- per kg from 15-9-1987 to 30-9-1988, Rs. 42/- per kg from 1-10-1988 to 28-2- 1989, Rs. 42.65 per kg from 1-3-1989 to 23-7-1989 and Rs. 45.65 per kg from 24-7-1989 to 31-12-1989. Thus the price ranged from Rs. 38/- per kg to Rs. 45.65 per kg. 41. The plea taken by the learned Sr. Counsel Shri F.S. Nariman that the assessments were provisional and his reliance on para 95 of the Hon'ble Supreme Court judgment in the case of Mafatlal Industries Ltd. v. UOI (supra) and the decision of the Single Member Bench in the case of Needle Industries case reported in 1998 (101) E.L.T. 286 wherein it had been held that refund claimed by the appellants consequent upon adjustment on finalization of the provisional assessments under rule 9B(5) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other particulars which the appellants were not able to furnish. Appellants were not able to submit even very basic documentary evidence like Bin cards, Stores ledger, Production, Stores requisition slips, material issue slips etc. which alone could furnish the ratio in which the inputs were used in the manufacture of specified products. The appellants informed the department that no such documents were maintained to prove that in a specific ratio, inputs were used in the manufacture of PCTR. In the absence of such documentary evidence, the claim of the appellants that they have proved that the duty burden was not passed on as intended under Section 12B of the CE Act, 1944 is not correct and is unacceptable as per the spirit of Section 12B ibid. The department attempted to determine the break-ups of sales price based on the annual report of the company during the relevant financial year for the simple reason to follow the principles of natural justice to see whether the duty was passed on or not, even though the burden of proving the fact was entirely on the appellants to prove with documentary evidence that the burden of duty was not passed on as envisaged under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Additional paper Book No. 2) requested the Assistant Collector to furnish the detailed working of PCTR as arrived at by the AD (Cost). The Assistant Collector vide her letter dated 24-3-1993 (which has been reproduced under para 16 of this order) has given a detailed reply to their query raised vide their letter dated 24-2-1993. We find that the report comprised of the method adopted by the AD (Cost) and the elements considered in arriving at the decision in an elaborate manner, as observed by the Assistant Collector in para 28 of her order dated 21-5-1993, which has been extracted under para 21 of this order. Therefore, their contention that the report in full was not furnished to them, is not acceptable and is not based on facts. The appellants did not submit any of the authoritative documents cited by the AD (Cost). Appellants clearly stated that they are not maintaining such records and made request to the AD (Cost) to have physical visit of the factory for which the expert declined since physical visit was not going to serve any purpose in the absence of authoritative documents as requested by the department. On the contrary, appellants had submitted that it was imposs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are based on evidence which has been fully discussed and findings arrived at by them. The learned Sr. Counsel has also submitted that even if the presumption under Section 12B ibid has not been rebutted they can be proved under Section 12B with regard to full incidence of duty leviable on which admittedly is 15% under heading 4008.91, whereas duty has been paid @ 40% under heading 4008.21. He, therefore, submitted that the provisions of Section 12B would apply in case where duty of excise leviable and levied, have been passed on or when there is no evidence for rebuttal. 43. With regard to Section 11D he submitted that this section would be applicable and limited to the extent of the amount which was collected as duty @ 15% and 11D would not also apply and is therefore, not invocable. This plea of the appellants is not acceptable since duty has been paid under protest under chapter heading 40 (main heading 40.08 sub-heading 4008.21) @ 40% adv. vide their protest letter dated 1-7-1986 and the same has been passed on fully to the consumers. The plea that only duty payable @ 15% under tariff sub-heading 4008.91 should be treated as having been passed on and not the whole duty @ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose for which the said Section has been introduced in the Statute. To appreciate the said facts, it is relevant to reproduce Section 12B: "12B Presumption that incidence of duty has been passed on to the buyer. "Every person who has paid the duty of excise on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of duty to the buyer of such goods" Therefore, on a reading of this Section, it is clear that the burden to prove the fact that duty was not passed on to the buyer fully lies only on the assessee and in the absence of such proof of fact the department has to automatically presume that the full incidence of duty has been passed on to the buyers. This Section nowhere mentions about the Evidence Act, and therefore, such co-relation of the provisions of Evidence Act with Section 12B of the CE Act, 1944 and Section 12A of the Act ibid is against the law and is not acceptable. The appellants' contention that even where it is not shown to the satisfaction of a Court that a fact exists, that fact can still be said to be proved in law when its existence is so probable that a prudent man ought to act on the "suppo ..... 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