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TMI Blog2013 (10) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... er. 3. M/s. Sirpur Paper Mills engaged in the manufacture of paper and paper board falling under Chapter 48 of Central Excise Tariff Act, 1985 had filed two refund claims for Rs. 2,95,010/- and Rs. 2,81,258/- on the ground that they had given the quantity discount to their wholesale dealers as an incentive by way of credit notes for the months of April and May, 2011; that the discount was given subsequent to the clearances as agreed mutually prior to clearance of goods from the factory; that the quantity discount had been extended to all wholesale dealers but the quantity and amount would vary from party to party and area to area as agreed before lifting the material. The appellant had submitted a copy of the letter dated 4-9-2002 of the Vice President (Marketing), introducing the quantity discount with the features and statements of details of credit notes issued for the months of April and May, 2011. 4. There are two orders-in-appeal and these orders have been passed on an appeal filed by the Revenue and in an appeal filed by the assessee against two Orders-in-Original whereby in one case refund was sanctioned and in the other case refund was rejected. Consequently, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be taken by the very same Bench of the Hon'ble Tribunal in the present batch of appeals, when there is no change in the law or facts. B. Whether refund of duty in proportion to quantity discount is admissible on merits when the Appellant has not opted for provisional assessment. C. Whether the bar of unjust enrichment would be attracted when the burden of the excess duty claimed as refund is shown to have been borne by the Appellant, by issuing credit notes and cheques covering the said amount in favour of the buyer. 6.3 Submissions in brief : A. When this Hon'ble Tribunal has admittedly decided an identical issue on the same facts in favour of the Appellant herein, whether a contrary view can be taken by the very same Bench of the Hon'ble Tribunal in the present batch of appeals, when there is no change in the law or facts. It is submitted at the outset that the issue involved in the present case is squarely covered in favour of this appellant on identical facts in its own earlier cases. This fact is not disputed by the department even, in their written submissions. No attempt has been made to distinguish the present case on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (D) CE, dated 25-3-2011 12 12 & 13/2011 (H-I) (D) CE, dated 29-7-2011 13 20 & 21/2011 (H-I) (D) CE, dated 26-9-2011 We wish to further rely upon the observations of the Hon'ble Kerala High Court in the case of T.A. Mohammed v. State of Kerala reported in 2011 (263) E.L.T. 202 Kerala which is as follows : 'A judicial officer may have his own views on question of law. Those views need not necessarily be in consonance with the decisions of the superior courts. But such personal views should not be reflected in the judicial orders passed by a judicial officer, if the same runs contra to the law laid down by the superior courts. If a judicial officer is allowed to do so, there is no meaning in the hierarchy of courts and the powers of the Supreme Court and High Court in the manner interpreting provisions of law and in laying down the principles. The subordinate courts are not entitled to ignore a binding precedent of the Supreme Court or of the High Court and to misinterpret any such binding precedent in the manner it was done by the learned Sessions Judge. Such practice is liable to be condemned'. In view of the principles of judicial discipline and the doctrine of precedents w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal assessment. This submission made on behalf of the Department runs counter to the following decisions, wherein it has been consistently held in the context of the amended provisions of Section 4 that "transaction value" is the net commercial price, after deducting discounts, which though known at the time of removal are quantified subsequently : In the case of Mahavir Spinning Mills Ltd. v. Commissioner of Central Excise, Jalandhar reported in 2007 (207) E.L.T. 94 (Tri.-Del.), the Tribunal held as under : 'Value for the purpose of central excise assessment is the net commercial price arrived at after deducting, inter alia, discounts (emphasis supplied). Criterion for discount is that it should not be refundable for any reason. In the present case, the commercial nature of the discount is not in dispute. Sale policy of the assessee which has been quoted in the order of the Commissioner brings out that discount is allowed after taking permission from the Central Marketing organization and in such a way as to meet the competition in the market. There is no allegation or finding that the discounts given area wise by the Appellant were for consideration other than purely commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) while interpreting the provisions of Section 4 of Central Excise Act, as it stood during the period prior to 1-7-2000 and in which there was a specific provision for deduction of trade discount from the assessable value, has held that the deduction of trade discounts known and understood at the time of removal of goods is permissible even if the same are quantified later and in Para 58 and 60 of the judgment with regard to "turnover discount" given on half yearly basis depending upon the volume of purchases made by the dealers, held that its deductions is permissible as it is known and understood at the time of removal of the goods, though it is quantified later. Though the present Section 4 w.e.f. 1-7-2000 in which the assessable value is the transaction value of the goods, does not has a specific provision for deduction of trade discounts, the concept of transaction value, by its very nature would include the deduction of trade discount and, therefore, the judgment of Hon'ble Supreme Court in case of Union of India v. Madras Rubber Factory (supra) is also applicable to Section 4, as it stood w.e.f. 1-7-2000. Moreover in these cases, it is not the contention of the Department t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd place of removal and subsequent reduction of price under certain exigencies. In this manner, the judgment of the Hon'ble Supreme Court in the MRF case reported in 1997 (92) E.L.T. 309 (S.C.) has been distinguished. This Hon'ble Tribunal following the ratio of the Apex Court ruling in the case of Government of India v. MRF Ltd. reported in 1995 (77) E.L.T. 433 (S.C.) held as under : "Their lordships had ordered that prompt payment discount did not form part of the assessable value in terms of Section 4. We find that in an arm's length transaction, conditions for payment & delivery remaining same, the value for assessment of excisable goods did not undergo change on introduction of the 'transaction value'. The relevant value is the net consideration exchanged for delivery of the goods at the place of removal in an arm's length transaction. We find that in the circumstances, the above observations of the Apex Court apply equally to the transaction value post 30-6-2000. The assessable value of the excisable goods has all along been the total consideration received by the manufacturer of excisable goods from the buyer. This will not include the discount allowed. In the instant case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that even in the case of downward price revision refund cannot be denied on the ground that the appellant did not opt for provisional assessment. Again, as pointed out before the Hon'ble Bench, in the case of Bipico Industries (Tools) Pvt. Ltd. reported in 2009 (247) E.L.T. 811 (Tri.-Ahmd.), the Hon'ble Ahmedabad Bench of this Hon'ble Tribunal, of which the Hon'ble Member (Technical)) was a part, has held, that non-intimation of discounts to the Department or failure to opt for provisional assessment cannot be a ground for rejecting the abatement towards quantity discount or the refund thereof. In the written submissions filed on behalf of the department it has been erroneously stated that this decision is per incuriam on the ground that the same has been rendered in ignorance of the provisions of Rule 7 of the Central Excise Rules, 2002. It is humbly submitted that this decision has been rendered only after taking into account the provisions of Rule 7 which prescribes the procedure for provisional assessment. There is nothing in this provision to suggest that eligibility to quantity discount is subject to opting for provisional assessment. On the contrary, the aforesaid decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon'ble Tribunal and that on identical circumstances it was held that the refund claim was not barred by unjust enrichment. The Commissioner (Appeals) further gave a finding in Para 27 that in the following judgments relied upon by the appellant, the Punjab and Haryana High Court and the Karnataka High Court had held under similar facts that the bar of unjust enrichment would not apply when the amount of duty claimed as refund although collected initially was returned by raising credit notes : (a) Vardhaman Industries Ltd. reported in 2011 (267) E.L.T. A25 (S.C.) upholding the High Court ruling reported in 2006 (202) E.L.T. 765 (P & H) = 2007 (8) S.T.R. 429 (P & H). (b) Sudhir Papers Ltd. Case - 2012 (276) E.L.T. 304 (Kar.). (c) A.K. Spintex Ltd. - 2009-TIOL-12-HC-Raj-CXJ = 2009 (234) E.L.T. 41 (Raj.). Despite noting the aforesaid rulings squarely covering the issue, the Commissioner (Appeals) has taken a view contrary to the same. It is submitted that with the Apex Court ruling in Vardhaman Industries case supra, the issues stands finally settled in the appellant's favour. Apart from the said judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 64A of the Sale of Goods Act. In view of the specific provision contained in Section 11B of the Act it would be legitimate for the Court to presume, until the contrary is established, that a duty of excise or a customs duty has been passed on. It is a presumption of fact which a Court is entitled to draw under Section 114 of the Indian Evidence Act. It is undoubtedly a rebuttable presumption but the burden of rebutting it lies on the person who claims the refund and it is for him to allege and establish that as a fact that he has not passed on the duty, and therefore equity demands that his claim for refund be allowed. (Emphasis supplied). This is the position de hors 1991 Amendment Act. Amendment Act has done no more than to give Statutory recognition to the above concepts." Hence, the Hon'ble Supreme Court has clearly laid down that the presumption that the burden of duty has been passed is a presumption of fact and can be rebutted by claimant on the basis of evidence that the burden of duty has in fact not been passed on. In the following High Court rulings, a consistent view has been taken that where the duty burden initially passed on is neutralized by issue of credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not passed on the incidence of such duty to any other person i.e., his customer, the duty paid is refundable. In the instant case, when the duty at a higher rate was paid by the manufacturer to the Department is not collected from the customer, in other words, if the higher duty is not passed on to the customer and the customer has not paid the said amount, the assessee is entitled to refund of that excess amount paid at a higher rate.' 6.4 Instead of following settled law, the Commissioner (Appeals) has relied upon certain judgments wherein, on facts it was found that the claimant of the refund had failed to rebut the presumption that the excess duty burden had not been passed on by him. 6.5 The Commissioner (Appeals) has chosen to rely upon the judgment of the Supreme Court in the Sangam Processers Ltd. v. CCE, Jaipur case reported in 1999 (12) E.L.T. A115 (S.C.) in preference to the Apex Court ruling in the Vardhaman Industries Ltd. case on the ground that the first mentioned judgment was rendered by a three member bench, while the second mentioned judgment was rendered by a two member bench. It is submitted that there was scope for referring to or relying upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the refund claims in question are also not barred by unjust enrichment. A complete list of authorities and copies of the case laws relied upon above, which were not handed over at the time of hearing are enclosed. For the above reasons, apart from the submissions made in the appeal memorandum and at the time of hearing it is prayed that this Hon'ble Tribunal may be pleased to allow the appeal with consequential relief. 6.7 Written submission by Departmental Representative for the Revenue : In the background of the above facts, the following submissions are made :- (1) The value adopted for payment of duty for delivery at the time and place of removal represents the transaction value. The transaction value as defined under Sec. 4(3)(d) of the Central Excise Act, 1944 reads as " 'transaction value' means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 69] that duty is chargeable at the rate and price when the commodity is cleared at the factory gate and not on the price reduced at a subsequent date is unexceptionable. (Emphasis supplied) Similarly, the Hon'ble High Court of Punjab & Haryana in the case of Maurya Udyog Ltd. v. CCE - 2007 (207) E.L.T. 31 (P&H) has held on the issue of refund that once it is not shown that the clearance of goods were made on provisional basis, reduction of price at a later date could not be made a foundation to seek refund. This view of the Hon'ble High Court has been upheld by the Hon'ble Supreme Court - 2008 (22) E.L.T. A120 (S.C.). (3) If the price payable on the goods is not determinable at the time and place of removal for reasons that the quantum of discount is not known, then, as per Rule 7 of the Central Excise Rules, 2002, the assessee has to opt for provisional assessment. This was precisely the instructions conveyed by the Board vide the Circular dated 30-6-2000 wherein it is clarified that "where the assessee claims that the discount of any description for a transaction is not readily known but would be known only subsequently - as for example year end discount - the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irement for provisional assessment in cases where the transaction value cannot be determined at the time and place of removal. In support of the above submission, reliance is placed on the judgment dated 13-8-2002 of the Hon'ble High Court of Andhra Pradesh in W.P. No. 14175/2002 (K. Srinivas Rao v. State of A.P. and Ors.) (copy enclosed) which reads as under : "Per incuriam and sub silentio are exceptions to the concept of stare decisis. Sir John Salmond in his Treatise on Jurisprudence has aptly stated the circumstances under which a precedent can be treated per incuriam. "A precedent is not binding if it was rendered in ignorance of a statute or a rule having the force of statute, i.e., delegated legislation. This rule was laid down for the House of Lords by Lord Halsbury in the leading case [London Street Tramways v. L.C.C. - (1898) A.C. 375] and for the Court of Appeal it was given as the leading example of a decision per incuriam which would not be binding on the court. [Young v. Bristol Aeroplane Co. Ltd. - (194) K.B. at 729 (C.A.)]. The rule apparently applies even though the earlier court knew of the statute in question, if it did not refer to, and had not present to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neously to square up the transaction. Therefore, it is submitted that the Hon'ble Supreme Court's decision in MRF case has overriding effect. Reliance is also placed on the Hon'ble Tribunal's Final Order No. 528 to 530/2011, dated 30-08-2011 in the case of M/s. TFL Quinn India (P) Ltd. (Bangalore Bench) wherein, relying on the Larger Bench decisions cited supra, it was held that mere issuance of credit notes by a refund claimant (assessee) subsequent to clearance of goods would not obliterate the bar of unjust enrichment. 7. Similar appeals involving exactly the same issues were decided vide Order-in-Appeal Nos. 22, 23 & 24/2010 (H-I) (D) CE dated 29-11-2010, 2 & 3/2011 (H-I)(D) CE dated 25-1-2011; 13, 14 & 15/2011, dated 25-3-2011; 20 & 21/2011 (H-I)(D) CE dated 26-9-2011; earlier, in favour of the respondents. However, in view of the several judgments/decisions cited in support of the grounds of appeal of the department, particularly the judgments of Supreme Court in the case of MRF Ltd. v. CCE, Madras - 1997 (92) E.L.T. 309 (S.C.); Mauria Udyog Ltd. v. Commissioner - 2008 (221) E.L.T. A120 (S.C.) in respect of the merits of the matter (eligibility for quantity discount in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) ...................... (c) ...................... (d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods." 10. As observed by the learned Commissioner in his order, according to Section 4 of Central Excise Act, the duty has to be discharged on excisable goods on each removal of the goods and value shall be the transaction value for delivery at the time and place of removal. 11. The definition of transaction value is important. It would show that the transaction value includes any addition to the amount charged as price, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Chief Commissioner of Central Excise for such further period as he may deem fit. (4) The assessee shall be liable to pay interest on any amount payable to Central Government, consequent to order for final assessment under sub-rule (3), at the rate specified by the Central Government by notification issued under section 11AA [ * * * * ] of the Act from the first day of the month succeeding the month for which such amount is determined, till the date of payment thereof. [(5) Where the assessee is entitled to a refund consequent to an order of final assessment under sub-rule (3), then, subject to sub-rule (6), there shall be paid an interest on such refund as provided under section 11BB of the Act.] (6) Any amount of refund determined under sub-rule (3) shall be credited to the Fund : Provided that the amount of refund, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to - (a) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person; (b) the duty of excise borne by the buyer, if he had not passed on the incide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 4 read with Rules reproduced above would show that the law contemplates and takes care of situation in which the assessee finds itself in. The law provides that goods can be cleared at lower rate and if the dealer or the customer becomes eligible for the discount at the end of the year or at the end of the month, the discount already passed on would require no change and therefore there will be no need for any payment of duty. However, if the discount is not admissible, the dealer will have to pay back the amount and this can be recovered by the assessee and the duty element involved can be paid to the department and assessment can be finalized which would be done by the Assistant Commissioner/Deputy Commissioner. This is the system/procedure i.e., contemplated by law, in view of the fact that Section 4 provides for payment of duty on any amount received as consideration at any time for the goods sold and provides for provisional assessment where the assessee is not able to know exactly what would be the price and provides for bond and surety/security for the differential duty so that the Revenue is safeguarded and goods are cleared at a lower price. 15. It can be ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses. Hon'ble Supreme Court in the case of Sahakari Khand Udyog Mandal Ltd. v. CCE - 2005 (181) E.L.T. 328 (S.C.) had examined the provisions relating to unjust enrichment in great detail which in our opinion is relevant. Even though the dispute relates to only where in the absence of provisional assessment refund can be claimed or not, it is necessary to examine unjust enrichment in this case for the reasons which will be discussed subsequently after extracting the relevant portion of the Hon'ble Supreme Court's decision. "25. It was also argued that the authorities below could not have invoked the provisions of Section 11B of the Act for denial of the benefit of notifications. Section 11B was inserted in the Act by the Amendment Act of 1978 (Act 25 of 1978) with effect from November 17, 1980. It provided for refund of duties in certain cases of excess payment. The section was further amended by the Amendment Act of 1991 (Act 14 of 1991) with effect from September 19, 1991. 26. In Union of India v. Jain Spinners Ltd., (1992) 4 SCC 389 and in Union of India v. I.T.C. Ltd., (1993) Supp (4) SCC 326, this Court held that so long as the refund proceedings are pending and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when a person retains money or benefits which in justice, equity and good conscience, belong to someone else. 32. The doctrine of 'unjust enrichment', therefore, is that no person can be allowed to enrich inequitably at the expense of another. A right of recovery under the doctrine of 'unjust enrichment' arises where retention of a benefit is considered contrary to justice or against equity. 33. The juristic basis of the obligation is not founded upon any contract or tort but upon a third category of law, namely, quasi-contract or the doctrine of restitution. 34. In the leading case of Fibrosa v. Fairbairn, (1942) 2 All ER 122, Lord Wright stated the principle thus : "...(A)ny civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are genetically different from remedies in contract or in tort, and are now recognized to fall within a third category of the common law which has been called quasi- contract or restitution." 35.&e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s challenged and refund was claimed. The Court, however, relying on Orient Paper Mills held that consumer public who had borne the ultimate burden were the persons really entitled to refund and since the market committees represented their interests, they were entitled to retain the amount and the licensees who had levied and collected the amount from consumers could not claim the benefit. 41. The Court said; "The primary purpose of Section 23A is seen on the face of it; it prevents the refund of license fee by the market committee to dealers, who have already passed on the burden of such fee to the next purchaser of the agricultural produce and who want to unjustly enrich themselves by obtaining the refund from the market committee, Section 23A, in truth, recognizes the consumer-public who have borne the ultimate burden as the persons who have really paid the amount and so entitled to refund of any excess fee collected and therefore directs the market committee representing their interest to retain the amount. It has to be in this form because it would, in practice, be a difficult and futile exercise to attempt to trace the individual purchasers and consumers who ultimately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 995 as also other State Acts was challenged inter alia on the ground of legislative competence of the State Legislatures. The Court allowed the petition and held that the State Legislatures were not competent to impose luxury tax on tobacco and tobacco products and the Acts were declared ultra vires and unconstitutional. In the intervening period, however, tax was collected by the appellants from consumers and also paid to the State Governments. In certain cases, interim relief was obtained by the appellants from this Court against recovery of tax and as alleged by the State Governments, the appellants continued to charge tax from consumers/customers. 47. In the circumstances, speaking through Constitution Bench, one of us, (Ruma Pal, J.) stated : "(F)ollowing the principles in Somalya Organics (India) Ltd. v. State of U.P., (2001) 5 SCC 519 while striking down the impugned Acts we do not think it appropriate to allow any refund of taxes already paid under the impugned Acts. Bank guarantees if any furnished by the assessees will stand discharged. It was stated on behalf of the State Governments that after obtaining interim orders from this Court against recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumers who cannot take credit. No doubt the provisions of Section 11B do not contemplate verification as to whether a buyer has passed on the credit or not. However, the law laid down by the Hon'ble Supreme Court requires that there should be no unjust enrichment and only the person who has suffered the burden of duty should claim refund. This is the reason why the provisions of Section 11B have been enacted and provision has been made for the buyer to claim refund. The law ensures that a person who has suffered the duty can claim the refund. Therefore, the law does not contemplate any verification down the line because only the person who has suffered the duty has to claim the refund. In the situation created by the assessee in this case, a dealer might have passed on the duty liability to the customer or might have even passed on the amount of duty paid as Cenvat credit if the goods purchased from the appellant has already been sold by the dealer in the course of the normal trade. 18. At this juncture, it would be appropriate to take note of the submissions made by the learned advocate for the appellant that the very same issue had come up before the Hon'ble High Court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or seeking refund (para 7 of the order). The learned DR relied upon the decisions rendered by the Hon'ble Supreme Court in the case of MRF Ltd. and Hon'ble High Court of P & H in the case of Mauria Udyog, which we find are applicable to the facts of this case. 20. The discussion above would lead to the following conclusions. (a) The scheme of assessment, recovery of differential duty and refund of excise payment contemplates appropriate procedures under the relevant provisions of law (b) If the provisions of law are implemented as contemplated, the unjust enrichment of any person would not be possible. (c) The law contemplates provisional assessment only when the price/classification cannot be determined by the assessee. Therefore where an assessee provides for quantity discount, the law contemplates that the assessee should pass on the quantity discount at the time of removal and if it is found subsequently that a customer is not eligible, recover the amount and pay the differential duty to the department. (d) An assessee cannot create a situation whereby the result of action taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on this aspect and would not like to give it as our conclusion. 22. Even the decision of the Hon'ble Supreme Court seems to have left a window open that when the law provides for refund without making a provision for unjust enrichment, such refund would be admissible. In this case, in view of the several decisions cited by the learned counsel, prima facie, we have found that the unjust enrichment clause cannot be applied for sanctioning refund. It was submitted on behalf of the appellant that the appellant maintained a running account in respect of each dealer and as soon as a dealer becomes eligible for quantity discount, his account is credited with the amount admissible as discount thereby passing on the benefit of reduced price along with duty liability to the dealer. In such a case, in our opinion, the appellant cannot be said to have unjustly enriched themselves. Therefore the grounds taken by the Revenue for denying the refund on the ground of unjust enrichment do not appear to be valid. 23. As regards judicial discipline and need to follow precedent decision, we find that the reliance by the learned AR on the decision of Hon'ble High Court of Andhra Pradesh in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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