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TMI Blog2004 (3) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... following question of law involved in this civil appeal to a Larger Bench and accordingly the matter has come before this court. 2. "Whether a claim for refund after final assessment is governed by Section 11B of the Central Excise Act 1944 ?" Facts : 3. New India Industries Ltd. (NIIL) is incorporated under the Companies Act, 1956 and carries on business of manufacturing photographic printing paper which became chargeable to excise duty vide Tariff Item No. 37C(2) of the Central Excise Act, 1944 (hereinafter referred to as "the Act") with effect from March 1, 1974. NIIL had entered into distribution agreement with a firm, Agfa Gevaert (India) Ltd. (M/s. AGIL) for supply of goods. On 8-5-1974 the Department served show cause notice on NIIL (Manufacturer) to explain why prices declared by the company vide letter dated 7-3-1974 should not be rejected as wholesale cash price and why prices charges by M/s. AGIL to its dealers should not be approved in terms of Section 4(a) of the said Act. On 13-12-1974 the Department confirmed the show cause notice and directed NIIL to pay excise duty on the prices charges by M/s. AGIL to its dealers. In pursuance of the said order, a notice of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame for hearing before learned Single Judge on 29-8-1988. The learned Judge held that the action of the Department in collecting duty not on the sale price of NIIL to M/s. AGIL was illegal and, therefore, NIIL was entitled to refund. However, since the question of unjust enrichment was debatable, the learned Judge referred the question to the Full Bench. After the decision of the Full Bench in the case of New India Industries Ltd. v. Union of India reported in [1990 (46) E.L.T. 23], the said Writ Petition No. 1336/87 was reposted before the learned Judge on 17-1-1990 when he directed Union of India to prove that the tax burden has in fact been shifted to consumers. Pending further examination, the Department was directed to deposit Rs. 1,25,34,988.97 in Court. When the Writ Petition came for hearing on 22-3-1990, NIIL conceded that it had passed on the burden to M/s. AGIL the sole-selling distributors of NIIL. The learned Judge, however, directed M/s. AGIL to file affidavit stating whether it had passed on the burden to its dealers or not. Therefore on 22-3-1990 the refund claims of NIIL were rejected but the learned Judge went into further enquiry as to whether the burden had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon them to show cause why Rs. 1,25,34,988.97 should not be transferred to Consumer Welfare Fund. By judgment and order dated 31-10-1997 passed by the Assistant Commissioner refund was granted to M/s. Allied Photographics India (P) Ltd. (M/s. APIL). This order of Assistant Commissioner was confirmed in appeal by the Commissioner (Appeals) and the Tribunal vide impugned order dated 13-6-2000 and the Department was directed to refund Rs. 1,25,34,988.97 with interest. Being aggrieved, the Department has come to this Court by way of present civil appeal under section 35L(b) of the Act. Arguments : 4. Mr. A.K. Ganguli, learned Senior Counsel for the Department submitted that there was a difference between provisional assessment under Rule 9B and payment of duty under protest in terms of Rule 233B. In this connection reliance was placed on the judgment of this Court in Mafatlal's case (supra). He submitted that under the second proviso to Section 11B if duty is paid by the manufacturer under protest the limitation of six months was not applicable, however, the purchaser of duty paid goods, after finalisation of assessment of excise duty payable by the manufacturer, was not entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which itself was more than the burden of additional duty. However, on behalf of the Department it was contended that excess duty component was a part of cost incurred by M/s. APIL during the above period 1974/1984 and there is no reason why M/s. APIL did not recover it from its dealers particularly when M/s. APIL had no right as a purchaser to claim refund which was recognised only on 20-9-1991 when Section 11B was amended and therefore, M/s. APIL was seeking to unjustly enrich itself by seeking such refund. Lastly, it was urged that M/s. APIL had worked out its sale prices before the Department in such a way that it has not passed the burden to its dealers and yet it has earned profits varying from 12.6535% to 21.1333% which was contrary to normal conduct of a trader. In this connection it was further submitted that M/s. APIL did not produce any material before the Department disclosing how its sale price were arrived at. 5. Per contra, Shri S. Ganesh, learned Senior Counsel for the respondent - M/s. APIL submitted that M/s. APIL as the purchaser was entitled to claim refund of the excess duty as that amount had been passed on by NIIL to M/s. APIL. In this connection reliance wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of CCE v. National Tobacco Co. of India Ltd. reported in [1978 (2) E.L.T. (J146) (S.C.) = AIR 1972 SC 2563]. According to the learned Counsel the same principle was applicable in cases where the Department has to refund moneys to the appellant on finalisation of the assessment; which principle has been reiterated vide Para 104 of the Mafatlal judgment. Accordingly it was submitted that the doctrine of unjust enrichment in Section 11B would not apply to the present case. Lastly it was urged that the argument of the Department was based entirely on Section 11B(3) which had no bearing on the basic issue as to whether Section 11B(2) was at all applicable particularly when the appellant was seeking refund of an "On account" payment made Under Protest or under the Provisional assessment". Therefore, the reliance on Section 11B(3) was misplaced. That in the circumstances, neither Sinkhai Synthetics nor T.V.S. Suzuki can be said to be in any way incorrect, much less per incuriam. On merits, learned Counsel for the respondent submitted that the question as to whether the burden of duty has been passed on to the consumer is to be answered by relying on one singular test viz. whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances, it was submitted that on the said material and evidence and having regard to the specific findings the only possible conclusion was that the respondent, M/s. APIL had not passed on the disputed duty burden to its dealers/customers. Point for Determination : 6. Whether the doctrine of unjust enrichment in Section 11B of the Act is applicable to the facts of this case, having regard to the fact that NIIL (manufacturer) had paid the differential disputed excise duty under protest from 1-3-1974 to 31-10-1984 when the assessment was finalised in favour of NIIL in view of the judgment of this Court in the case of Union of India & Ors. v. Bombay Tyre International Ltd. reported in [1983 (14) E.L.T. 1896 (S.C.) = AIR 1984 SC 420]? Findings : 7. The points at issue in this civil appeal are - whether refund of duty paid under provisional assessment is similar to duty paid under protest as both are "On Account" payments adjustable on finalisation of assessment or vacating of protest? Secondly, in the course of such adjustment or vacation of protest, if any amount is found payable by the Department to the manufacturer, is it open to the purchaser to contend that he (the purchaser) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction; (e) in a case where duty of excise is paid provisionally under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof; (f) in any other case, the date of payment of duty. (2) If on receipt of any such application, the Assistant Collector of Central Excise is satisfied that the whole or any part of the duty of excise paid by the applicant should be refunded to him, he may make an order accordingly. (3) Where as a result of any order passed in appeal or revision under this Act refund of any duty of excise becomes due to any person, the Assistant Collector of Central Excise may refund the amount to such person without his having to make any claim in that behalf. (4) Save as otherwise provided by or under this Act, no claim for refund of any duty of excise shall be entertained. (5) Notwithstanding anything contained in any other law, the provision of this section shall also apply to a claim for refund of any am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 rules, the duty provisionally assessed shall be adjusted against the duty finally assessed, and if the duty provisionally assessed falls short of, or is in excess of the duty finally assessed, the assessee shall pay the deficiency or be entitled to a refund, as the case may be." 8. Before analysing Section 11B, it is important to note that there is a difference between making of refund and claiming of refund. Section 11B was inserted in the said Act w.e.f. 17-11-1980. Under sub-clause (e) to Explanation B to Section 11B(1), where assessment was made provisionally the relevant date for commencement of limitation of six months was the date of adjustment of duty as final assessment. Entitlement to refund would thus be known only when duty was finally adjusted. Sub-clause (e) referred to limitation in cases covered by Rule 9B which dealt with duty paid under provisional assessment. The said rule started with a non-obstante clause. Rule 9B(1)(a) to (c) indicated the circumstances in which the proper officer would allow pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act : Provided further that the limitation of six months shall not apply where any duty has been paid under protest. (2) If, en receipt of any such application, the Assistant Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund : Provided that the amount of duty of excise as determined by the Assistant Commissioner of Central Excise under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to- (a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India; (b) unspent advance deposits lying in balance i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision for provisional assessment of duty was Rule 9B. Therefore, even with the deletion of old sub-clause (e), Rule 9B continued during the relevant period. The deletion of sub-clause (e) and continuation of Rule 9B shows that the Section 11B (as amended) applied to claiming of refunds where the burden was on the applicant to apply within time and prove that the incidence of duty has not been passed on whereas Rule 9B covered cases of ordering of refund/making of refund, where on satisfaction of the conditions, the concerned officer was duty bound to make the order of refund and in which case question of limitation did not arise and, therefore, there was no requirement on the part of the assessee to apply under Section 11B. Lastly, Rule 9B referred to payment of duty on provisional basis by the assessee on his own account and, therefore, in cases where the manufacturer has been allowed to invoke this rule and refund accrues on adjustment under Rule 9B(5) that refund is on the account of the manufacturer and not on the account of the buyer. If one reads Section 11B on one hand and Rule 9B on the other hand, both indicate payment by the assessee on his own account and refund becom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and duty paid under Rule 9B. The duty paid under protest falls under Section 11B whereas duty paid under provisional assessment falls under Rule 9B. That Section 11B deals with claim for refund whereas Rule 9B deals with making of refund, in which case the assessee has not to comply with Section 11B. Therefore, Section 11B and Rule 9B operate in different spheres and, consequently, in Para 104 of the said judgment, it has been held that in cases where duty is paid under Rule 9B and refund arises on adjustment under Rule 9B(5), then such refund will not be governed by Section 11B. In the said para, it has been clarified that if an independent refund claim is made after adjustment on final assessment under Rule 9B(5), agitating the same issues, then such claim would attract Section 11B. This is because when the assessee makes an independent refund claim after final orders under Rule 9B(5), such application represents a claim for refund and, it would not come in the category of making of refund and therefore, the bar of unjust enrichment would apply. Hence, there is no merit in the contention of the respondent M/s. APIL that although in this case duty was paid under protest, there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .L.T. (J444) (S.C.) = AIR 1975 SC 960], this Court has held that the resale price charged by a wholesale dealer who buys goods from the manufacturer cannot be included in the real value of excisable goods in terms of Section 4 of the said Act. Therefore, it is clear that the basis on which a manufacturer claims refund is different from the basis on which a buyer claims refund. The cost of purchase to the buyer consists of purchase price including taxes and duties payable on the date of purchase (other than the refund which is subsequently recoverable by the buyer from the Department). Consequently, it is not open to the buyer to include the refund amount in the cost of purchase on the date when he buys the goods as the right to refund accrues to him at a date after completion of the purchase depending upon his success in the assessment. Lastly, as stated above, Section 11B dealt with claim for refund of duty. It did not deal with making of refund. Therefore, Section 11B(3) stated that no refund shall be made except in terms of Section 11B(2). Section 11B(2)(e) conferred a right on the buyer to claim refund in cases where he proved that he had not passed on the duty to any other per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is, therefore, per incuriam. Learned Counsel for the respondent herein placed reliance on the judgment of this Court in the case of TVS Suzuki Ltd. (supra). In that case, application for refund was filed. This was on completion of final assessment. On 9-7-1996, the Department issued a show cause notice as to why the refund claim should not be rejected for non-compliance of Section 11B. By order dated 17-7-1996, the refund claim was rejected on the ground that it was beyond limitation. On appeal, the Commissioner (Appeals) observed that the bar of unjust enrichment was not applicable as the assessee claimed refund consequent upon final assessment. He allowed the refund claim. CEGAT agreed with the view of Commissioner (Appeals). Before this Court, the Department conceded rightly that in view of Para 104 of the judgment of this Court in Mafatlal Industries Ltd. (supra), bar of unjust enrichment was not applicable in cases of refund consequent upon adjustment under Rule 9B(5). The judgment of this Court in the case of TVS Suzuki Ltd. (supra), therefore, supports the view which we have taken herein above that refund consequent upon finalisation of provisional assessment did not attra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor M/s. AGIL sold the goods in the market. By order dated 31-12-1974, the Department held that the transactions between NIIL and M/s. AGIL (predecessor of the respondent herein) were not at arms length and accordingly it was ordered that the prices charged by the distributor M/s. AGIL should be taken as a wholesale cash price under Section 4 of the said Act, as it stood at the relevant time. However, later on, in view of the judgment of this Court in the case of Bombay Tyre International Ltd. (supra) the Department approved the price list of NIIL vide order dated 31-10-1984 and accepted the ex-factory price of NIIL. On the basis of the said order, NIIL claimed refund of Rs. 1,25,34,988.97 on which the Department issued show cause notice on 23-2-1987 calling upon NIIL to show cause why the said amount should not be credited to the Consumer Welfare Account. NIIL objected. However, their objection was rejected. Thereafter, the litigation took place as stated above. Ultimately, vide order dated 31-10-1997, the Assistant Commissioner, Central Excise granted refund, which order was confirmed in appeal by the Commissioner (Appeals) and by CEGAT. Hence, the Department has come by way of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the manufacturer. The buyer says that he has not passed on the burden to its dealers. The buyer has bought the goods from the manufacturer paying the purchase price which included cost of purchase plus taxes and duties on the date of purchase. In such cases, cost of purchase to the buyer is a relevant factor. None of the authorities below have looked into this aspect. Even the Appellate Tribunal has not gone into this relevant factor. It has merely quoted the passages from the order of the lower authority, whose order was impugned before it. Costing of the goods in the hands of the distributor, the cost element and the treatment given to purchases by the buyer in his own account were relevant circumstances which the authorities below failed to examine. It was submitted that cost of purchase was not a relevant factor. It was submitted on behalf of the respondent that the resale price charged by the buyer was not a relevant factor. It was submitted that since the sale price of the goods before and after the assessment remained the same the burden of excess duty was absorbed by the respondent. It was submitted that in any event the sale price of the goods increased much less than ..... X X X X Extracts X X X X X X X X Extracts X X X X
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