1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR -------------------------------------------------------- CENTR.EXCISE APPEAL No. 34 of 2007 UNION OF INDIA V/S M/S A.K. SPINTEX LTD. & ANR. Mr. RISABH SANCHATI AND MR.VK MATHUR, for the appellant. Mr. SANJEEV JOHARI, for the respondent. Date of Order : 26.11.2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J. ORDER ----- REPORTABLE This appeal has been filed by the revenue, seeking to challenge the order of the Tribunal, dated 20.4.2005. The appeal was admitted on 21.5.2007, by framing following substantial question of law: “Whether in the facts and circumstances of the case, the Tribunal is right in law in allowing the refund where the incidence of duty had been passed onto the customers initially and subsequently the debit notes were issued by the suppliers of raw material but not credited in the accounts of the customers by the assessee?” The necessary facts, giving rise to the controversy are, that the assessee processes man-made fabrics. For that they receive grey unprocessed fabric, from the suppliers, and in terms of Notification dated 1.3.2001, they got deemed CENVAT Credit in respect of declared inputs, used in the manufacture of processed fabrics. The prevalent rate of deemed credit was 45% of the duty, paid on the processed fabric. 2 It was the date 11.6.2001, on which the said notification was amended vide notification No. 25/2001 CE, whereby the deemed credit was increased to 50%. In the order of the Tribunal, there is a confusion, as to whether the amendment was effective from 1.6.2001 or 11.6.2001. It is however, not in dispute, that the Notification was issued on 11.6.2001, and since the controversy in the present case, relates only to the period 11.6.2001 to 13.6.2001, we need not go into the question, as to whether the notification was effective from 1.6.2001 or 11.6.2001. The assessee continued to make clearance of the processed fabric, on payment of 55% duty, instead of 50%, up to 13.6.2001, with deemed credit benefit @ 45% to their customers. However, the customers were aware of the change in the rates, and protested against the charge of duty, @ 55%, and thereupon, the customers immediately issued debit notes to the assessee, with a view to take credit of the differential amount of duty. Accordingly, the assessee filed a claim for refund of duty in the sum of Rs. 61,146/- contending, that this amount has neither been realized from their customers, nor the duty has been passed on to the customers. The application for refund was rejected on the ground, that the duty liability was passed on to the customers, and subsequent credit notes issued to the customers, does not make the bar of unjust enrichment inapplicable. Against the rejection, appeal was filed before the Commissioner (Appeals), which too was disposed, relying upon the judgment of the Tribunal in CCE Madras Vs. Addision & Co. reported in 1997 (93) ELT 429, wherein it was held, that if after the date of payment of duty, any payments are made, same cannot be taken cognizance of for the purpose of Section 11-B. The assessee carried the 3 matter, by further appeal, before the Tribunal, relying upon larger bench judgment of the Tribunal, in S. Kumar Ltd. Vs. CCE, Indore 2003 (153) ELT 217, wherein it was noticed, that since there is no dispute on the fact, that this amount of duty has not been collected by the appellants, it is not hit by the principle of unjust enrichment. The learned Tribunal found, that there is substantial force in submission of the learned counsel for the assessee, incidence of duty has not been passed on by them to their customers, who had immediately objected to charging of duty @ 55 % instead of 50%, with effect from 11.6.2001, and once the customers protested, the assessee immediately issued credit notes, which have not been disputed by the revenue, it cannot be claimed that incidence of duty, of which refund is now being sought, by the appellant, has been passed on to the customers. It was held, that question of passing the incidence of duty, to the customers, which has not been paid by them, to their customers, does not arise, thus, the appeal was allowed. Arguing the appeal, learned counsel for the revenue relied upon the judgment of Hon’ble the Supreme Court in Mafatlal Industries Ltd. And Ors. Vs. Union of India and Ors., reported in (1997) 5 SCC 536, and a judgment of the Tribunal in Sangam Processors (Bhilwara) Ltd. Vs. Collector of Central Excise, Jaipur reported in 1994 (71) ELT 989, to contend, that once the incidence of excise duty has been passed on to the customers, it is the ultimate customer only, who can lay claim for refund, and that, the system of issue of debit note and credit note, cannot be recognized, to lay the claim for refund. 4 On the other hand, learned counsel for the assessee submitted, that the period relates to 11.6.2001 to 13.6.2001, and on 31.7.2001 itself, the refund application has been filed. It was also submitted, that issuance of debit note and credit note, in the commercial transactions is as good as cash passing, with the result, that burden of excise duty, which was passed on by the assessee, to its customers, was immediately reversed back, and came to be suffered by the assessee only, as a result of which, there was issuance of debit notes and credit notes, and therefore, no interference is required to be made in the order of the learned Tribunal. After going through the judgments, at the outset, we may observe, that the question is framed on basic misconception, rather on assumption, which is not borne out from the record, in as much as, the question apprehends error on the part of the Tribunal, in allowing refund, where incidence of duty has been passed on to the customers initially, and subsequently debit notes were issued by the suppliers of raw material but, no credit notes were credited in the account of the customers by the assessee. We may at once observe, that this is no where, that the authorities below were of the view, that the debit note were not credited in the account of the customers, by the assessee. Rather as is clear from the impugned order of the Tribunal, that it was not disputed on the side of the revenue, that customer had immediately issued the debit notes, and it was never contended, whether before the Assistant collector or the Commissioner (Appeals), or the Tribunal, that the necessary credit was not given by the assessee. Obviously, if it is to be assumed, that though debit notes were issued by the customers, but, the assessee 5 did not credited to them, then, obviously, the assessee would not be entitled to claim for any refund, while, herein positive case of the assessee is, that it also issued corresponding credit notes, which fact has also not been disputed any where, before the authorities below. Therefore, the question required to be examined is, as to whether despite exchanges of debit notes and credit notes respectively, between the assessee and its immediate purchaser, the assessee is not entitled to claim refund, so as to find, that the Tribunal was wrong in allowing the refund. On the face of the things itself, it is clear that once the goods are supplied, the property in the goods passes to the purchaser, and seller becomes entitled to the price, and once the debit note is issued by the purchaser, and corresponding credit note is issued by the seller, the price of the goods stand reduced to the extent of debit note and credit note, meaning thereby, that after issuance of debit note and credit note, the price of goods charged by the seller, from the purchaser, is the price, initially billed, minus the amount of the debit note, and credit note, and therefore, when the debit notes and credit notes are issued and effected, which are not disputed, it cannot be assumed, that incidence of burden of excise duty has been passed on to the purchaser. So far as Section 12-B is concerned, it only places burden of proof on the assessee, by enacting the presumption, against him, and does not do anything beyond it. The burden placed on the assessee, by Sec. 12-B, obviously, is a rebuttable one, and the assessee may lead 6 evidence in rebuttal, by proving issuance of debit note and credit note. likewise there may be cases, where purchaser may refund the amount to seller, in cash, or may issue some bank note, like Cheque, or Draft, for refund of the amount, or there may be case, where goods are sold on credit, and while making payment of price of the goods, the purchaser may debit the amount, and thus, pay lesser amount to the seller, and if all those facts are shown and proved, the burden placed on the assessee, by sec. 12-B, would shift on the revenue, then, it is required for revenue, to prove, either that the theory projected by the assessee, is fake and false, or that the burden has actually been passed on. Once the assessee leads reliable evidence, about his having not passed burden on the purchaser, and revenue fails to rebut that evidence, the presumption enacted by Sec. 12-B, stands sufficiently rebutted, and cannot survive ad-infinitum. The preposition propounded by the Hon'ble Supreme Court in Mafatlal case being preposition No. 3, entitling only the ultimate person, bearing the burden, to be entitled to lay claim for the refund, is obviously, not open to any argument, and is duly respected. The question, then arise is, the question of fact, as to who is an ultimate person, who has borne the burden. Obviously, if it is established by the assessee, that the burden has not been passed on, or has been appropriately reversed, the ultimate person, who has suffered the burden, would be assessee himself. It is faced with this situation, that the submission made by the learned counsel for the revenue, was, that in 7 the scheme of things, when the goods are sold or cleared for sale, it has to be assumed, that the burden has been passed on to the purchaser, and this process of issuance of debit note or credit note, cannot have the effect of reversal of passing of the burden, as it is only a paper transaction, to get undue benefit by the assessee. In our view, the stand cannot be accepted. Passing on the burden of excise duty to the next purchaser, cannot be left in the realm of presumption. In cases, where the assessee is able to show, that the burden is not passed on, or it has been reversed, the claim of refund cannot be denied. It is then, contended by the learned counsel for the revenue, that mechanism of issuance of debit note and credit note, if countenanced, it will open flood gates for pilferage of revenue. Firstly, we do not agree with the preposition, that it can open flood gates, in as much as, where false, fictitious or shame Debit note and credit note are issued for adjustment, the revenue can very well lead evidence, or can lead evidence in rebuttal. Simply because the revenue fails, and is not able to rebut evidence, it cannot be assumed, that it will open flood gates for pilferage of the revenue. Difficulties may be on either side, but then, that cannot be considered as a ground for interpreting sec. 12-B, in the manner the revenue wants us to interpret it. Thus, in our view, on the facts of the case, it cannot be said, that Tribunal was in error, in allowing the claim of the refund. 8 Consequently, the question is answered, with above modification, against the revenue, and in favour of the assessee. There is no force in the appeal, the same is dismissed. ( KISHAN SWAROOP CHAUDHARI ),J. ( N P GUPTA ),J. /ns./