Case: Commnr.,Central Excise, Madras Vs. M/S. Adison &amp; Co. Ltd

Civil Appeal No. 7906 of 20025. The respondent in the above appeal is a manufacturer of cutting tools. The respondent-Assessee filed a refund claim for Rs. 40,22,133/- on 19.07.1988 and a supplementary refund claim for Rs. 5,44,688/- on 15.06.1989 towards excise duty paid on various taxes and discounts such as turnover tax, surcharge, additional sales discounts, transitory insurance, excise discounts, additional discounts and turnover discounts. The said claim was later on revised to Rs. 40,37,938/- on 17.08.1988. The claim of the Assessee was that the said amount was deductable from the excise duty. The Department was of the opinion that the refund towards turnover discount and additional discount was to be rejected as the Assessee was not eligible for deduction from the wholesale price for determination of value under Section 4 of the Central Excises & Salt Act, 1944. On 23.08.1989 a notice was issued to the respondent to show cause as to why the refund claim involving turnover discount and additional discount should not be rejected. After hearing the Assessee, the Assistant Collector by an order dated 06.12.1989 rejected the refund claim amounting to Rs.26,37,462/- and Rs.17,17,808/- in respect of turnover discount and additional discount respectively on the ground that the quantum of discount become known only at the year end. The Collector of Central Excise Appeals set aside the said order dated 06.12.1989 of the Assistant Collector by his order in appeal dated 21.02.1990 and held that the Assessee was entitled to refund.6. As per the amendment made to Section 11-B of the Central Excise Act, 1944, (hereinafter referred to as) an application filed for refund prior to the Central Excises & Customs Laws (Amendment) Act 1991 shall be deemed to have been made under the Amendment Act and considered accordingly. The Assistant Collector of Excise issued a show cause notice dated 13.02.1992, directing the Assessee to produce evidence in support of the refund claim. It was mentioned in the said notice that the burden of proof to show that the full incidence of duty has not passed on to the buyers is on the Assessee as per Section 12-B of the Act.7. The Assistant Collector passed an Order-in-Original dated 27.10.1992 holding that the Assessee is entitled for the refund claimed by him. The Collector of Central Excise by Order-in-Appeal dated 20.10.1993 rejected the appeal filed by the Revenue and upheld the order dated 27.10.1992 of the Assistant Collector of Central Excise, Madras Vth Division. The Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT), South Zone Bench of Madras allowed the appeal filed by the Revenue against the order dated 20.10.1993 of the Collector of Central Excise. The Tribunal held that the Assessee would be entitled to grant of refund only if he had not passed on the duty burden to his buyers. It was also held that the buyer in turn, would be entitled to claim refund only if he has not passed on the incidence of duty to any other person. It was further held by the Tribunal that the event which gives rise to cause of action for refund is payment of duty made in respect of goods cleared from the factory and once the duty burden has been passed on to the buyer at the time of clearance, issuance of credit note at a later point of time would not entitle the Assessee to claim any refund. The Tribunal also held that burden of duty is normally passed by the manufacturer and the dealer to the ultimate consumer.8. The Assessee filed an application for reference of questions arising out of the final order dated 07.12.1996. The Tribunal referred the following questions for consideration of the High Court by its order dated 28.08.1998, taking note of the fact of the existence of divergent views on the point.Whether by passing on the duty element on the discount to its dealers the applicant had satisfied the requirements of provisoto sub Section 11-B (2) of the Central Excise Act, 1944 and was therefore, entitled to be paid the amount claimed asWhether the Tribunal after finding that the burden of duty was passed on by the applicant to its various dealers by issue of credit notes was right in concluding that the ingredients of Section 11-B were not satisfied.The High Court of Madras answered the reference in favour of the Assessee by its judgment dated 23.11.2000. The High Court held that the refund towards deduction of turnover discount cannot be denied on the ground that there was no evidence to show who is the ultimate consumer of the product and as to whether the ultimate consumer had borne the burden of the duty. According to the High Court, Section 11-B of the Act cannot be construed as having reference to the ultimate Consumer and it would be sufficient for the claimant to show that he did not pass on the burden of duty to any other person. It was further held by the High Court that the claim for refund made by the manufacturer is not dependent on the identification of the ultimate consumer. The wordused in Section 12-B of the Act does not refer to ultimate consumer and has reference only to the person who buys the goods from the person who has paid duty i.e. the manufacturer. The High Court concluded that the Tribunal committed an error in holding that the Assessee was not entitled for refund despite the Assessee proving that the duty was not passed on to its buyers. Challenging the legality and validity of the said judgment of the High Court, the Commissioner of Central Excise, Madras has filed Civil Appeal No. 7906 of 2002.The Assessee i.e. Andhra Pradesh Paper Mills Ltd. manufactures Paper and Paper boards. There is no dispute that excise duty is paid by the Assessee and the same is passed on to its buyers. Applications were filed by the Assessee for refund of amounts towards trade discounts that were given to its buyers. The refund claim is on the basis of credit notes raised by the Assessee subsequent to the sale/removal of goods. The credit notes that were raised by the Assessee were towards trade discounts which included the component of excise duty. The refund claims of the Assessees were rejected by the Assistant Commissioner of Central Excise, Rajahmundry Division. The Commissioner Customs, Central Excise (Appeals) Hyderabad confirmed the said orders in the appeals filed by the Assessee. The Customs, Excise and Service Tax Appellate Tribunal, South Zonal Division, Bangalore dismissed the appeals filed by the Assessee.26. The Assessee approached the High Court of Andhra Pradesh by filing Central Excise Appeals. By a judgment dated 19.02.2014, the High Court of Andhra Pradesh allowed the Central Excise Appeal Nos. 9, 10 and 51 of 2004 and 21 of 2005. The appeals were allowed, as being squarely covered by the judgment of the Madras High Court in Addison and Company Ltd., Madras Vs. Collector of Central Excise, Madras reported in (1997) 5 SCC 763. 27. The Revenue has filed Special Leave Petitions against the said judgment dated 19.02.2014. Special Leave Petition (C) Nos. 12282, 16141 and 16142 of 2016 were filed by the Revenue against the judgment dated 01.07.2015 of the Division Bench of the Andhra Pradesh High Court which followed its earlier judgment datedAppeal No. 14689 of 201529. The above Civil Appeal is filed by the Commissioner of Central Excise and Customs challenging the judgment of the Andhra Pradesh High Court in Central Excise Appeal No. 21 of 2004. The Respondent-Assessee manufactures Pesticide formulations which are used as pesticides in agricultural farms. The Pesticides are sold at the factory gate and also through depots. The Assessee submitted an application for refund towards allowable discounts after the removal of goods from the factory. Credit notes were issued by the Assessee in favour of the buyers towards trade discounts which also contained a component of the excise duty. There is no dispute regarding the fact of payment of the excise duty originally by the manufacturer being passed on to his buyers. The refund claim of the Assessee was rejected by the Deputy Commissioner vide Order-in-Original No. 58 of 2002 dated 30.12.2002. The above said order was reversed by the Commissioner of Customs and Central Excise by his order dated 12.03.2003.30. The Revenue filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Division, Bangalore which was allowed. The Assessee preferred an appeal to the High Court aggrieved by the order of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Division, Bangalore. The High Court following its own judgment in Andhra Pradesh Paper Mills Vs. Commissioner of Central Excise allowed the appeal.31. The Assessee is engaged in the processing of man-made fibre. Prior to 11.06.2001 the CENVAT credit admissible on the declared inputs used in the manufacture of process of man-made fibre was 45 per cent. The net duty payable on the fibre was 55 per cent of the effective duty. On 11.06.2001, a notification was issued increasing CENVAT credit from 45 per cent to 50 per cent which resulted in the net duty payable being 50 per cent. The Assessee continued to pay the effective duty at 55 per cent for a short period between 11.06.2001 to 13.06.2001. The effective duty of excise is 16 per cent and the duty payable from the personal ledger account prior to the notification dated 11.06.2001 was 8.8 per cent and after 11.06.2001 the duty payable is 8 per cent. The Assessee made an application for refund of Rs. 61,146/- paid in excess on 31.07.2001. The said application for refund was rejected by an Order-in-Original dated 12.08.2002 by the Assistant Commissioner, Bhilwara on the ground that the Assessee was a job worker engaged in the processing of grey fabric and that the said fabric was returned to the owners of the fabric who sold the processed fabric in the market. It was also held that the incidence of the duty was passed on to the ultimate customers/consumers before the debit notes were raised by the owners of the fabric. As the duty paid at 8.8 per cent was passed on by the owner of the fabric to the ultimate consumer the processor was not entitled for a refund.32. The Assessee approached the Commissioner Appeals, II Customs & Central Excise, Jaipur by filing an appeal which was rejected by an order dated 27.02.2003. The Central Excise and Service Tax Appellate Tribunal by its order dated 11.05.2005 allowed the appeal filed by the Assessee on the ground that the incidence of duty was not passed on by the Assessee to the customers. The customers protested to the charging of the net duty payable at 8.8 per cent instead of 8 per cent in spite of the notification issued on 11.06.2001. This protest was made without any delay so the question of passing the incidence of duty by the owners of the fabric to their customers does not arise.33. In Central Excise Appeal No. 34 of 2005 filed by the Union of India through Commissioner of Central Excise, Jaipur, the High Court of Judicature for Rajasthan at Jodhpur confirmed the order of the Central Excise and Service Tax Appellate Tribunal. Challenging the said judgment of the High Court dated 26.11.2008, the Union of India has filed the above Appeal. The contention raised by the Revenue before the High Court regarding the presumption under Section 12-B of the Act was rejected by the High Court by holding that once the Assessee shows that he has not passed on the duty to his buyer, then the burden shifts to the Revenue. The submission that there is a presumption of the duty being passed on to the ultimate consumer was not accepted by the High Court. The High Court held that the claim for refund should be accepted once the Assessee shows that he has raised a credit note regarding the excess duty. The High Court had further held that passing on the burden of excise duty to the ultimate buyer cannot be left in the realm ofAppeal No. 8488 of 200935. The respondent-Assessee is a 100 per cent Export Oriented Unit (EOU) manufacturing cotton yarn. The respondent filed an application for refund of an amount of Rs. 2,00,827/- on 14.08.2002 on the ground that it had paid excess excise duty at the rate of 18.11 per cent instead of 9.20 per cent. The Assessee initially passed on the duty incidence to its customers. Later the Assessee returned the excess duty amount to its buyers which was evidenced by a certificate issued by the Chartered Accountant on 02.08.2002. The refund claim was rejected by the Deputy Commissioner of Central Excise, Kolhapur Division vide an order dated 24.09.2002 on the ground that the Assessee did not submit either the credit notes or the Charteredcertificate at the time of filing the refund application. Not satisfied with the genuineness of the documents the Deputy Commissioner rejected the refund claim. The Commissioner (Appeals) Central Excise, Pune allowed the appeal filed by the Assessee by taking note of the certificate issued by the Chartered Accountant and the credit notes dated 29.07.2002. The Appellate Authority accepted thecontentions and held that there was no reason to doubt the genuineness of the documents produced. The Appellate Authority allowed the appeal of the Assessee and the said order was confirmed by the Central Excise and Service Tax Appellate Tribunal vide judgment and order dated 06.10.2005. The said order of Central Excise and Service Tax Appellate Tribunal was further confirmed by the High Court of Judicature at Bombay in Central Excise Appeal No. 100 of 2008 filed by the Revenue. The Revenue has filed the above Civil Appeal challenging the validity of the judgment of the High Court in Central Excise Appeal No. 100 of 2008.

Reasoning:
This Court approved the normal practice under which discounts are given and held that the discount is known to the dealer at the time of purchase. The Additional Solicitor General submitted that any credit note that was raised post clearance will not be taken into account for the purpose of a refund by the Department. We do not agree with the said submission as it was held by this Court in Union of India Vs Bombay Tyre International (supra) that trade discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price. It is the submission of the Assessee that the turnover discount is known to the dealer even at the time of clearance which has also been upheld by this Court. It is clear from the above that the Assessee is entitled for filing a claim for refund on the basis of credit notes raised by him towards turnover discount.In the instant case, the Assessee has admitted that the incidence of duty was originally passed on to the buyer. There is no material brought on record to show that the buyer to whom the incidence of duty was passed on by the Assessee did not pass it on to any other person. There is a statutory presumption under Sectionof the Act that the duty has been passed on to the ultimate consumer. It is clear from the facts of the instant case that the duty which was originally paid by the Assessee was passed on. The refund claimed by the Assessee is for an amount which is part of the excise duty paid earlier and passed on. The Assessee who did not bear the burden of the duty, though entitled to claim deduction, is not entitled for a refund as he would be unjustly enriched.The sine qua non for a claim for refund as contemplated in Sectionof the Act is that the claimant has to establish that the amount of duty of excise in relation to which such refund is claimed was paid by him and that the incidence of such duty has not been passed on by him to any other person. Section(2) provides that, in case it is found that a part of duty of excise paid is refundable, the amount shall be credited to the fund. Section 2 (ee) defines Fund to mean the Consumer Welfare Fund established under SectionThere is a proviso to Section(2) which postulates that the amount of excise duty which is refundable may be paid to the applicant instead of being credited to the fund, if such amount is relatable to the duty of excise paid by the manufacturer and he had not passed on the incidence of such duty to any other person. Clause (e) to proviso of Section(2) also enables the buyer to receive the refund if he had borne the duty of excise, provided he did not pass on the incidence of such duty to any other person. There is a third category of a class of applicants who may be specified by the Central Government by a notification in the official gazette who are also entitled for refund of the duty of excise. A plain reading of Clauses (d), (e) and (f) of the proviso to Section(2) shows that refund to be made to an applicant should be relatable only to the duty of excise paid by the three categories of persons mentioned therein i.e. the manufacturer, the buyer and a class of applicants notified by the Central Government. Clause (e) refers to the buyer which is not restricted to the first buyer from the manufacturer. The buyer mentioned in the above Clause can be a buyer downstream as well.That a consumer can make an application for refund is clear from paras 98 and 99 of the judgment of this Court in Mafatlal Industries (supra). We are bound by the said findings of a Larger Bench of this Court. The wordin Clause (e) to proviso to SectionThe High Court proceeded on an erroneous assumption of fact as well. It was held by the High Court that there is no unjust enrichment as the burden has not been passed on. The Highinterpretation of Sectionis also notissues involved in the above Civil Appeals are similar to that of Civil Appeal No. 7906 of 2002.Except for a factual dispute about the genuineness of the certificate issued by the Chartered Accountant and the credit notes raised by the Assessee regarding the return of the excess duty paid by the Assessee, there is no dispute in this case of the duty being passed on to any other person by the buyer. As it is clear that the Assessee has borne the burden of duty, it cannot be said that it is not entitled for the refund of the excess duty paid. In view of the facts of this case being different from Civil Appeal No.7906 of 2002, the appeal preferred by the Revenue is dismissed.