Case: Commnr. Of Central Excise, Mumbai Vs. M/S. Allied Photographics India Ltd

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.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 demand dated 3.1.1975 was served on NIIL demanding excise duty of Rs. 99,631/for the period 1.3.1974 to 20.5.1974 which NIIL paid, Under Protest, and carried on appeal to the Appellate Collector. On 8.1.1976 the said appeal was dismissed. NIIL moved the High Court under Article 226 of the Constitution of India vide Misc. Petition No. 841 of 1976 challenging the order holding that the liability of NIIL to pay excess duty should be ascertained by the price charged by M/s. AGIL to its dealers. The petition was subsequently withdrawn. On 15.9.1975, NIIL addressed a letter to the Department submitting a declaration stating that M/s. AGIL is not related to NIIL in terms of section 4(a) of the said Act. On 1.10.1975, the said section 5 of the Act was amended and the concept of related person was introduced. On 11.11.1975, NIIL was asked by the Department to pay excise duty on the price charged by M/s AGIL to its dealers. NIIL went in appeal, which was dismissed on 21.9.1979. On 31.10.1984 the Department approved theprice of NIIL instead of the price list of M/s. AGIL to its dealers. Therefore, from 1.11.1984, NIIL started paying excise duty on theprice charged by NIIL to M/s. AGIL and not on price charged by M/s. AGIL to its dealers. On 11.8.1986, NIIL filed refund claims for Rs. 60,19,238.65 for recovery of excise duty between the period 1.11.1981 to 31.10.1984. On 29.9.1986 another refund claim for Rs. 42,77,358.59 was lodged for recovery of excise duty during the period 1.11.1978 to 31.10.1981. Similarly on 7.4.1987 another refund claim was lodged for excise duty paid in excess during the period 1.3.1974 to 31.10.1978 by NIIL amounting to Rs. 22,38,391.72. These refund claims were made in view of the judgment of this Court in the case of Union of India and others vs. Bombay Tyre International Ltd. reported in (AIR 1984 SC 420 ). On 7.4.1987, NIIL made a consolidated refund claim of Rs. 1,25,34,988.97 for the entire period from 1.3.1974 to 31.10.1984. In respect of these refund claims the Department served a show cause notice and ultimately the Assistant Collector granted refund to NIIL only for two months preceding the lodgment of the claim. On 13.4.1987, NIIL filed Writ Petition No. 1336 of 1987 in the High Court challenging the order of Assistant Collector denying refund except for two months. That writ petition came 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. vs. Union of India reported in (1990 (46) ELT 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, thedistributors 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 passed on by M/s. AGIL to its dealers and by judgment dated 14.6.1990 held that Union of India had failed to prove that M/s. AGIL had passed on the burden to its dealers and accordingly granted refund of Rs. 1,25,34,988.97 to M/s. AGIL. Being aggrieved, the Department carried the matter in appeal to the Division Bench which took the view that since NIIL had conceded of having passed on the tax burden to M/s. AGIL there was no question of the trial court further examining the question as to whether M/s. AGIL had passed on the burden to its dealers. Accordingly, the Division Bench allowed the appeal filed by the Department vide judgment dated 2.3.1993. Being aggrieved, NIIL came to this Court vide SLP No. 7484 of 1993. By order dated 30.1.1997, this Court disposed of the SLP observing that since NIIL had passed on the burden of excise duty to M/s. AGIL the refund claims filed by NIIL are liable to be rejected. Accordingly, the said SLP was dismissed. However, it was clarified that the said Order will not prevent M/s. AGIL from adopting appropriate remedy as open to it in law. In view of the order dated 30.1.1997 passed by this Court, M/s. AGIL filed Writ Petition No. 1776 of 1993 in the High Court contending that the petitioners (AGIL) were entitled to refund of Rs. 1,25,34,988.97 as sole selling distributors of NIIL. That as distributors they (AGIL) were not related to NIIL. That their transaction was at arms length and therefore, the Department had erred in collecting excess excise duty from NIIL on the basis of the prices charged by M/s. AGIL to its dealers. In the Writ Petition, M/s. AGIL relied on the judgment of this Court in the case of Bombay Tyre (supra). By order dated 28.9.1993 passed by the High Court, the Department was allowed to withdraw Rs. 1,25,34,988.97 with undertaking to bring back the amount with interest as and when the Court so directs. In the meantime on 19.12.1996 this Court delivered its judgment in Mafatlals case (supra) inter alia giving 60 days time to those claimants, who had earlier adopted legal proceedings claiming refund to move under section 118 as amended w.e.f. 20.9.1991. Consequently, M/s. AGIL moved their refund claim before the Department on 11.2.1997 for Rs. 1,25,34,988.97. On 9.5.1997, a show cause notice was issued by the Department to M/s. Allied Photographics India Ltd. (formerly known as M/s. AGIL) calling 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.

Court's reasoning:
The deletion of(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 becomes due on that accountargument was obviously advanced because unless the two payments are equated as contended, the respondent M/s. APIL was required to comply with section 11B. In this matter, duty has been paid under protest. It is the case of the respondent M/s. APIL that since such payment was similar to payment under rule 9B, the respondent M/s. APIL was not required to comply with section 11B. In the light of the discussion hereinabove, we hold that the respondent was bound to comply with section 11B. Lastly, in any event, the application dated 11.2.1997 fell in the category of refund claim being made after finalization of assessment of NIIL and, therefore, section 11B had to be complied with in terms of para 104 of the above judgment in the case of Mafatlal Industries Ltd. (supra). For above stated response, since there was failure to comply with section 11B, the respondent was not entitled todo not find any merit in this argument. In the case of Bombay Tyre International Ltd. (supra) it has been held by this Court that section 3 of the said Act is a charging section whereas section 4 is a computation section which covers assessment and collection of excise duty. That the basis of assessment under section 4 was the real value of excisable goods, which included manufacturing cost and manufacturing profit but excluded selling cost and selling profit. That the price charged by the manufacturer for sale of the goods represented the real value of the goods for assessment of excise duty.Having come to the conclusion that the respondent was bound to comply with section 11B of the Act and having come to the conclusion that the refund application dated 11.2.1997 was time barred in terms of section 11B of the Act, we are not required to go into the merits of the claim for refund by the respondent who has alleged that it has not passed on the burden of duty to its dealers. Mr. Ganesh, learned senior counsel however submitted that this Court should not interfere, under Article 136 of the Constitution, in view of the concurrent finding of fact given by the authorities below that the respondent has not passed on the incidence of duty to its dealers. We do not find any merit in this argument. In may, 1974, the Department took the view that price declared by NIIL in its price list cannot be accepted as assessable value of excisable goods and price at which their sole distributor M/s. AGIL sold the goods represented the correct price. Accordingly, on 8.5.1974notice was issued to NIIL as to why the prices submitted by NIIL should not be rejected and why excise duty should not be collected from NIIL on the prices at which their distributor 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 theprice of NIIL. On the basis of the said order, NIIL claimed refund of Rs. 1,25,34,988.97 on which the Department issuednotice on 23.2.1987 calling upon NIIL towhy 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 the present Civilthe present case, there is no material placed on record by M/s. AGIL as to how it had accounted for the cost of purchase in its books and the accounting treatment it gave to the said item at the time of payment of the purchase price. No record as to costing of that item has been produced. This material was relevant as in the present case NIIL conceded that it had passed on the burden of duty to its distributor M/s. AGIL (buyer) and it was the buyer who claimed refund. It has been urged on behalf of the respondent and which argument has been accepted by the Authorities below that 20% of the total price paid by M/s. AGIL to NIL represented total excess excise duty levied and not the excess duty collected by NIIL in the form of sale price from its distributor M/s. NIIL. It was argued that excess duty collected by NIIL represented only 1.62% of the total price. It was argued that resale price charged by M/s. AGIL to its dealers had no grievance to excess excise duty paid by M/s. AGIL to NIIL at the time of purchase as the sale price charged by M/s. AGIL to its dealers was based on the prevailing market price. We do not find any merit in this argument. In the present case, the refund claim is made by a buyer and not by the manufacturer. The buyer says that he has not passed on the burden to its dealers. The buyers 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 the amount of duty (differentia) involved in this case and, therefore, incidence of duty was not passed on to the consumers. In this connection, reliance was placed on several judgments of the Tribunal. We have gone through these judgments. They are not applicable to the facts of this case. In the present case, we are concerned with the distributor buying the products from the manufacturer and reselling them to its dealers. Hence, the cost of purchase is a relevant factor. The facts of the cases before the Tribunal deal with sale by manufacturer to the consumer. They deal with assessees invoice bearing a composite price. They are the cases which dealt with the claim of refund by the manufacturer. They did not deal with claim of refund by the buyer. Hence, they have no bearing on the facts of the present case.19. Before concluding, we may state that uniformity in price before and after the assessment does not lead to the inevitable conclusion that incidence of duty has not been passed on to the buyer as such uniformity may be due to various factors. Hence, even on merits, the respondent has failed to make out a case for refund. Since relevant factors stated above have not been examined by the authorities below, we do not find merit in the contention of the respondent that this Court should not interfere under Article 136 of the Constitution in view of the concurrent finding of fact.