1. These are 15 appeals filed by the above appellants against Order-in-Appeal passed by the Commissioner of Customs and Central Excise, (Appeals), Ghaziabad upholding orders-in-original passed by the Assistant Collector rejecting refund claims filed by the appellants on the ground that plastic components for audio-cassettes were exempted from payment of duty and, therefore, no Modvat credit on these inputs was admissible and, therefore, the appellants, who are purchasers of these plastic components, will not be entitled to any refund. The Assistant Commissioner had further held that the question relating to unjust enrichment will not be applicable to the case of the appellants.
2. Appellants M/s. Super Cassettes Industries Ltd. and others are engaged in the manufacture of audio-cassettes falling under sub-heading 8523.12 of the Central Excise Tariff Act, 1985. Audio-Cassettes falling under sub-heading 8523.12 were exempted from payment of duty vide Notification No. 117/90, dated 16-5-1990. The appellants had purchased from manufacturers plastic components like hub stoppers and rollers.
There was dispute between manufacturers of hub stoppers and rollers and the Department on the question whether these plastic components for audio systems will or will not be liable to duty under 85.23. Pending resolution of the said dispute the manufacturers of hub stoppers and rollers paid duty applicable to sub-heading 8523.12 under protest.
Subsequently, in 1992 the manufacturers were informed that hub stoppers and rollers were not classifiable under Heading No 85.23. In between, the manufacturers had sold the stoppers and rollers to various purchasers, i.e., the present appellants. As the said manufacturers could not claim refund (since they had collected duty from present appellants,) the appellants filed refund claims of the duty paid on the plastic components under Heading No. 85.23. The appellants had also in the meantime used the plastic components in the manufacture of their final products, namely, audio-cassettes. The Assistant Commissioner who passed the order-in-original rejected the refund claims on the ground that Central Excise Duty paid by the manufacturers of plastic components had taken Modvat credit on the inputs and therefore, the appellants who were purchasers of the plastic components will not be entitled to refund. Appellants contention was that since duty under sub-heading 8523.12 collected on plastic components was without authority of law, no duty was in fact payable. It was also submitted that it was not permissible to adjust the amount already paid as duty payable on these items under some other heading. Reliance was placed on the decisions of the Delhi High Court and the Tribunal in support.
3. Appearing for the appellants Shri G. Shiv Das, ld. Counsel contended that (1) the amount of duty collected on goods falling under Heading 8523.12 cannot be considered as duty payable when the same goods were held to be classifiable under a different Tariff Heading; (2) No amounts collected without authority of law can be adjusted as a duty of excise under a different tariff heading: (3) even if such adjustment is permissible, the same could not be made without issue of a SCN to the manufacturers under Section 11A of the Act for recovery of duty not levied/short levied; (4) even if such duty is recoverable from a manufacturer the same cannot be adjusted from the refund claim of a customer; (5) a refund claim of a customer cannot be rejected on the ground that duty has been paid by the manufacturer from Modvat credit which had been correctly taken and availed of at the relevant time; (6) no refund claim can be adjudicated by an adjudicating authority or appellate authority on a ground which is not part of the SCN.4. He submitted that the manufacturers of hub stoppers and rollers had paid the duty under protest since a classification dispute was pending.
When the classification dispute got resolved in favour of the manufacturers it meant that the duty paid under protest and collected by the Department earlier was without authority of law. Consequently, the amount paid as a duty of excise cannot be legally collected under Section 3 of the Central Excise Act. The Appellants who had purchased the said goods from the manufacturers had, therefore, rightly applied for refund of the duty under Rule 173S read with Section 11B for the reason that the incidence of duty borne by the appellants had not been passed on to the customers. Also, the entire quantity of duty-paid on hub-stoppers and rollers had been consumed by the appellants in their factories for the manufacture of audio-cassettes. Since the amount collected from the manufacturers cannot thus be said to be a duty of excise, at best it can only be said to be a deposit with the Government. Ld Counsel argued that no amount collected without authority of law can be adjusted against duty payable under a different tariff heading without first establishing liability for payment of such duty and without undertaking a proper adjudication after issuing a demand or SCN under Section 11A of the Act on the manufacturers.
Further, recovery, if any, has to be made from the manufacturer. There was no provision in law for recovery or for adjusting the amount of duty, if any, recoverable from the manufacturers from the refund claim of the customers. Ld. Counsel relied on the following judgment of the Apex Court, Delhi High Court and the Tribunal in support of his contention : (i) Order of the Apex Court in Civil Appeal No. 3431-34 of 1987 in Bharat Commerce and Industries v. U.O.I. - 1979 (4) E.L.T. (J527) (Delhi);Indian Oil Corporation v. C.C.E.He referred to the findings of the Commissioner (Appeals) holding that if the manufacturers themselves were not entitled to any refund, as the duty had been paid by them out of Modvat credit which was not admissible, the buyers of goods will also not be entitled to such refund since they had derived their authority from manufacturers. The Department had contended that SCNs were not issued to the parties for this reason. Ld. Advocate submitted that the Department's stand had no legal basis. He therefore pleaded for the setting aside of the orders passed by the Commissioner (Appeals), Ghaziabad and for a direction on the Revenue for payment to the appellants of the balance of the amount of refund claim with interest under Section 11BB.5. Ld. JDR, Shri A.M.Tilak submitted that the present appellants after buying the inputs from the manufacturers were selling the final products and therefore, the bar of unjust enrichment would apply to them. He relied on the Madras High Court judgment in Indo-Swiss Synthetics Gems Co. v. C.C.E., reported in 1996 (13) R.L.T. 379.
Further, as was observed in the Bombay High Court judgment in Solar Pesticides case [1992 (57) E.L.T. 201] the burden was on the person claiming refund to show that the incidence of duty had not been passed on to the buyer. As regards the entitlement for a person other than a manufacturer for claiming refund as envisaged under Section 11B what was relevant in such cases was the date of purchase of the goods by the buyer of the goods and not whether the duty had been paid by the manufacturer [See Definition of "relevant date" Clause (e)]. For purposes of Section 11B the relevant date was the date of purchase. In the facts of the present cases it cannot be disputed that the duty payment had to be adjusted as had been made clear in the order of the Assistant Collector and the provisions of Rule 57E relating to adjustment would clearly apply to these cases. He also submitted that refund claims are subject to the provisions relating to limitation and relied on the Tribunal decision in Miles India v. CCE, 6. In rejoinder, the ld. Counsel submitted that the limitation point could not be taken up at this.stage since it had been proposed neither in the SCN nor argued before the Assistant Commissioner. As regards the aspect relating to unjust enrichment, Assistant Commissioner had himself held that the said question will not apply in the case of the appellants. He also relied on two decisions of the Tribunal in support, namely, Electronic Research Ltd. v C.C.E., 1998 (26) RLT 305 and East India Plastic v. CCE. - 1995 (74) E.L.T. 29. Ld. Counsel submitted that the decision of the Tribunal in Electronic Research case, supra, was clearly applicable in the facts of the present appeals. Further, he also submitted that there was no question of limitation being made applicable when the duty was paid under protest. He also draw attention to the fact that the approval of the classification list filed by the manufacturers took over two years because of the classification dispute and the refund claim could not have been filed by the manufacturers any way without the classification dispute being first decided. As regards unjust-enrichment, ld. Counsel referred to the Apex Court decision in Kargil Fire Works v. CCE. -1997 (95) E.L.T. 3 (S.C.). He further submitted that though the Assistant Commissioner may have made an observation about adjustment of duty later, no such adjustment can be made if such adjustment is not permissible under law.
7. We have considered the submissions. We find that there are two principal issues raised in this bunch of appeals.
8. The first issue is whether an amount of duty collected by the Department on the basis that the goods fell under a particular Chapter Heading can be held on by the Department when the dispute relating to classification is held against the Department and the goods are held to be classifiable under a different tariff heading. On this aspect appellants had relied on the decision of the Tribunal in Indian Plywood Manufacturing Co. v. Collector of Central Excise (supra). We find that the Tribunal had, on the basis of the Andhra Pradesh High Court judgment in Kesoratn Cements v. Collector of Central Excise, [1982 (10) E.L.T. 214 (A.P.)] and Lakshmi Narayanan case [1974 (33) STC] held that merely because some payments have been made by an assessee, the Department cannot retain such an amount except when there has been a levy according to law. This argument derives further support from the Tribunal judgment in Ceat Tyres v. Collector of Central Excise [1980 (6) E.L.T. 563 (Bom.)] wherein it was held that if an assessee makes a mistake of paying an amount which the Department has received without authority of law, it did not entitle the Department to retain the sum.
In the facts of the present case it is not in dispute that the manufacturers of plastic components had paid duty applicable to sub-heading 8523.12 under protest and subsequently the Department had informed the manufacturer that the said items were not classifiable under Heading No. 85.23. We, therefore, agree with the contention of the ld. Counsel for the appellants that the amounts paid by the manufacturers on the plastic components cannot be retained by the Department.
9. The second question relates to whether such amounts can be adjusted as duty payable under a different tariff heading and if so, whether such adjustments can be made without issue of a proper demand to the manufacturer under Section 11A for the recovery of duty not levied or short levied. In this connection, appellants had relied on the Delhi High Court judgment in Bharat Commerce and Industries v. Union of India [1979 (4) E.L.T. J 527) (Del.)]. In that case it was held that if levy and assessment of goods under one particular Tariff item is held to be illegal, the Department cannot refuse to refund the amount on the ground that duty could have been levied under some other Tariff item.
The Hon'ble High Court held that it was not permissible to do so without a proper demand in terms of Rule 10. We find that the said ratio has been followed in Indian Plywood Mfg. Co. Ltd. v. CCE [1985 (22) E.L.T. 144 (T)]. Further, the Tribunal had, in Indian Oil Corporation v. CCE [1991 (54) E.L.T. 110] held that duty paid under a particular heading is not to be adjusted towards duty payable under a different tariff heading and also that procedures required under law have to be initiated before making any such adjustment.
10. The further issues relate to whether a duty even if recoverable, can be recovered from the refund claim of the customers. As also, whether such refunds are subject to the provisions relating to unjust enrichment. A further point urged on behalf of the Department was relating to such refund claims being subject to the limitation period under Section 11B. The Assistant Commissioner had rejected the refund claim of the present appellants on the ground that the manufacturers of plastic components had taken Modvat credit on the inputs. Since the appellants had used the said components for further manufacture of audio-cassettes they were not entitiled to any refund. The appellants contention that since the duty under sub-heading 8523.12 of plastic components was without authority of law, no duty was in fact payable was rejected by the Assistant Commissioner. As regards the point of limitation under Section 11B, we find that the limitation period of 6 months under Section 11B will not apply in this case since the initial payment of duty itself has been paid under protest [second proviso to Section 11B(1)]. In the present appeal it is not in dispute that the manufacturers had paid the duty under protest pending decision in the classification dispute. We, therefore, find no force in the Departmental Representatives contention that as per the definition of the 'relevant date' under Section 11B, the six month period would be reckoned from the date of purchase of goods by any person other than the manufacturer. Further, we also find that the Ld. Counsel for the appellants is correct in his contention that the point relating to limitation had not been proposed in the SCN nor argued before the Assistant Collector. Ld. Counsel had also submitted that Section 11B(1) after its amendment in 1980 provided for persons other than manufacturer to apply for refund. It is, therefore, not in doubt that the appellants being persons who had purchased the plastic components from the manufacturers after paying duty thereon cannot be said to be without a locus siandi in relation to the amounts paid by the manufacturers under protest. We, therefore, hold that the appellants would be entitled to claim refund of the amounts collected by the Department as duty on tariff item 8523.12 without authority of law. As regards the aspect of unjust enrichment also we find that the ld.Counsel has correctly relied on the Hon'ble Calcutta High Court judgment in Assistant Collector v. East Anglia Plastic (India) Ltd. v.CCE, [1994 (74) E.L.T. 29 (Cal.)] wherein it was held that there will be no bar of unjust enrichment where the goods are used in the manufacture of other products and where there is nothing on record to show that the assessee had passed on the incidence of duty to other persons. Reliance in this connection had also been made on the Bombay High Court judgment in Solar Pesticides Limited v. Union of India - 1992 (57) E.L.T. 201. The Hon'ble High Court, Calcutta had also following the Apex Court decision in Salonah Tea Co. Ltd. v. Supdt. of TaxesShri Ballabh Glass Works Ltd. v. Union of India [1984 (16) E.L.T. 171] held that in cases where refund is claimed on a tax collected without authority of law, the State is liable to refund the said amount and the statutory provision relating to limitation under any special law providing for refund is not applicable.
11. As regards the claim for interest for delayed refunds under Section 11BB, we find that the said provision applies to duty ordered to be refunded under Section 11B(2). In the instant case there is no order passed by the Assistant Commissioner under Section 11B(2). The question of awarding any interest does not therefore arise.
12. In the light of the above discussions, we allow all the 15 Appeals and set aside the impugned orders. The appellants will be entitled to the refund claims in terms of above findings.