Judgment:
1. The issue involved, in this appeal filed by M/s. Infar (India) Ltd., is whether the principle of unjust enrichment is applicable to the refund of Customs duty claimed by them.
2. Shri L.P. Asthana, learned Advocate, mentioned that the Appellants had filed ten bills of Entry claiming classification of Agglutinating Sera for the detection of human chorionic gonadotrophin in urine under Sub-heading 3002.90 of the First Schedule to the Customs Tariff Act, read with Notification No. 208/81-Cus dated 22.9.1981 which was upheld by the Tribunal vide Order Nos. 636-637/96-C dated 14.10.1996; that they then filed refund claims which were denied to them by the Assistant Commissioner on account of applicability of principle of unjust enrichment holding that the Appellants had not been able to prove by any documentary evidence that the duty was borne by them, and that the Customs duty was not indicated in balance sheet as outstanding/recoverable; that the Commissioner (Appeals) also under the impugned Order, rejected their appeal relying upon the judgment of the Supreme Court in the case of Mafatlal Industries v. UOI and holding that merely by remarking in the invoices that the prices did not include customs duty and by continuing to maintain the same price it cannot be said that they had not passed on the burden of duty. The learned Counsel submitted that the Supreme Court did not intend to hold nor has it held that in every case, without exception, it will be deemed that the incidence of duty has been passed on to the customer; that it will be possible for an assessee or importer to prove in a given case that the incidence of duty has not been passed on to the Customer; that it is evident from the judgment of the Supreme Court in Living Media India Ltd. v. UOI that in a given case it is possible to establish that the duty incidence has not been passed on to the customer since in the said matter refund of excess duty was held to be admissible without insisting any affidavit from the petitioner on the basis of unjust enrichment; that whether in a particular case incidence of duty has been passed on to the buyer or not is a question of fact; that their sale prices had remained constant during the period when duty was being charged by the Customs and during the period when no duty was paid by them; that in such situation, the Tribunal, after taking note of the decision in Mafatlal Industries case, has held in the case of CC Chennai v. New Trade Links 1999 (33) RLT 205 (CEGAT) : 1999 (83) ECR 872 (T) that in case of no change in the range of sale price of the goods before and after imposition of higher duty, refund is admissible as incidence of higher duty has not been passed on. He also mentioned that the Commissioner (Appeals) has impliedly admitted that they sold the goods without including the duty to earn goodwill; that the auditors have categorically certified that prior to the dispute when Customs Authorities were not charging the duty, particular price was being charged by the Appellants; that Mr. Sebastian Joseph, Director of the Appellant Company, has mentioned in his affidavit that the Company had not passed on to its customers and/or to consumers the incidence of the customs duties paid by them. He further mentioned that for commercial reasons the products had to be sold without including the customs duty; that the Appellants deal in and are market leaders of family planning medicines and devices; that it would have been suicidal for them to withdraw one of its most popular products out of basket of family planning products; that by not marketing the impugned product without any substitute, they would have lost their market share in this competitive industry; that the Commissioner (Appeals) is in fact trying to find out facts by applying the ratio of the decision in the case of Mafatlal Industries; that there was no requirement in law or accounting practice for them to show the amount as outstanding in the balance sheet; that this cannot be a ground for rejection of the refund claim.
He finally relied upon the following decisions:Swarup Fibre Inds. Ltd. v. CCE, Meerut 3. Countering the arguments, Shri M.M. Dubey, learned D.R., submitted that the Appellants have not shown the amount of refund, claimed by them, in their balance sheet as an outstanding amount; that this goes to show that the incidence of Customs duty was not borne by them; that with the intent to remain in the market, they had sold the goods at the price prevalent prior to the payment of duty; that the affidavit filed by the Director is subsequent to the event and as such is of no relevance; that the judgment of the Supreme Court in Solar Pesticides case makes it very clear that the phrase 'incidence of duty' is of wide implications than the burden of duty; that for arriving at the price of the product, all expenses incurred has to be included. He finally submitted that the ratio of the decision in the case of New Trade Links, supra, is not applicable as the facts are different since the Collector (Appeals) in that matter had considered the correspondence regarding the unsuccessful attempts by the assessee to increase its sale price.
4. We have considered the submissions of both the sides. As per provisions of Section 27 of the Customs Act, any person claiming refund of duty has to furnish evidence to establish that the amount of duty in relation to which refund is claimed, its incidence had not been passed on by him to any other person. The Appellants have claimed that the price charged by them for the impugned produce remained same in spite of levy of Customs duty. The Revenue has not controverted this fact. On the other hand, the Commissioner (Appeals) has mentioned in the impugned Order that the prices were maintained at the same level perforce due to various reasons. They had submitted a certificate of the Chartered Accountant also to prove that the local sale price had been consistent. In such a situation it has been held by the Tribunal in the case of Swamp Fibre Industries Ltd., supra, that "as no change has taken place in the price structure of the product after increase in the rate of duty, it cannot be said that the incidence of higher rate of duty has been passed on to the customer." The similar views were expressed by the Tribunal in the case of Modi Xerox Ltd., supra. The Tribunal has been taking consistently the view that in case of price remaining the same even after levy of duty or enhancement of duty, it cannot be said that the incidence of duty has been passed on to the customers. Accordingly the Appellants are eligible to the refund of the Customs duty. We, therefore, allow the appeal. Signed separately Sd/- (Krishna Kumar) (V.K. Agrawal) Member (Judicial) Member (Technical) 5. I have perused the order recorded by the Learned Brother. With due respect, I do not agree for the following reasons. The appellants lay stress on the point that prior to, and, during the period, duty was levied. They were charging the same price strictly as per the provisions of Drug Laws in the country; that there was no question of withdrawing the goods from the market because it was a very well known brand and considering their reputation in the market, the appellants could not change the prices or discontinue the supply. Moreover, the goods are covered under the Essential Commodities Act; that the company continued to sell the goods at the same price in spite of customs duty imposed. Hence, the duty incidence, it is contended, was not passed on to the customers. The Hon'ble Apex Court in the case of M/s. Mafatlal Industries Ltd. v. Union of India 91. It is next contended that in a competitive atmosphere or for other commercial reasons, it may happen that the manufacturer is obliged to sell his goods at less than its proper price. The suggestion is that the manufacturer may have to forego not only his profit but also part of excise duty and that in such a case levy and collection of full excise duty would cease to be a duty of excise; it will become a tax on income or on business. We are unable to appreciate this argument. Ordinarily, no manufacturer will sell his products at less than the cost-price plus duty. He cannot survive in business if he does so. Only in case of distress sales, such a thing is understandable but distress sales are not a normal feature and cannot, therefore, constitute a basis for judging the validity or reasonableness of a provision. Similarly, no one will ordinarily pass on less excise duty than what is exigible and payable. A manufacturer may dip into his profits but would not further dip into the excise duty component. He will do so only in the case of a distress sale again. Just because duty is not separately shown in the invoice price, it does not follow that the manufacturer is not passing on the duty. Nor does it follow therefrom that the manufacturer is absorbing the duty himself. The manner of preparing the invoice is not conclusive. While we cannot visualise all situations, the fact remains that, generally speaking, every manufacturer will sell his goods at something above the cost-price plus duty. There may be a loss-making concern but the loss occurs not because of the levy of the excise duty--which is uniformly levied on all manufacturers of similar goods--but for other reasons.
No manufacturer can say with any resonableness that he cannot survive in business unless he collects the duty from both ends. The requirements complained of (prescribed by Section 11B) is thus beyond reproach--and so are Sections 12A and 12B. All that Section 12A requires is that every person who is liable to pay duty of excise on any goods, shall, at the time of clearance of the goods, prominently indicate in all the relevant documents the amount of such duty which will form part of the price at which the goods are to be sold, while Section 12B raises a presumption of law that until the contrary is proved, every person who has paid the duty of excise on any goods shall be deemed to have passed on the full incidence of such duty to the buyer of such goods. Since the presumption created by Section 12B is a rebuttable presumption of law--and not a conclusive presumption--there is no basis for impugning its validity on the ground of procedural unreasonableness or otherwise. This presumption is consistent with the general pattern of commercial life. It indeed gives effect to the very essence of an indirect tax like the excise duty/customs duty. In this connection, it is repeatedly pointed out by the learned Counsel for the petitioners-appellants that the levy of duty is upon the manufacturer/assessee and that he cannot disclaim his liability on the ground that he has not passed on the duty. This is undoubtedly true but this again does not affect the validity of Section 12A or 12B. A manufacturer who has not passed on the duty can always prove that fact and if it is found that duty was not leviable on the transaction, he will get back the duty paid. Ordinarily speaking, no manufacturer would take the risk of not passing on the burden of duty. It would not be an exaggeration to say that whenever a manufacturer entertains a doubt, he would pass on the duty rather than not passing it on. It must be remembered that manufacturers as a class are knowledgeable persons and more often than not have the benefit of legal advice. And until about 1992, at any rate, Indian market was by and large a sellers' market.
6. In view of the above, merely by remarking in the invoices that the prices do not include customs duty and indicating in the statements that by continuing to maintain the same price all along the appellants have incurred losses and not passed on the burden of duty, does not hold water. The appellants did not pass on the burden of duty is a question of fact well within the knowledge of the appellants. It has to be proved by them. Simply by dipping their profit margins, the appellants cannot claim that they have not passed on the burden of duty. The fact is that their expenses had increased and this might have reduced their profit margins. In Solar Pesticides v. Union of India , the Apex Court has observed that where the duty paid on raw materials is added to the price of the finished goods which are sold, the incidence of the duty on the raw material would stand passed on to the purchaser of the finished product. The finished product of the appellant bears nil rate of duty. But for arriving at the assessable value/price of the product, all expenses incurred in the manufacture of the product has to be included. The appellant has not shown the amount claimed as refund as recoverable/outstanding in his books of accounts. Therefore, the customs duty paid on the inputs has to be construed as part of the price of the final product. In the case of Collector of Central Excise v. Dai Ichi Karkaria Ltd. observed that the manufacturer is not likely to include the amount of duty availed as modvat credit in his price. Going by the ratio of the Mafatlal judgment as extracted above, and the Dai Ichi Karkaria judgment, it would follow that the incidence of duty would be necessary to be construed as part of the price charged by the manufacturer. This aspect is clearly brought out by the Apex Court in the case of Bata (India) Ltd. 1996 (64) 678 (SC) in para 6 as under: The cost of production, estimated profits and the taxes on the manufacture and sale of the goods are usually included in the sale price of the goods. It is only because the wholesale price is usually the cum-duty-price that Sub-section 4(d) lays down that the value will not include the duty of excise, sales tax and other taxes if any payable on the goods. But if a manufacturer includes in the wholesale price any amount by way of tax even when no such tax is payable, then he is really including something in the price which is not payable as duty at all. He is really increasing his profit element included in the wholesale price in another guise. In such a situation, there cannot be any question of deduction of duty payable on the goods from the wholesale price because as a matter of fact no duty has actually been included in the wholesale price.
7. The ratio is clear. When a manufacturer does not claim an assessment to be provisional in view of the disputed amount and does not clearly set off the duty recoverable/outstanding on that account in his books of accounts, he cannot claim a deduction from his price of an amount which is not payable as duty at all. In the facts and circumstances of the present case, it has to be construed that the duty burden has been passed on by inclusion of the expenses on duty in the price of the final product. If a refund is sanctioned to the appellant, it would result in unjust enrichment to him. The appellant does not have a claim on this amount since it is apparent from the balance sheet that he has not shown this amount as disputed one. The appellants' submission that their case is squarely covered by the Apex Court judgment in the case of M/s. Living Media cannot stand close scrutiny. In that case, the finding was that M/s. Living Media had two separate sources of income/revenue; one from sale of magazines and another from advertisements in the magazines. In that event, the Hon'ble Apex Court took the view that the sale price of the magazines was clearly less than the cost price of the inputs and so could not be construed to be made up of the disputed amount of duty as well. In this case, the product was admittedly sold to earn goodwill. It was not a distress sale or a sale which indirectly fetched revenue from another source upon sale of the product. The contention that the drug control policy or the product being an essential goods forced them to sell the product at a lesser price is not convincing. The goods were not subsidised by the Government. No manufacturer or trader will be charitable enough to sell at a price lower than the cost price except for commercial reasons. All expenses that go into the manufacture, as reflected in the books of accounts must necessarily be construed to be included in the price. The appellants are, therefore, not entitled for the refund. In my view, the appeal filed by the appellant deserves to be dismissed.
Whether the incidence of duty of Excise has been passed on to others and accordingly the appeal is to be dismissed as ordered by the learned Member (Judicial) or the incidence of duty has not been passed to the customers and the appeal is to be allowed as held by the Member (Technical)? 8. A difference of opinion having arisen between the two ld. Members of the Tribunal, this matter is referred to the third Member to resolve the difference. I have accordingly heard Shri L.P. Asthana, Advocate assisted by Shri Himanshu Jain, Advocate for the appellants and Shri V.K. Verma, JDR for the respondents. I have carefully considered the submissions made before me. The facts of the case are given in detail in the above two orders which need not be repeated. The ld. Member (T) has relied on some earlier decisions of the Tribunal in which it is held that if no change has taken place in the price structure of the product after increase in the rate of duty, it cannot be said that the incidence of higher rate of duty has been passed on to the customers.
In the present case,--it is observed--the appellants have claimed that the price charged by them for the imported produce remained same in spite of levy of customs duty; that the Tribunal has been taking consistently the view that in case of price remaining the same even after levy of duty or enhancement of duty, it cannot be said that the incidence of duty has been passed on to the customers. On this ground alone, the ld. Member (T) has held that the appellants are eligible to the refund of the customs duty. It may however be observed that this view is directly in conflict with the ratio of the judgments of the Hon'ble Supreme Court in the case of Mafatlal Industries and Solar pesticides etc. referred to supra. In these judgments it is held that whether or not the burden of tax has been passed on to another person directly/indirectly is a question of fact to be determined in each case of claim of refund viz., "(iii) A claim for refund, whether made under the provisions of the Act as contemplated in proposition (i) above or in a suit or writ petition in the situations contemplated by proposition (ii) above, can succeed only if the petitioner/plaintiff alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of duty or to the extent he has not so passed on, as the case may be". If this be the legal proposition laid down by the Apex Court on the principle of unjust enrichment, one cannot at all say that by mere fact of the price remaining the same even after levy of duty or enhancement of duty, the burden of duty has not been passed on to another person.
There may be a case where the price remaining the same after levy of duty where the burden of tax has not been passed on whereas in another case, the same is passed on. Similarly, the mere increase in the sale price after levy of duty in itself cannot determine that the burden of duty has been passed on. Whether the burden of duty has been passed on or not is a proposition to be determined on the facts of each case.
With due respect, this aspect has not been examined in either of the above orders. The ld. Member (J) in his order has gone by the legal proposition as held by the Hon'ble Supreme Court in their judgments that ordinarily no manufacturer will sell his products less than the cost price plus duty and that ordinarily speaking, no manufacturer would take the risk of not passing the burden of duty. But the Hon'ble Supreme Court in the same judgment--extracts from which are quoted in extenso in the order of Ld. Member (J)--have also observed, "A manufacturer who has not passed on the duty can always prove that fact and if it is found that the duty was not leviable on the transaction, he will get back the duty paid".
9. Now let us examine the facts of the present case in the light of the above proposition laid by the Apex Court. The appellants apart from pleading that they have not increased the sale price of their product even after increase in the rate of duty, have also pleaded that their sale invoices clearly mentioned that the price does not include customs duty. They pleaded that when the same invoice bears the endorsement that the sale price does not include customs duty, it is evident that no customer would have paid the duty to them. It is difficult to figure out as to what more a seller could do to make his intention clear to the buyer that he is not passing the duty element in the sale price of the goods to him than to make a mention of this in the invoice for the sale of the goods?. The Tribunal in its decision in JCL International Ltd. v. CCE Ghaziabad invoice of the product in that case observed that invoice is the best evidence regarding passing on of burden of duty as envisaged under Section 12A of the Central Excise Act, 1944 (Section 28C of the Customs Act, 1962 in the present case) and that is why it has been stipulated that it should be mentioned in the sale invoice as to what part of the price, excise duty in respect of such goods is going to form. Since in that case, the sale invoice very clearly specified that the rate per cylinder was inclusive of the central excise duty, the contention of the appellants that the same was not passed on to the buyer was not accepted and their appeal against the denial of the refund claim on the grounds of unjust enrichment was rejected. The facts in the present case though in reverse, are identical to those in the cited decision of M/s. JCL International. In that case, the appellant had mentioned in the invoice that the sale price was inclusive of excise duty whereas in the case under consideration, the appellants have clearly mentioned in their invoice that the sale price does not include the customs duty.
Therefore, the ratio of the cited decision will apply to these facts.
The same view is held in the decision of the Tribunal in Xerox Modi Corporation Ltd. v. CCE Meerut party against this decision, the same is dismissed by the Hon'ble Supreme Court as reported in Court Room Highlights 2002 (142) ELT A 173-174. In this case the Tribunal has observed, "Since in this case, it is not disputed that the excise duty element which is paid to the department is reflected in the sale invoice of the party, the same is therefore realised from the buyers". Apart from the above, the appellants are also pleading that their product is sold strictly as per the Drug laws including selling at the pre-determined prices according to the Price Lists prescribed by law which are filed with the Ministry.
The appellants have filed the certificates from the Chartered Accountant certifying that the customs duty element is not passed on to the customers. None of the authorities below have found anything wanting in these certificates. The observation of the lower authorities that the company in their balance sheet for the years 1995-96 did not indicate Rs. 94,86,522/- as outstanding recoverable from customs on account of excess duty as they were contesting the same with the department and therefore it can safely be concluded that they have included the said excess duty amount in their costing and passed on the burden of said duty to third party is subjective, arbitrary and unreasonable. At that time, the company was still contesting the levy of customs duty on the product imported by them in an appeal before the CEGAT. They therefore would not have known whether they would succeed in their appeal and if successful, consequently how much amount they would get from the department as refund. It, therefore, would have been highly presumptuous on their part to reflect an amount in their books of account as due from the customs department, the receipt and the quantum of which was still in limbo.
10. In view of the above analysis, I am of the view that the appellants--on the given evidence--have successfully rebutted statutory presumption held against them under Section 28D of the Customs Act, 1962. I, therefore, hold that the incidence of duty has not been passed on to the customers and the appeal is to be allowed as held by the ld.Member (T).
11. The matter will now revert to the referral Bench for passing the final order on the appeal.
As per majority, the incidence of duty has not been passed on by the Appellants to the customers and accordingly, they are eligible to refund of the Customs duty. The Appeal is thus allowed.