Sahab Singh
This is an appeal filed by the Revenue against the order passed by the Commissioner of Central Excise (Appeals) who allowed the appeal filed by M/s. GTC Indus.Ltd. ( hereinafter referred to as the Respondent). 2. The brief facts of the case are that the respondents are engaged in the manufacture of Cigarettes and they had initially filed refund claim of Rs. 54,40,642.71 vide their letter dated 30.10.1984. This amount was paid by them against show cause notice dated 23.12.1982 issued by the Range Supdt. The said amount was paid by the respondent vide TR6 challan No.82/83/280 dated 3.1.1983 being the differential duty on the clearances of cigarettes effected during the period 30.11.1982 to 13.12.1982 on account of rescinding of Notification No. 30/79-CE dated 1.3.79 ( prescribing concessional rate) by Notfn. No.284/82-CE dated 30.11.1982 which made the tariff rate of duty applicable to cigarettes with effect from 30.11.1982. However, the respondent came to know about the order passed by the Madras High Court in the case of M/s. Asia Tobacco Ltd. that any Notification issued takes effect not from its date of issue but from the date it is made known to the public in gazette. Since the Notification 284/82-CE dated30.11.1982 rescinding the Notfn.30/79-CE dated 1.3.79 was brought to their notice on 14.12.1982 vide letter dated 14.12.1982 of the Range Supdt. , the duty at the tariff rate ought to have been collected from them from 14.12.1982 onwards and not from 30.11.1982. The respondents therefore filed the refund claim of Rs. 54,40,042.71. The above refund claim was rejected the then Asst.Collector Division VI vide order dated 22.07.1985 on the ground that once the Notification is published in the Gazette, the Notification will have the effect from the dater of publication in the official Gazette.
3. Being aggrieved by the order of the Asstt.Collector, the respondent filed Writ Petition No.2413/85 in the Hon’ble Mumbai High Court. It was held by the Court vide its judgement dated 4.11.1987 that the withdrawal Notfn.No.284/82 dated 30.11.1982 had been published in the Gazette and the Gazettee was on sale from 8.12.1982, the recovery made on the basis of withdrawal Notification from 8.12.1982 onwards were perfectly valid and that what the department cannot retain is the alleged excess recovery made from 30.11.1982 to 7.12.1982 and therefore the department should make refund of the alleged excess recovery made during the period with interest at the rate of 6% per annum from the date of order till payment. The appeal filed by the department against the above order was dismissed by the Divisional Bench of the High Court vide order dated 5.9.1991 with direction to the department to refund an amount of Rs. 35,57,094.74 to the respondent with interest at the rate of 12% p.a. to be calculated from 4.11.1987 till the payment.
4. Aggrieved by the above order the department preferred SLP before the Hon’ble Supreme Court. The said SLP was disposed of by the Court vide order dated 9.1.1998 directing the Asstt.Collector to decide the entitlement of the respondent for refund of Rs. 35,57,094.74 in the light of Section 11B of the Central Excise Act. Meanwhile, the respondent has initiated contempt proceedings vide Motion No.1230/92 against the department for having not paid the amount in spite of High Court order. The said Notice of Motion was disposed of by the Court vide order dated 25.2.1993 directing the Asstt.Commissioner of Central Excise, Dn.VI to dispose of the claim within three months from the date of order in accordance with Sec.11B of the Central Excise Act, 1944. Pursuant to the High Court’s order dated 25.2.1993, the then Asstt.Commissioner of Central Excise Dn.VI decided the matter vide Order-in-Original dated 22.5.1993 rejecting the respondent’s refund claim of Rs. 54, 40,642.71 subsequently reduced to Rs. 35,57,094.74 on the ground of unjust enrichment. The respondent preferred an appeal against the said order and the Commissioner of Central Excise(Appeals) vide order No. ZBN/12/M-V/99 has remanded the case back for denovo adjudication with direction to decide the entitlement of the respondent for refund in the light of Section 11B of the Central Excise Act as per Supreme Court order dated 9.1.98.
5. Concurrently , there was another dispute relating to the assessable value of the cigarettes in which the contention of the respondent was that for the purpose of computing the assessable value the amount of duty was to be deducted at the full tariff rate from the cum-duty-price and thereafter duty was payable at concessarional rate on ex-duty price. On the other hand, the department was of the view that deduction from cum- duty price was also to be made at the concessional rate only. Writ petition was filed by the respondent before the Hon’ble Delhi High Court which was rejected and it was held by the Court that duty at only concessional rate was deductible from the cum-duty price for determination of assessable value reported as I.T.C. Ltd. and another vs Union of India and others 1987(30)ELT 321 (Delhi). In pursuance of the Delhi High Court’s order the respondent was required to pay Rs. 20,23,381.53 to the department.
6. The Dy.Commissioner vide O/Ol No.03/GSA/Refund/2003 dated 7.5.2003 after rejecting the amount of Rs. 20,33,381.53 out of Rs. 35,57,094.53 sanctioned the refund amount of Rs. 15,33,713/- but since the incidence of duty has been passed on to the buyers, the said amount was ordered to the credited to the Consumer Welfare Fund constituted under Section 12(C) of CEA, 1944 under the provisions of Section 11B of the Act. The respondents filed the appeal before the Commissioner of Central Excise(A) who vide the impugned order allowed the party’s appeal. The Revenue is in appeal against the Order-in-appeal before us.
7. The Ld.Addl.Commissioner appearing for the Revenue submitted that the assessee has calculated assessable value from the cum-duty price after taking into account the tariff rate of duty and paid the duty to the department at the concessional rate on the assessable value. Since at the time of clearance of the goods the duty was deducted from the cum-duty price at the tariff rate as such the duty amount payable as per tariff rate has been collected by the respondent from the buyer through their sale invoices wherein the buyers have been billed fro cum duty price allowing deductions only on account of quantity discount and regional discount. This aspect of recovering of duty element at tariff rate had been discussed in Order-in-Original dated 22.5.1993 as well as Order-in-Original dated 6.5.2003 and this has been explained by the original authority by way of illustration for invoice No.01/w/120061 dated 7.12.1982 for brand Panama Virginia special. He submitted that the gross price charged in the invoice was Rs. 69.18 . Out of this, the post manufacturing expenses amounted to Rs. 0.78 only and after deducting this amount and the duty amounting to Rs. 61.66 calculated at tariff rate the assessable value would arrive at Rs. 6.74. On this assessable value, the duty of Rs. 33.63 was paid to the department at the time of clearance of the goods. He, therefore, submitted that from the invoice value of Rs. 69.18 the respondents have recovered the duty amounting to Rs. 61.66 from the buyers. Therefore, the refund claim submitted by the respondent is clearly hit by the doctrine of unjust enrichment under Sec.11B of the Act and the claim is therefore rightly rejected in the Order-in-Original. He submitted that the Commissioner(Appeals) has not properly appreciated the fact and allowed the appeal filed by the respondent. He therefore requested that the appeal filed by the Revenue required to be admitted by the Tribunal.
8. The Ld. Advocate appearing for the Respondent submitted that the difference between the duty computed based on the deduction from the cum-duty price at the full tariff rate and duty computed based on deduction at the concessional rate had already been paid by them by way of adjustment of Rs. 20,23,381.53 from the refund claim to give the effect to orders of of the Delhi High Court. He, therefore, submitted that now denying the balance amount only on the ground of unjust enrichment is unlawful. He submitted that the deduction of duty amount at full tariff rate from the cum-duty price was on ly for the purpose of computing the assessable value and such computation cannot be a basis for the presumption that the respondent had actually collected duty at full tariff rate from the buyers in spite of the fact that it was eligible for making payment of duty at concessional rate. He contended that the amount deducted from cum-duty price to calculate assessable value does not represent the actual amount of duty collected by the respondent from the buyers. He relied on the decision of the Patna High Court in the case of Bata Shoe Company vs. CCE, patna ( Civil Writ Jurisdiction Case No. 1330 of 1970 decided on 28/6/1971) which was affirmed by the Supreme Court in Bata Shoe Company (P) Ltd. Vs. Collector of Central Excise - 1985 (21) E.L.T. 9 (S.C.) in support of his contention. He specifically referred to the following observation made by the Hon’ble Patna High Court in para 20 of the judgement:-
“The liability of duty is automatic and that in no way depends upon the composition of the prevailing wholesale price. The manner in which the burden of the duty is borne or shared by the producer or his customer is also irrelevant for the purpose of applying the formula laid down in the section.”
He further submitted that subsequent decision of Supreme Court in the case of Asstt.Collector of Central Excise vs Bata Shoe company - 1996(84)ELT 164 (S.C.) also supports the case of the respondent. He, therefore, contended that the computation of assessable value by way of deduction of duty element at tariff rate from the cum-duty price cannot be taken to hold that duty has been collected from the buyers at the tariff rate and therefore, their claim cannot be rejected on the ground of unjust enrichment.
9. We have heard both sides and gone through the appeal papers. The issue involved in this appeal is whether refund amount of Rs. 15,33,713 is liable to be rejected on ground of unjust enrichment under Sec.11B of the Act.
10. Ld. Sr.Counsel appearing for the respondent relied on the judgment of the Patna High Court in the case of Batta Shoe Company Private Ltd. Vs. Collector of Central Excise, Patna and Others in Civil Petition No.1330 of 1970. In this case the issue before the Court was valuation of Footwears for the purpose of exemption Notification No.171/67 dated 24.7.67. It was held by the Court that the assessable value was to be worked out as per the formula embodied in Sec.4 of the Central Excise Act and the fact no duty was collected by the assessee was not relevant. This decision of the Patna High Court was affirmed by the Hon’ble Supreme Court in Batta Shoe Company (P) Ltd. Vs. CCE -1985(21)ELT 9(S.C.). In case of Asstt.Collector of CE. vs Bata India Ltd. -1996(84)ELT 164 (S.C.) the issue before the Court was what shall be value of footwears for the purpose of exemption Notification No.49/86 dated 12.2.1986 and Notification No.89/87 dated 1.3.87 and the three Judges Bench of the Court has held that when manufacturer has included in the wholesale price any amount by way of tax even when no such tax payable, he is increasing the profit element which cannot be excluded as representing element of excise duty. Assessee in this case placed reliance on the decision of the Supreme Court in the case of Bata Shoe Co. -1985(21)ELT 9 (S.C.) The relevant para 21 and 22 of the decision are reproduced below:-
“21 Strong reliance was placed on behalf of the assessee on the decision of this Court in the case of Bata Shoe Co. v. Central Excise, 1985(21)E.L.T. 9(S.C.) = (1985) 3 SCR 960, and particularly, on the passage below:-
“It is, therefore, plain that before determining the question of availability of the exemption under Notification dated July 24, 1967, the first essential step is to determine the ‘value’ of the article in the manner prescribed in Section 4 of the Act. The fact that on such a computation the article may ultimately be found to be exempted from excise duty does not have any bearing on the question of applicability of Section 4 of the Act for determining the ‘value’, for purpose of duty.”
22. Section 4 has undergone drastic changes since this case was decided. The concept of effective duty of excise was also not there at that time.”
11. We find that in the cases cited by the respondents, the court examined the value of footwears for the purposes of exemption Notification No.171/67 and 49/06 and 89/87. The judgment of the Patna High Court pertained to the period governed by Sec.4 of CEA 1944 as it existed before 1975 and the Supreme Court in the case of Asstt.Collector vs Bata India Ltd. has made observations on the decision of the Supreme Court affirming the decision of Patna High Court in para 22 of the judgment. Court held that duty not payable is not excludible from the wholesale price. We note that the respondent has not disputed the computation of assessable value of cigarettes after the decision of the Delhi High Court as the respondent has not challenged deduction of amount of Rs. 20,33,381.53 from the total refund of Rs.35,57,094.53. Therefore, we are of the view that the decisions relied upon by the respondents do not support their claim which is rejected on the ground of unjust enrichment.
12. As an illustration, the Order-in-Original has considered the case of one invoice No.01/W/120061 dated 7.12.82 in respect of Panama Virgina Special.
The gross price as per invoice charged from the buyers = Rs.69.18
Total duty deducted at tariff rate Rs. 61.66
Less on the post manufacturing expenses Rs. .78
Assessable value Rs. 6.74
13. The respondent has determined the assessable value of Rs. 6.74 after deducting the duty element of Rs. 61.66 calculated at the tariff rate from the invoice price whereas they had paid the duty of Rs. 33.63 to the department at the time of clearance of the goods. We find that the argument of the Revenue that since invoice price of Rs. 69.18 was recovered from the customers, the burden of Rs. 61.66 was also passed on to the customers has considerable force and cannot be rejected.
14. We also find that the original authority in para 12 of the order refers to statements of Shri N.V. Bangera, Manager(Accounts) of respondent company recorded under Sec.14 of the Central Excise Act which have been discussed at length by the Asstt.Collector of Central Excise in earlier order dated 22.5.93. We find that in response to the Question No.8 in his statement dated 19.5.93 Shri Bangera has stated as under:-
“The invoice price charged to the buyers from 30.11.82 to 07.12.82 includes the duty amount calculated at the rate of 440% Adv. plus Rs. 32/- specific amount of duty paid as explained in reply to question No. 9 in statement dated 18.05.1993 and the duty paid in the ARI from 30.11.82 to 7.12.82 is calculated and paid under Notification No. 30/79 dated 01.03.79 plus 50% of the disputed amount shown in ARI and less than the duty amount charged in the invoices.
Thus from the above it is clear that although duty has been charged at tariff rate from the buyers in the invoice, the total amount of duty paid to the Central Excise department as is evident from the ARI assessment is less than the amount recovered as duty from the buyers.
15. We, therefore find that the respondent has not been able to prove that the amount sought to be refunded by the assessee was not recovered from buyers. We therefore set aside the order passed by the Commissioner(Appeals) and allow the Revenue appeal.