Calcutta Steel Industries Vs. Collector of C. Ex. - Court Judgment

Excerpt:
1. these appeals are filed against the common order-in-appeal therefore these are taken up together for final disposal. the appellants filed these appeal against the common order-in-appeal passed by the commissioner of central excise (appeals) whereby he upheld the finding of the assistant collector of central excise. the assistant collector of central excise held that it is established beyond doubt that appellant has actually collected the central excise duty from the buyers and had thus passed on the incidence of duty from their own shoulders to the buyers and no refund accrue on them on this count as per unjust enrichment clause under the provisions of section 12b of the central excises and salt act, 1944. the assistant collector sanctioned the refund and ordered that the amount be credited to the consumer welfare fund under section 11b(2) and 12c of the central excises and salt act, 1944.2. ld. counsel appearing on behalf of the appellant submits that respondents has wrongly held that appellants had passed the burden of duty to the buyers. he submits that the balance sheet of the appellants indicate that the central excise duty has been paid by the assessee and debited in the expenditure account. he further submitted that sale invoice indicate that in addition to the price, the appellant has only charged sale tax or central sales tax and no central excise duty has been charged from the buyers. he also relied upon the certificate issued by the chartered accountant certifying that central excise duty element has not been passed on to the buyers. he also submitted that the appellants produced the evidence to the effect that buyers have not availed the modvat credit in respect of the duty paid by the appellants. in these circumstances he prays that the burden of duty has not been passed on to the buyers.3. shri d.k. nair, jdr appearing on behalf of the respondents submitted that the provisions of section 12b of the central excises and salt act, 1944 provides that there is presumption that duty is passed to the consumers unless it is proved otherwise. he relied upon the decision of the hon'ble supreme court in the case of mafatlal industries ltd. v.union of india reported in 1997 (89) e.l.t. 247. he submitted that the relevant gp 1 shows that the amount of duty paid. he submits that there is nothing on record to show that the duty amount has been deposited by the appellants and it has not been recovered from the buyers. he submits that the balance sheet shows that duty has been paid from the income. therefore it means that they have collected the duty from the sale of goods. he therefore, prays that the appeals be dismissed.4. heard both sides. the only short question involved in this appeal is whether the burden of duty has been passed on to the buyers or not. the adjudicating authority in the order-in-original held that in gate passes in the instance case indicate the amount of central excise duty paid by the party and the invoice indicate the total price inclusive of all taxes. the appellants were not bound by the central excise law to indicate the duty element separately on invoice since the statutory central excise document was mentioned in the gate pass. it was a practice to issue gate passes and invoice both in the name of the customers and indicate the duty element on gate passes only. in any case both were to be correlated and read together. hence the above practice by no way alternate the fact that duty is being charged from them from their buyers.5. the appellant relied upon the certificate issued by the chartered accountant. we find that the certificate issued by the chartered accountant does not show any details of sales price of the goods and the details of other particulars. the certificate simply certifies that the firm has not charged any excise duty from its customers and the excise duty has been deposited by the firm from their own under protest as verified by us from the information and explanation given to us by the firm and from the sales bills, gate passes and general ledger. in the absence of bills of sales price and other particulars the certificate given by the chartered accountants cannot be relied upon.6. the appellants have not produced any record showing that the excise duty mentioned in the gp 1 has been deposited by them from their account. no separate account has been maintained by the appellants regarding the amount in dispute.7. regarding the invoices the hon'ble supreme court in the case of mafatlal industries v. union of india (supra) in para 91 held as under : 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 reasonableness 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 manufacturer 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.7. section 12b of the central excises and salt act, 1944 provides as under: "that every person who has paid the duty of excise on any goods under this act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyers of such goods." 8. in the present case, the burden is on the appellant to prove that burden of duty has not been passed on. the gp 1 shows that duty has been paid on the goods at the time of clearance and the appellants have issued invoice inclusive of the tax to the customers. the appellants has not produced any record showing that duty has been paid from their own account or any separate account has been maintained in respect of the duty paid from their own account. further they simply produced the record showing the duty has been mentioned in their expenditure account. the record produced by them further shows that the duty has been paid from their income account. it shows that they have received the duty from their customers.mafatlal industries v.union of india held that all claims of refunds under the central excise act should subject to claims establishing that the burden of duty has not been passed on to the buyers. in view of our discussion, we do not find any merits in these appeals. the appeals are dismissed.

Judgment:
1. These appeals are filed against the common order-in-appeal therefore these are taken up together for final disposal. The appellants filed these appeal against the common order-in-appeal passed by the Commissioner of Central Excise (Appeals) whereby he upheld the finding of the Assistant Collector of Central Excise. The Assistant Collector of Central Excise held that it is established beyond doubt that appellant has actually collected the Central Excise duty from the buyers and had thus passed on the incidence of duty from their own shoulders to the buyers and no refund accrue on them on this count as per unjust enrichment clause under the provisions of Section 12B of the Central Excises and Salt Act, 1944. The Assistant Collector sanctioned the refund and ordered that the amount be credited to the consumer welfare fund under Section 11B(2) and 12C of the Central Excises and Salt Act, 1944.

2. Ld. Counsel appearing on behalf of the appellant submits that respondents has wrongly held that appellants had passed the burden of duty to the buyers. He submits that the balance sheet of the appellants indicate that the Central Excise duty has been paid by the assessee and debited in the expenditure account. He further submitted that sale invoice indicate that in addition to the price, the appellant has only charged sale tax or Central sales tax and no Central Excise duty has been charged from the buyers. He also relied upon the certificate issued by the Chartered Accountant certifying that Central Excise duty element has not been passed on to the buyers. He also submitted that the appellants produced the evidence to the effect that buyers have not availed the Modvat credit in respect of the duty paid by the appellants. In these circumstances he prays that the burden of duty has not been passed on to the buyers.

3. Shri D.K. Nair, JDR appearing on behalf of the respondents submitted that the provisions of Section 12B of the Central Excises and Salt Act, 1944 provides that there is presumption that duty is passed to the consumers unless it is proved otherwise. He relied upon the decision of the Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. v.Union of India reported in 1997 (89) E.L.T. 247. He submitted that the relevant GP 1 shows that the amount of duty paid. He submits that there is nothing on record to show that the duty amount has been deposited by the appellants and it has not been recovered from the buyers. He submits that the balance sheet shows that duty has been paid from the income. Therefore it means that they have collected the duty from the sale of goods. He therefore, prays that the appeals be dismissed.

4. Heard both sides. The only short question involved in this appeal is whether the burden of duty has been passed on to the buyers or not. The adjudicating authority in the order-in-original held that in gate passes in the instance case indicate the amount of Central Excise duty paid by the party and the invoice indicate the total price inclusive of all taxes. The appellants were not bound by the Central Excise law to indicate the duty element separately on invoice since the statutory Central Excise document was mentioned in the gate pass. It was a practice to issue gate passes and invoice both in the name of the customers and indicate the duty element on gate passes only. In any case both were to be correlated and read together. Hence the above practice by no way alternate the fact that duty is being charged from them from their buyers.

5. The appellant relied upon the certificate issued by the Chartered Accountant. We find that the certificate issued by the Chartered Accountant does not show any details of sales price of the goods and the details of other particulars. The certificate simply certifies that the firm has not charged any excise duty from its customers and the excise duty has been deposited by the firm from their own under protest as verified by us from the information and explanation given to us by the firm and from the sales bills, gate passes and general ledger. In the absence of bills of sales price and other particulars the certificate given by the Chartered Accountants cannot be relied upon.

6. The appellants have not produced any record showing that the excise duty mentioned in the GP 1 has been deposited by them from their account. No separate account has been maintained by the appellants regarding the amount in dispute.

7. Regarding the invoices the Hon'ble Supreme Court in the case of Mafatlal Industries v. Union of India (supra) in para 91 held as under : 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 reasonableness 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 manufacturer 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.

7. Section 12B of the Central Excises and Salt Act, 1944 provides as under: "that every person who has paid the duty of Excise on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyers of such goods." 8. In the present case, the burden is on the appellant to prove that burden of duty has not been passed on. The GP 1 shows that duty has been paid on the goods at the time of clearance and the appellants have issued invoice inclusive of the tax to the Customers. The appellants has not produced any record showing that duty has been paid from their own account or any separate account has been maintained in respect of the duty paid from their own account. Further they simply produced the record showing the duty has been mentioned in their expenditure account. The record produced by them further shows that the duty has been paid from their income account. It shows that they have received the duty from their customers.Mafatlal Industries v.Union of India held that all claims of refunds under the Central Excise Act should subject to claims establishing that the burden of duty has not been passed on to the buyers. In view of our discussion, we do not find any merits in these appeals. The appeals are dismissed.