Commissioner of Central Excise Vs. Southern Agrifurane Industries - Court Judgment

Excerpt:
1. this appeal of the revenue is against an order which was passed by the commissioner of central excise (appeals) in a second round of litigation. the respondents were manufacturers of 'furfuraldehyde' (hereinafter referred to as furfural) which was an input for bulk drugs. furfural was exempted from duty of excise under notifications issued from time to time. one of these notifications was notification no. 147/84-ce dated 18.6.84, which was withdrawn with effect from 1.9.91 by notification no. 35/91-ce. the respondents, however, continued to clear their product without payment of duty. the department issued a show-cause notice dated 26.2.93 demanding duty from them in respect of the clearances of 'furfural' for the period 1.9.91 to 29.12.92. the demand was resisted, but confirmed by the original authority as per an order dated 9.9.93. the demand so confirmed was for an amount of rs. 1,54,41,755. the authority also imposed a penalty of rs. 15.00 lakhs on the party under rule 173q. aggrieved by this decision of the original authority [collector of central excise], the respondents preferred an appeal to this tribunal and made therein a pre-deposit of rs. 40.00 lakhs as directed by the tribunal. that appeal was disposed of as per order dated 8.5.96, whereby the order of the collector confirming the demand of duty was upheld but the quantum of penalty was reduced. thereupon, the respondents paid the balance of amount of duty (rs. 1,15,41,755) on 23.7.96. the respondents, however, approached the tribunal with an application seeking rectification of mistake in order dated 8.5.96, which application was partly allowed as per order dated 23.1.98. the order of rectification restricted the demand of duty to the normal period of limitation. thus, the respondents were held not liable to pay duty for the period beyond the normal period of six months preceding the date of issue of the show-cause notice. consequentially, the respondents were eligible to apply for a refund of duty. this application, they filed on 25.2.98 with the jurisdiction assistant commissioner. subsequently, a show-cause notice dated 21.5.98 was issued to the respondents asking them to show cause why cash refund should not be denied on the ground of unjust enrichment. this show-cause notice was adjudicated upon by the assistant commissioner by order dated 8.12.99 whereby refund of an amount of rs. 1,05,62,041 was sanctioned to the respondents. the department then preferred an appeal to the commissioner (appeals), pursuant to review of the assistant commissioner's order by the jurisdictional commissioner. the commissioner (appeals), by order dated 20.10.2000, set aside the order of the lower authority and remanded the case to it with certain specific directions. the terms of this remand are contained in para 14 of the order of the commissioner (appeals), which is extracted below: "let me first take up the department's grounds of appeal. on perusal of the impugned order, it is observed that the lower authority has not recorded in his findings as to how he was satisfied that incidence of duty was not passed on to the customers by the respondent company. the company merely said in their reply to show-cause notice dated 20.5.98 that they have not collected any amount towards duty from the customers. on perusal of the clearance documents like invoice cum delivery note for the relevant period that no duty amount was collected from the buyers. but all the invoices are marked as provisional. since the duty liability is there on the impugned goods under above documents it is not known whether any supplementary invoices have been raised by the company to collect the duty portion from the customers. to this effect, no recording has been done by the lower authority. since it is found from the invoices that the customers are only two (i.e.) mrl and ioc, the lower authority could have easily verified this fact from the other end. i direct the lower authority to verify this aspect after hearing the party".in the remanded proceedings, the assistant commissioner made enquiries with the assessee's customers through the central excise officers having jurisdiction over them. the two customers so contacted by the original authority were m/s. madras refineries ltd. [mrl] and m/s.indian oil corporation ltd. [ioc]. m/s. mrl replied, saying that they did not pay any amount of excise duty by way of supplementary invoices in respect of the goods purchased from the respondents. m/s. indian oil corporation ltd., apparently, did not respond to the queries of the assistant commissioner. the assistant commissioner did not choose to wait for long for ioc's response either. after examining mrl's response, as part of an exercise of de novo adjudication, the assistant commissioner found the refund claim to have been hit by the bar of unjust enrichment and accordingly credited the amount to the consumer welfare fund as per order dated 19.12.2001. aggrieved by this order of the assistant commissioner, the respondents approached the commissioner (appeals) again and the latter allowed their appeal by order dated 24.2.2003 holding that the doctrine of unjust enrichment was not applicable to the facts of the case. hence, the present appeal of the revenue.2. heard both sides. ld. consultant shri mandal, representing the appellant, has made an attempt to revive the time-bar issue, after referring to a miscellaneous application filed in this appeal by the department. miscellaneous application no. e/ag/320/2003 was filed by the appellant for leave of the bench to introduce an additional limitation-related ground in the appeal. we have perused this application and have considered the arguments thereon. the appellant wants to raise time-bar as (additional ground for challenging the refund order. ld. consultant has urged that this additional ground be allowed to be incorporated. this plea has been vehemently opposed by the respondents' counsel, who submits that the question whether the refund claim was time-barred or not had been buried long back. counsel refers to the order dated 19.12.2001 of the assistant commissioner and submits that, in para 3(a) of the findings thereof, the adjudicating authority categorically held that "there cannot be a dispute on the part of time factor in preferring the claim by the assessee in the instant case. so, i do not propose to proceed further on this point".it appears to us from this and further submissions made by both sides that the finding of the assistant commissioner has already become final and binding for want of challenge by the department. the assistant commissioner's finding, upon attaining finality, rendered the refund claim immune to challenge on the ground of limitation. hence, the application seeking to incorporate time-bar cannot be allowed and the same is rejected.3. ld. consultant now proceeds to argue on the issue of unjust enrichment. he seeks to distinguish the case law relied on by the commissioner (appeals) in the impugned order. on the order hand, ld.counsel for the respondents submits that the issue arising in this case stands squarely covered by the case law relied on by ld. commissioner (appeals). ld. counsel adds to the case law by citing the tribunal's decision in cce, pune v. charda chemicals ltd., 2003 (56) rlt 929, wherein the above case law was followed. the case law relied on by the commissioner (appeals) is the following:punjab beverages pvt. ltd. v. cce, ld. consultant has particularly relied on an observation contained in para 4 of the tribunal's order in easter industries (supra), which was to the effect that the presumption under section 12b could be only to the extent of duty assessed and paid at the time of clearance of goods and not of the duty subsequently collected from the assessee unless there was some positive evidence to that effect produced by the department. it has been argued that, where there is positive evidence produced by the department to show that the incidence of the duty in this case had actually been passed on by the assessee to their customers, the presumption under section 12b is available. ld.consultant submits that, in the instant case, the department has been able to gather positive evidence in the form of purchase orders of the assessee's customers. it is pointed out that the purchase orders had incorporated therein a condition that, in the event to the goods being dutiable at any point of time in future, the liability would be on the buyer to pay up such duty. we have examined the purchase order of ioc placed on record by the consultant and have found a condition to the above effect. however, we have not found any evidence whatsoever to show that the aforesaid condition was carried into effect. a specific query was put from the bench as to whether the respondents' customers had acted upon the above condition by paying duty on the goods purchased from the respondents. the answer is in the negative. yet another query was, contextually, made from the bench as to whether the respondents had issued subsidiary invoices to their buyers subsequent to the clearance of the goods, to recover duty from them. ld.consultant has replied that there is no such evidence on record. at this stage, he suggests a remand of the case to the original authority for fresh consideration of evidence on the unjust enrichment question.this plea is opposed by the counsel, who submits that it is not open to the department to adduce fresh evidence at this stage.4. we have examined all the submissions on the question of unjust enrichment. it is not in dispute that the amount of duty covered by the refund claim was paid long after clearance of the goods. it has been categorically held by this tribunal in the case of easter industries (supra) that the presumption under section 12b of the central excise act would not be applicable to a claim for refund of duty which was paid subsequent to clearance of the goods. ld. consultant has picked one sentence from para 4 of the order in easter industries (supra) and the same reads as under: "it is not denied by the revenue that only the lower amount of duty was assessed and paid at the time of removal of the goods so the presumption made in section 12b can be only to the extent of duty assessed and paid at the time of clearance of the goods and not of the duty subsequently collected from the appellants unless there is some positive evidence to that effect produced by the department." ld. consultant's emphasis is on the underlined clause of the sentence.the argument, however, does not help the appellant inasmuch as the revenue has not been able to show that the duty was subsequently collected by the respondents from their buyers by way of supplementary invoices or otherwise. section 12b is to the effect that, in a sale of goods by the assessee to his buyer, it shall be presumed that the incidence of duty thereon has been passed on to the latter unless the contra is proved by the former. the incidence of duty should normally pass on alongwith the goods, and not later. any different interpretation will be repugnant to the basic tenet of central excise law that excisable goods which are not exempt from payment of duty can be removed by the manufacturer only on payment of duty. in the instant case, there was no payment of duty at the time of removal of the goods by the respondents and, therefore, we have to accept the reliance placed by ld. commissioner (appeals) on the tribunal's decisions in easter industries (supra) and other cases. the stage of adducing evidence being long over, there is no scope for any remand of the matter. the dispute has to be given a quietus at this stage. as the presumption under section 12b against the assessee was inapplicable to the facts of this case, the burden was on the revenue to establish that the refund claim in question was barred by unjust enrichment. they have not succeeded in discharging this burden. hence, the respondents will get cash refund of the amount alongwith admissible interest thereon, the impugned order is affirmed and revenue's appeal is rejected.

Judgment:
1. This appeal of the Revenue is against an order which was passed by the Commissioner of Central Excise (Appeals) in a second round of litigation. The respondents were manufacturers of 'furfuraldehyde' (hereinafter referred to as furfural) which was an input for bulk drugs. Furfural was exempted from duty of excise under notifications issued from time to time. One of these notifications was Notification No. 147/84-CE dated 18.6.84, which was withdrawn with effect from 1.9.91 by Notification No. 35/91-CE. The respondents, however, continued to clear their product without payment of duty. The Department issued a show-cause notice dated 26.2.93 demanding duty from them in respect of the clearances of 'Furfural' for the period 1.9.91 to 29.12.92. The demand was resisted, but confirmed by the original authority as per an order dated 9.9.93. The demand so confirmed was for an amount of Rs. 1,54,41,755. The authority also imposed a penalty of Rs. 15.00 lakhs on the party under Rule 173Q. Aggrieved by this decision of the original authority [Collector of Central Excise], the respondents preferred an appeal to this Tribunal and made therein a pre-deposit of Rs. 40.00 lakhs as directed by the Tribunal. That appeal was disposed of as per order dated 8.5.96, whereby the order of the Collector confirming the demand of duty was upheld but the quantum of penalty was reduced. Thereupon, the respondents paid the balance of amount of duty (Rs. 1,15,41,755) on 23.7.96. The respondents, however, approached the Tribunal with an application seeking rectification of mistake in order dated 8.5.96, which application was partly allowed as per order dated 23.1.98. The order of rectification restricted the demand of duty to the normal period of limitation. Thus, the respondents were held not liable to pay duty for the period beyond the normal period of six months preceding the date of issue of the show-cause notice. Consequentially, the respondents were eligible to apply for a refund of duty. This application, they filed on 25.2.98 with the jurisdiction Assistant Commissioner. Subsequently, a show-cause notice dated 21.5.98 was issued to the respondents asking them to show cause why cash refund should not be denied on the ground of unjust enrichment. This show-cause notice was adjudicated upon by the Assistant Commissioner by order dated 8.12.99 whereby refund of an amount of Rs. 1,05,62,041 was sanctioned to the respondents. The department then preferred an appeal to the Commissioner (Appeals), pursuant to review of the Assistant Commissioner's order by the jurisdictional Commissioner. The Commissioner (Appeals), by order dated 20.10.2000, set aside the order of the lower authority and remanded the case to it with certain specific directions. The terms of this remand are contained in para 14 of the order of the Commissioner (Appeals), which is extracted below: "Let me first take up the department's grounds of appeal. On perusal of the impugned order, it is observed that the lower authority has not recorded in his findings as to how he was satisfied that incidence of duty was not passed on to the customers by the respondent company. The company merely said in their reply to show-cause notice dated 20.5.98 that they have not collected any amount towards duty from the customers. On perusal of the clearance documents like invoice cum delivery note for the relevant period that no duty amount was collected from the buyers. But all the invoices are marked as provisional. Since the duty liability is there on the impugned goods under above documents it is not known whether any supplementary invoices have been raised by the company to collect the duty portion from the customers. To this effect, no recording has been done by the lower authority. Since it is found from the invoices that the customers are only two (i.e.) MRL and IOC, the lower authority could have easily verified this fact from the other end. I direct the lower authority to verify this aspect after hearing the party".

In the remanded proceedings, the Assistant Commissioner made enquiries with the assessee's customers through the Central Excise officers having jurisdiction over them. The two customers so contacted by the original authority were M/s. Madras Refineries Ltd. [MRL] and M/s.

Indian Oil Corporation Ltd. [IOC]. M/s. MRL replied, saying that they did not pay any amount of excise duty by way of supplementary invoices in respect of the goods purchased from the respondents. M/s. Indian Oil Corporation Ltd., apparently, did not respond to the queries of the Assistant Commissioner. The Assistant Commissioner did not choose to wait for long for IOC's response either. After examining MRL's response, as part of an exercise of de novo adjudication, the Assistant Commissioner found the refund claim to have been hit by the bar of unjust enrichment and accordingly credited the amount to the Consumer Welfare Fund as per order dated 19.12.2001. Aggrieved by this order of the Assistant Commissioner, the respondents approached the Commissioner (Appeals) again and the latter allowed their appeal by order dated 24.2.2003 holding that the doctrine of unjust enrichment was not applicable to the facts of the case. Hence, the present appeal of the Revenue.

2. Heard both sides. Ld. Consultant Shri Mandal, representing the appellant, has made an attempt to revive the time-bar issue, after referring to a miscellaneous application filed in this appeal by the Department. Miscellaneous application No. E/AG/320/2003 was filed by the appellant for leave of the Bench to introduce an additional limitation-related ground in the appeal. We have perused this application and have considered the arguments thereon. The appellant wants to raise time-bar as (additional ground for challenging the refund order. Ld. Consultant has urged that this additional ground be allowed to be incorporated. This plea has been vehemently opposed by the respondents' counsel, who submits that the question whether the refund claim was time-barred or not had been buried long back. Counsel refers to the order dated 19.12.2001 of the Assistant Commissioner and submits that, in para 3(a) of the findings thereof, the adjudicating authority categorically held that "there cannot be a dispute on the part of time factor in preferring the claim by the assessee in the instant case. So, I do not propose to proceed further on this point".

It appears to us from this and further submissions made by both sides that the finding of the Assistant Commissioner has already become final and binding for want of challenge by the Department. The Assistant Commissioner's finding, upon attaining finality, rendered the refund claim immune to challenge on the ground of limitation. Hence, the application seeking to incorporate time-bar cannot be allowed and the same is rejected.

3. Ld. Consultant now proceeds to argue on the issue of unjust enrichment. He seeks to distinguish the case law relied on by the Commissioner (Appeals) in the impugned order. On the order hand, Ld.

Counsel for the respondents submits that the issue arising in this case stands squarely covered by the case law relied on by Ld. Commissioner (Appeals). Ld. Counsel adds to the case law by citing the Tribunal's decision in CCE, Pune v. Charda Chemicals Ltd., 2003 (56) RLT 929, wherein the above case law was followed. The case law relied on by the Commissioner (Appeals) is the following:Punjab Beverages Pvt. Ltd. v. CCE, Ld. Consultant has particularly relied on an observation contained in para 4 of the Tribunal's order in Easter Industries (supra), which was to the effect that the presumption under Section 12B could be only to the extent of duty assessed and paid at the time of clearance of goods and not of the duty subsequently collected from the assessee unless there was some positive evidence to that effect produced by the department. It has been argued that, where there is positive evidence produced by the department to show that the incidence of the duty in this case had actually been passed on by the assessee to their customers, the presumption under Section 12B is available. Ld.

Consultant submits that, in the instant case, the Department has been able to gather positive evidence in the form of purchase orders of the assessee's customers. It is pointed out that the purchase orders had incorporated therein a condition that, in the event to the goods being dutiable at any point of time in future, the liability would be on the buyer to pay up such duty. We have examined the purchase order of IOC placed on record by the Consultant and have found a condition to the above effect. However, we have not found any evidence whatsoever to show that the aforesaid condition was carried into effect. A specific query was put from the Bench as to whether the respondents' customers had acted upon the above condition by paying duty on the goods purchased from the respondents. The answer is in the negative. Yet another query was, contextually, made from the Bench as to whether the respondents had issued subsidiary invoices to their buyers subsequent to the clearance of the goods, to recover duty from them. Ld.

Consultant has replied that there is no such evidence on record. At this stage, he suggests a remand of the case to the original authority for fresh consideration of evidence on the unjust enrichment question.

This plea is opposed by the counsel, who submits that it is not open to the department to adduce fresh evidence at this stage.

4. We have examined all the submissions on the question of unjust enrichment. It is not in dispute that the amount of duty covered by the refund claim was paid long after clearance of the goods. It has been categorically held by this Tribunal in the case of Easter Industries (supra) that the presumption under Section 12B of the Central Excise Act would not be applicable to a claim for refund of duty which was paid subsequent to clearance of the goods. Ld. Consultant has picked one sentence from para 4 of the order in Easter Industries (supra) and the same reads as under: "It is not denied by the Revenue that only the lower amount of duty was assessed and paid at the time of removal of the goods so the presumption made in Section 12B can be only to the extent of duty assessed and paid at the time of clearance of the goods and not of the duty subsequently collected from the appellants unless there is some positive evidence to that effect produced by the department." Ld. Consultant's emphasis is on the Underlined clause of the sentence.

The argument, however, does not help the appellant inasmuch as the Revenue has not been able to show that the duty was subsequently collected by the respondents from their buyers by way of supplementary invoices or otherwise. Section 12B is to the effect that, in a sale of goods by the assessee to his buyer, it shall be presumed that the incidence of duty thereon has been passed on to the latter unless the contra is proved by the former. The incidence of duty should normally pass on alongwith the goods, and not later. Any different interpretation will be repugnant to the basic tenet of Central Excise law that excisable goods which are not exempt from payment of duty can be removed by the manufacturer only on payment of duty. In the instant case, there was no payment of duty at the time of removal of the goods by the respondents and, therefore, we have to accept the reliance placed by Ld. Commissioner (Appeals) on the Tribunal's decisions in Easter Industries (supra) and other cases. The stage of adducing evidence being long over, there is no scope for any remand of the matter. The dispute has to be given a quietus at this stage. As the presumption under Section 12B against the assessee was inapplicable to the facts of this case, the burden was on the Revenue to establish that the refund claim in question was barred by unjust enrichment. They have not succeeded in discharging this burden. Hence, the respondents will get cash refund of the amount alongwith admissible interest thereon, the impugned order is affirmed and Revenue's appeal is rejected.