Motor Industries Company Ltd. Vs. Commissioner of Cus. - Court Judgment

Excerpt:
1. this appeal is filed against the order-in-appeal no. c. cus.372/2002, dated 21-8-2002, passed by the commissioner of customs (appeals), chennai. the appellants imported electric power tools during the period from 31-5-95 to 24-8-95. in view of the investigation by special valuation branch cell, the appellants made a provisional clearance on execution of a written bond for a value of rs. 4,83,200/- at the instance of the customs authorities. the appellants paid 5% extra duty deposit on each one of their clearances which were totally 14 in number. the total amount paid as extra duty deposit worked out to rs. 4,18,574/- on 28-8-1995, the assistant collector of customs, special valuation branch (svb) informed the appellants that the invoices value for imports have been accepted. on that basis, an assessment was completed. consequent to the completion of the assessment, the appellants have filed refund application on 20-12-2000 before the deputy commissioner of customs. the refund is for a sum of rs. 4,18,574/-. the deputy commissioner in his order dated 10-1-2002, credited the refund due to the appellants to the consumer welfare funds on the ground of unjust enrichment. the appellants were not successful even before the commissioner (appeals). hence they come before the tribunal for relief.3. shri rajesh chander kumar, learned advocate appeared for the appellants and shri r. n. viswanath, learned sdr appeared for the revenue. (i) the appellate authority has ignored the rulings of the tribunal holding that if the prices have remained the same before the payment and after the presumption would be that the duty burden has not been passed on to the customers. even though the appellants have filed sufficient evidence proving this aspect, the authority ignored the same. (ii) the appeals filed by the revenue against the above mentioned tribunal rulings have been dismissed by the apex court. the issue has reached finality. the appellate authority ought to have followed the above rulings. (iii) the tribunal have consistently held that no adverse presumption merely because duty element was not shown separately as per the requirement of section 28c of the customs act, 1962. as long as the prices have remained the same, then it is immaterial whether duty was shown separately as a composite price. when there is no dispute that the prices remained the same, the authorities should have followed the tribunal rulings and allow the appeal. (iv) the appellants proved beyond doubt that the amounts are shown as receivables as on 31-3-2001 as per standard accounting practice. the appellants submitted enormous evidence in support of their plea that the amounts are shown as receivables only as on 31-3-2001. the appellate authority has chosen to reject it by presuming own reasons without any basis in law. (v) the lower authority ignored the documentary evidence in the form of delivery challans, invoices, chartered accountant's certificate and extracts of books of account, all of which clearly showed that the appellants had not passed on the incidence of extra duty deposit made by the appellants at the time of provisional assessment to their customers. (vi) the lower authority misdirected himself in looking for an accounting of the extra duty deposit as receivables during the financial year 1995-96 itself. the commissioner failed to see as per the guidance note on accounting policies issued by the institute of chartered accountants especially accounting standard as-4, contingent gains should not be recognized in the financial statements until the realization of the gain is virtually certain. this explanation and details of guidance issued by the institute of chartered accountants of india was let in as evidence before the lower authority who has omitted to appreciate the same. only when the customs authorities informed the appellants to file a refund claim vide letter dated 31-1-2001, the refund became a reality. therefore immediately thereafter the extra duty deposit paid by the appellants was indicated and recognized in the financial statement for the year 2000-01 as receivables. (vii) the learned advocate relied on a number of case laws on the subject.5. the learned sdr urged the point that even if the imports were made in the year 1995, only in the account of the year 2000-01, the amount was shown as receivables. in view of this, the lower authority has rightly rejected the refund claim.6. we have gone through the records of the case carefully. in this case, pending svb investigations, the appellants were ordered to pay the required sum as extra duty deposit. in other words, the amount paid by the appellants at the instance of the customs authorities is duty deposit only. the customs authorities had doubt about the value shown in the invoices and on investigations, it was found that the value shown was correct. in these circumstances, even without any letter or application from the appellants, the department is duty bound to refund the deposit. the appellants have furnished enormous evidence to show that the extra duty deposit has not been passed on to the buyers of the goods. they have explained the reason for showing the amount in the accounts of the year 2000-01 as the amount receivable and not in the year 1995. they have explained that in the year 1995, when the imports were made and they were asked to pay extra duty deposit by the customs, they were not very sure of getting back the money from the customs. the fact is that the money is not payable was confirmed only in 2001. this is the reason for showing the duty as receivable in the accounts of 2000-01. in our view this explanation is acceptable. moreover, the appellants have also demonstrated that the prices before import and subsequently remain the same. in our view, sufficient evidence has been produced by the appellants to prove that they have not passed on the duty burden to their buyers. the tribunal in the case of printers (mysore) ltd. v. commissioner of customs, chennai [2001 (132) e.l.t.641 (tri. - chennai)] has held that when no change has taken place in the price structure of the product, after increasing rate of duty, incidence of duty cannot be said to have been passed on to the customer. the apex court in the case of mahavir aluminium ltd. v.collector of central excise, jaipur [1999 (114) e.l.t. 371 (s.c.)] has rejected the department's plea that refund of the amount predeposited for hearing of an appeal not to be released to the assessee unless it is established that he has not wrongly enriched himself by collecting duty from his customers. this decision has been relied on by the tribunal in the case of steelco gujarat ltd. v. commissioner of central excise, vadodara [2000 (122) e.l.t. 67 (tribunal)]. the high court of judicature at bombay in the case of suvidhe ltd. v. union of india [1996 (82) e.l.t. 177 (bom.)] has held that provisions of section 11b can never be applicable to the deposit made under section 35f. in our view, the ratio of these decisions is clearly applicable to the present case. hence we allow the appeal with consequential relief.(operative portion of the order has been pronounced in the court on completion of the hearing)

Judgment:
1. This appeal is filed against the Order-in-Appeal No. C. Cus.

372/2002, dated 21-8-2002, passed by the Commissioner of Customs (Appeals), Chennai.

The appellants imported electric power tools during the period from 31-5-95 to 24-8-95. In view of the investigation by Special Valuation Branch Cell, the appellants made a provisional clearance on execution of a written bond for a value of Rs. 4,83,200/- at the instance of the Customs authorities. The appellants paid 5% extra duty deposit on each one of their clearances which were totally 14 in number. The total amount paid as extra duty deposit worked out to Rs. 4,18,574/- On 28-8-1995, the Assistant Collector of Customs, Special Valuation Branch (SVB) informed the appellants that the invoices value for imports have been accepted. On that basis, an assessment was completed. Consequent to the completion of the assessment, the appellants have filed refund application on 20-12-2000 before the Deputy Commissioner of Customs. The refund is for a sum of Rs. 4,18,574/-. The Deputy Commissioner in his order dated 10-1-2002, credited the refund due to the appellants to the Consumer Welfare Funds on the ground of unjust enrichment. The appellants were not successful even before the Commissioner (Appeals). Hence they come before the Tribunal for relief.

3. Shri Rajesh Chander Kumar, learned Advocate appeared for the appellants and Shri R. N. Viswanath, learned SDR appeared for the Revenue.

(i) The appellate authority has ignored the rulings of the Tribunal holding that if the prices have remained the same before the payment and after the presumption would be that the duty burden has not been passed on to the customers. Even though the appellants have filed sufficient evidence proving this aspect, the authority ignored the same.

(ii) The appeals filed by the Revenue against the above mentioned Tribunal rulings have been dismissed by the Apex Court. The issue has reached finality. The appellate authority ought to have followed the above rulings.

(iii) The Tribunal have consistently held that no adverse presumption merely because duty element was not shown separately as per the requirement of Section 28C of the Customs Act, 1962. As long as the prices have remained the same, then it is immaterial whether duty was shown separately as a composite price. When there is no dispute that the prices remained the same, the authorities should have followed the Tribunal rulings and allow the appeal.

(iv) The appellants proved beyond doubt that the amounts are shown as receivables as on 31-3-2001 as per standard accounting practice.

The appellants submitted enormous evidence in support of their plea that the amounts are shown as receivables only as on 31-3-2001. The appellate authority has chosen to reject it by presuming own reasons without any basis in law.

(v) The lower authority ignored the documentary evidence in the form of delivery challans, invoices, Chartered Accountant's certificate and extracts of Books of account, all of which clearly showed that the appellants had not passed on the incidence of extra duty deposit made by the appellants at the time of provisional assessment to their customers.

(vi) The lower authority misdirected himself in looking for an accounting of the extra duty deposit as receivables during the financial year 1995-96 itself. The Commissioner failed to see as per the guidance note on accounting policies issued by the Institute of Chartered Accountants especially accounting standard AS-4, contingent gains should not be recognized in the financial statements until the realization of the gain is virtually certain.

This explanation and details of guidance issued by the Institute of Chartered Accountants of India was let in as evidence before the lower authority who has omitted to appreciate the same. Only when the Customs authorities informed the appellants to file a refund claim vide letter dated 31-1-2001, the refund became a reality.

Therefore immediately thereafter the extra duty deposit paid by the appellants was indicated and recognized in the financial statement for the year 2000-01 as receivables.

(vii) The learned Advocate relied on a number of case laws on the subject.

5. The learned SDR urged the point that even if the imports were made in the year 1995, only in the account of the year 2000-01, the amount was shown as receivables. In view of this, the lower authority has rightly rejected the refund claim.

6. We have gone through the records of the case carefully. In this case, pending SVB investigations, the appellants were ordered to pay the required sum as extra duty deposit. In other words, the amount paid by the appellants at the instance of the Customs authorities is duty deposit only. The Customs authorities had doubt about the value shown in the invoices and on investigations, it was found that the value shown was correct. In these circumstances, even without any letter or application from the appellants, the department is duty bound to refund the deposit. The appellants have furnished enormous evidence to show that the extra duty deposit has not been passed on to the buyers of the goods. They have explained the reason for showing the amount in the accounts of the year 2000-01 as the amount receivable and not in the year 1995. They have explained that in the year 1995, when the imports were made and they were asked to pay extra duty deposit by the Customs, they were not very sure of getting back the money from the Customs. The fact is that the money is not payable was confirmed only in 2001. This is the reason for showing the duty as receivable in the accounts of 2000-01. In our view this explanation is acceptable. Moreover, the appellants have also demonstrated that the prices before import and subsequently remain the same. In our view, sufficient evidence has been produced by the appellants to prove that they have not passed on the duty burden to their buyers. The Tribunal in the case of Printers (Mysore) Ltd. v. Commissioner of Customs, Chennai [2001 (132) E.L.T.641 (Tri. - Chennai)] has held that when no change has taken place in the price structure of the product, after increasing rate of duty, incidence of duty cannot be said to have been passed on to the customer. The Apex Court in the case of Mahavir Aluminium Ltd. v.Collector of Central Excise, Jaipur [1999 (114) E.L.T. 371 (S.C.)] has rejected the Department's plea that refund of the amount predeposited for hearing of an appeal not to be released to the assessee unless it is established that he has not wrongly enriched himself by collecting duty from his customers. This decision has been relied on by the Tribunal in the case of Steelco Gujarat Ltd. v. Commissioner of Central Excise, Vadodara [2000 (122) E.L.T. 67 (Tribunal)]. The High Court of Judicature at Bombay in the case of Suvidhe Ltd. v. Union of India [1996 (82) E.L.T. 177 (Bom.)] has held that provisions of Section 11B can never be applicable to the deposit made under Section 35F. In our view, the ratio of these decisions is clearly applicable to the present case. Hence we allow the appeal with consequential relief.

(Operative portion of the order has been pronounced in the court on completion of the hearing)