Vardhman Spg. and General Mills Vs. Collector of Customs - Court Judgment

Excerpt:
1. these are two appeals filed by the appellant in respect of refund claims for rs. 43,191 and rs. 4,90,696. the a.c. in his order held that the party in this case has not produced any evidence regarding the passing of the excess duty realised to consumers. the contention of the appellant that the burden of import duty was not passed on to the consumers was not accepted by the a.c. who held that the grant of refund claim to the party would amount to undue enrichment and accordingly rejected the refund claim. this order of the a.c. was confirmed by the collector (appeals).2. the brief facts of the case are that the appellants had imported acrylic fibre. the customs authorities while allowing the clearance of acrylic fibre charged basic import duty which was prevailing at the time of expiry of the said bond instead of the duty prevailing on the date of payment. the material on which duty was paid was consumed in the factory as raw materials for manufacture of acrylic yarn.3. shri r.s. saini, ld. consultant appearing for the appellants submitted that the customs and central excise officers have no authority to reject the claim for refund on the ground of unjust enrichment; that the collector (appeals) wrongly rejected their claim by placing reliance on the ratio of the judgment in the case of roplas india ltd. v. uoi [1988 (38) e.l.t. 27 (bom.)] decided by the hon'ble high court of bombay; that the collector (appeals) did not take into consideration the ratio of the decision pronounced by the tribunal in the case of anand metal & steel works v. cce, calcutta, reported in 1989 (41) e.l.t. 351; that the collector (appeals) rejected the claim relying on the judgment of the hon'ble supreme court in the case of shankar dal mills v. state of haryana reported in air 1980 sc 1037; that the ratio of the judgment is not applicable in the appellants' case as duty was recovered under coercion and was paid under protest.citing a number of cases, the ld. consultant submitted that he derives full support for his argument from the ratio of judgments in those cases; the appellants' refund claims are squarely covered by case law; that the a.c. and collector (appeals) have not adduced any evidence in support of its passing the burden to customers; that the final product acrylic yarn is exempt and invoices were produced before the collector (appeals) mat no duty was charged; that the imported goods acrylic fibre were not sold as such but were used as a material for manufacture of acrylic yarn; that the department has miserably failed to prove that the excess duty paid has been passed on to the customers or any drawback has been claimed for it and that the two orders passed by the a.c. and the collector (appeals) are based on presumption, surmises and assumption without having any documentary evidence to substantiate them and therefore prayed that the orders passed may be set aside and relief granted to the appellants.4. from the records it is seen that during the course of earlier hearing, the ld. consultant was directed to peruse the judgment of the apex court on the question of unjust enrichment holding that central excise & customs laws (amendment) act, 1991 which came into operation from 20-9-1991 have retrospective effect and, therefore, applied to refund orders passed before 20th september, 1991 [this order pertains to uoi v. jain spinners ltd. reported in 1992 (61) e.l.t. 321 (sc). ld.consultant also referred to the judgment of the hon'ble high court of bombay in the case of solar pesticides pvt. ltd. v. union of india reported in 1992 (57) e.l.t. 201 (bom.)].5. shri v.c. bhartiya, ld. jdr concedes that the case of the appellant is fully covered by the judgment of the hon'ble bombay high court.6. heard both sides and considered their submissions. we observe that the position has been very lucidly explained by the bombay high court in the case of solar pesticides pvt. ltd. v. union of india reported in 1992 (57) e.l.t. 201 (bom.). in the present case before us the imported acrylic fibre has not been sold by the appellants to anybody. they have used the said goods themselves for manufacture of acrylic yarn. the appellants have therefore not passed on the duty paid by them on acrylic fibre to any buyer. had they done so, the buyer of the imported fibre would have claimed a refund and so on. since the appellants have consumed the imported acrylic fibre in the process of manufacture of acrylic yarn, they had not passed the incidence of duty to anybody in the manner envisaged in the scheme because the scheme envisages a direct transfer of the burden of duty along with sale of same goods which were imported to the buyer. undoubtedly, the import duty paid on acrylic fibre may become a part of the cost of manufacture of acrylic yarn. but when acrylic yarn is sold in the market it is difficult to ascertain how much of the import duty on acrylic fibre is passed on to the buyer of the acrylic yarn and in what proportion. nor can there be in such a case a kind of documentation required under the scheme, so that the buyer of the acrylic yarn cannot claim a refund of any part of the duty on acrylic fibre. where there is no sale of goods which were imported and no direct transfer of burden of duty to the buyer of the imported goods, the case falls under clause (a) or (b) of the proviso to section 27(2) of the customs act, 1962. we respectfully agree with the findings of the hon'ble high court of bombay and allow the appeals.the impugned orders are accordingly set aside.

Judgment:
1. These are two appeals filed by the appellant in respect of refund claims for Rs. 43,191 and Rs. 4,90,696. The A.C. in his order held that the party in this case has not produced any evidence regarding the passing of the excess duty realised to consumers. The contention of the appellant that the burden of import duty was not passed on to the consumers was not accepted by the A.C. who held that the grant of refund claim to the party would amount to undue enrichment and accordingly rejected the refund claim. This order of the A.C. was confirmed by the Collector (Appeals).

2. The brief facts of the case are that the appellants had imported acrylic fibre. The customs authorities while allowing the clearance of acrylic fibre charged basic import duty which was prevailing at the time of expiry of the said bond instead of the duty prevailing on the date of payment. The material on which duty was paid was consumed in the factory as raw materials for manufacture of acrylic yarn.

3. Shri R.S. Saini, Ld. Consultant appearing for the appellants submitted that the customs and central excise officers have no authority to reject the claim for refund on the ground of unjust enrichment; that the Collector (Appeals) wrongly rejected their claim by placing reliance on the ratio of the judgment in the case of Roplas India Ltd. v. UOI [1988 (38) E.L.T. 27 (Bom.)] decided by the Hon'ble High Court of Bombay; that the Collector (Appeals) did not take into consideration the ratio of the decision pronounced by the Tribunal in the case of Anand Metal & Steel Works v. CCE, Calcutta, reported in 1989 (41) E.L.T. 351; that the Collector (Appeals) rejected the claim relying on the judgment of the Hon'ble Supreme Court in the case of Shankar Dal Mills v. State of Haryana reported in AIR 1980 SC 1037; that the ratio of the judgment is not applicable in the appellants' case as duty was recovered under coercion and was paid under protest.

Citing a number of cases, the Ld. Consultant submitted that he derives full support for his argument from the ratio of judgments in those cases; the appellants' refund claims are squarely covered by case law; that the A.C. and Collector (Appeals) have not adduced any evidence in support of its passing the burden to customers; that the final product acrylic yarn is exempt and invoices were produced before the Collector (Appeals) mat no duty was charged; that the imported goods acrylic fibre were not sold as such but were used as a material for manufacture of acrylic yarn; that the Department has miserably failed to prove that the excess duty paid has been passed on to the customers or any drawback has been claimed for it and that the two orders passed by the A.C. and the Collector (Appeals) are based on presumption, surmises and assumption without having any documentary evidence to substantiate them and therefore prayed that the orders passed may be set aside and relief granted to the appellants.

4. From the records it is seen that during the course of earlier hearing, the Ld. Consultant was directed to peruse the judgment of the Apex Court on the question of unjust enrichment holding that Central Excise & Customs Laws (Amendment) Act, 1991 which came into operation from 20-9-1991 have retrospective effect and, therefore, applied to refund orders passed before 20th September, 1991 [This order pertains to UOI v. Jain Spinners Ltd. reported in 1992 (61) E.L.T. 321 (SC). Ld.

Consultant also referred to the judgment of the Hon'ble High Court of Bombay in the case of Solar Pesticides Pvt. Ltd. v. Union of India reported in 1992 (57) E.L.T. 201 (Bom.)].

5. Shri V.C. Bhartiya, Ld. JDR concedes that the case of the appellant is fully covered by the judgment of the Hon'ble Bombay High Court.

6. Heard both sides and considered their submissions. We observe that the position has been very lucidly explained by the Bombay High Court in the case of Solar Pesticides Pvt. Ltd. v. Union of India reported in 1992 (57) E.L.T. 201 (Bom.). In the present case before us the imported acrylic fibre has not been sold by the appellants to anybody. They have used the said goods themselves for manufacture of acrylic yarn. The appellants have therefore not passed on the duty paid by them on acrylic fibre to any buyer. Had they done so, the buyer of the imported fibre would have claimed a refund and so on. Since the appellants have consumed the imported acrylic fibre in the process of manufacture of acrylic yarn, they had not passed the incidence of duty to anybody in the manner envisaged in the scheme because the scheme envisages a direct transfer of the burden of duty along with sale of same goods which were imported to the buyer. Undoubtedly, the import duty paid on acrylic fibre may become a part of the cost of manufacture of acrylic yarn. But when acrylic yarn is sold in the market it is difficult to ascertain how much of the import duty on acrylic fibre is passed on to the buyer of the acrylic yarn and in what proportion. Nor can there be in such a case a kind of documentation required under the scheme, so that the buyer of the acrylic yarn cannot claim a refund of any part of the duty on acrylic fibre. Where there is no sale of goods which were imported and no direct transfer of burden of duty to the buyer of the imported goods, the case falls under clause (a) or (b) of the proviso to Section 27(2) of the Customs Act, 1962. We respectfully agree with the findings of the Hon'ble High Court of Bombay and allow the appeals.

The impugned orders are accordingly set aside.