CX - Refund - If it is established that appellant was issued debit note by principal towards excise duty initially paid by appellant and same has been accounted for in books of both parties, it is clear that incidence of duty paid does not stand passed on to principal: CESTAT
By TIOL News Service
MUMBAI, JULY 05, 2016 : THIS is an appeal filed by the assessee in the year 2010.
The appellant is doing job work for M/s V N Thakkar Hingwala & Sons - blending of Asafoetida with gum and wheat flour and paying duty. The appellant were getting lumpsum amount from their principals. At the end of the month, the appellant were raising the debit notes against the principal for the entire amount of excise duty paid during the month by adjusting the advance deposit.
There was a dispute regarding the process of compounding of Asafoetida, whether it amounts to manufacture or not, which traveled up to the Supreme Court and was finally settled in favour of the appellant. Accordingly, they returned the amount towards excise duty to the principal and thereafter claimed refund of said duty from the department.
The refund claim was sanctioned but credited into Consumer Welfare fund.
An appeal against this order proved fruitless and, therefore, the appellant filed an appeal before the CESTAT.
The appellant submitted that upon issue of debit note the burden of the duty has been borne by the appellant and the incidence thereof has not been passed on to any other person; that the CA certificate was discarded by the Commissioner (A) on the ground that the same alone is not proof that incidence of duty has not been passed onto any other person. It is also emphasized that in cases where there is pre-arrangement between seller and buyer on the issue of dispute of duty and when dispute is settled and amount has been adjusted by way of debit/credit note, refund will not hit by unjust enrichment. Reliance is placed on the decisions in Om Pharmaceuticals Ltd., The Phoenix Mills Ltd. - 2014-TIOL-1692-CESTAT-MUM.
The AR justified the action of the lower authorities by citing the decisions in M/s. Videocon International Ltd. - 2014-TIOL-50-CESTAT-MUM, TVS Electronics Ltd. - 2011-TIOL-2015-CESTAT-MAD.
The Bench observed -
"6. The issue of unjust enrichment is more of facts rather than the legal issue. On the available facts it has to be established that whether the incidence of duty for which refund was sought for, has been passed on to any other person or otherwise. In the present case there was prearrangement between appellant as a job worker and recipient of the goods i.e. principal that on settlement of the issue of duty on the job work goods, the duty so paid and recovered shall be returned by the appellant to the principal. It is also fact that the principal who is recipient of the goods has issued debit note towards amount of excise duty subsequent to the settlement of the issue. This fact has been certified by the C.A. by way of certificate that whatever duty was paid by the appellant was returned in the form of debit note issued by the principal to the appellant. If this transaction is correct then there is no reason to say that incidence of duty paid by the appellant and initially recovered but subsequently duty was returned back to the recipient of the goods, how the said amount can be recovered from any other person unless until it is proved by the department on the basis of tangible evidence….I am therefore of the view that if it is established that the appellant was issued debit note by the principal towards the excise duty initially paid by the appellant and same has been accounted for in the books of accounts of both the parties, it is clear that the incidence of duty paid by the appellant does not stand passed on to the principal. I am therefore of the view that both the lower authorities wrongly credit refund amount into consumer welfare fund. As I stated above, if the transaction of debit note is not found to be incorrect on the basis of books of account of the appellant then it is established that incidence of refund amount has not been passed on to any other person. I therefore direct the original adjudicating authority to verify the books of account of the appellant on the aspect as discussed above and re-process the refund claim accordingly…."
The appeal was disposed of by way of remand.
(See 2016-TIOL-1625-CESTAT-MUM)
