By TIOL News Service

MUMBAI, JULY 08, 2016 : THIS is a case that began its onward journey almost three decades ago and yet the destination is nowhere near.

The factsare that during the process of manufacture, 'Notional Resin Contents of Wire Enamels' is formed and the same was consumed captively by the appellant, without payment of duty. After pointing out by the Department, the appellant started paying duty on the said product 'Under Protest'.

The Tribunal decided the issue in favour of the appellant.

Subsequently, the appellant filed a refund claim on 29.09.1988 which was rejected by the Assistant Commissioner vide Order-in-Original dated 26.05.1998.

The Commissioner (Appeals) rejected their appeal on 28.10.1999.

Pursuant to a special Civil Application filed, the Gujarat High Court directed the Deputy Commissioner to decide the matter afresh in the light of the apex court decision in Solar Pesticides Pvt. Ltd. - 2002-TIOL-57-SC-CX.

A show-cause notice dated 20.02.2001 was issued to the appellant proposing rejection of refund claim on the ground of unjust enrichment.

By an adjudication order dated 02.05.2001, the refund claim was rejected, on the grounds that the appellant have not furnished any documentary evidence that they have not recovered the incidence of duty from the buyers.

The Commissioner (Appeals) on 24.11.2003 upheld the rejection of refund claim.

The CESTAT, Ahmedabad, on 11.07.2007 remanded the matter to the original adjudicating authority for de novo adjudication.

In de novo adjudication, the adjudicating authority once again rejected the refund claim on the ground that appellant could not prove that the incidence of the duty had not been passed on to any other person.

Again, the Commissioner (Appeals) rejected the appeal and, therefore, the appellant is before CESTAT.

The appellant submitted that the duty was paid on the intermediate product 'Under Protest'. However, the duty paid was not taken into account of cost of the final products and which is proved by the fact that price of the final product before and after payment of duty remained the same.

Therefore, since the burden of the said duty was borne by the appellant, the refund is not hit by mischief of unjust enrichment. Reliance is placed inter alia on the decisions in Business Overseas Corporation - 2013-TIOL-1825-CESTAT-DEL, Infar India Ltd. - 2002-TIOL-23-CESTAT-DEL.

It is further submitted that the appellants have produced Chartered Accountant certificate wherein it is certified that the incidence of the duty paid has not been passed on as the same was not found to be part of the cost of the Wire Enamels. However,this evidence had been discarded by the lower authorities.

The AR submitted that the appellant had not shown amount of duty paid by them as a receivable in books of account ; being a very old matter, the Chartered Accountant certificate also does not show the correct position, hence the Chartered Accountant certificate is vague and the same was rightly rejected by the lower authorities;merely because the price of the final product before and after payment of duty remained same the same is not sufficient evidence to show that the evidence of duty has not been passed; that the order needs to be upheld.

The Bench observed -

"5. …From the fact of the case it appears that the appellant have paid the Excise duty on the intermediate product on insistence of the Department, therefore they paid the duty 'Under Protest'. This is not the case of Excise duty were directly charged in the invoice for the reason that the duty was paid on intermediate product. In such case the test whether the incidence of the duty is forming the part of the final product or otherwise can be ascertain only on the basis that whether price of final product has been enhanced due to duty burden on the intermediate products. In the present case the stand of the appellant that the price of the final product remained same before and after the payment of the excise duty on the intermediate product. As regard the finding of the lower authorities that the amount of duty paid was not shown as receivable in the books account of appellant and the same was booked under Profit & Loss account, therefore no other proof required that the duty incidence is not included in the value of final product. I do not agree with this contention of the lower authorities for the reason that treatment of duty paid amount in the books of account is not conclusive proof that the incidence has been passed on to some other person. Even if the duty paid booked under expenditure and the same has not been charged any person then the result will be in profit reduction that itself shows that the incidence of such duty has been borne by the appellant, hence not passed on to any other person. Therefore merely because the Excise duty is booked as expenditure in Profit & Loss account, it cannot be said the incidence of duty has been passed on. As per the above discussion, I am of the view that considering the peculiar facts of this case if the duty paid by the appellant has not been explicitly charged to their customer and if price of the final product remained same for the period prior to payment of duty and thereafter, it is sufficient to accept that the incidence of Excise duty paid on intermediate product has not been passed to any other person. I therefore direct the adjudicating authority to verify properly the above aspects and if it is found correct then the appellant appears to be prima facie entitled for the refund…."

The impugned order was set aside and the appeal was allowed by way of remand.

(See 2016-TIOL-1667-CESTAT-MUM)