COMMNR.,CENTRAL EXCISE, MADRAS Vs M/S. ADISON & CO. LTD.
Bench: ANIL R. DAVE,AMITAVA ROY,L. NAGESWARA RAO
Case number: C.A. No.-007906-007906 / 2002
Diary number: 7515 / 2002
Advocates: B. KRISHNA PRASAD Vs
V. N. RAGHUPATHY
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 7906 of 2002
Commissioner of Central Excise, Madras .... Appellant(s)
Versus M/s Addison & Co. Ltd.
… Respondent(s) WITH
CIVIL APPEAL No. 8488 of 2009
CIVIL APPEAL No. _________of 2016 (Arising out of SLP (C) No. 25055 of 2009)
CIVIL APPEAL No. _________of 2016 (Arising out of SLP (C) No. 18426 of 2015)
CIVIL APPEAL No. _________of 2016 (Arising out of SLP (C) No. 18423 of 2015)
CIVIL APPEAL No. _________of 2016 (Arising out of SLP (C) No. 18425 of 2015)
CIVIL APPEAL No. _________of 2016 (Arising out of SLP (C) No. 23722 of 2015)
CIVIL APPEAL No. 14689 of 2015
CIVIL APPEAL No. _________of 2016 (Arising out of SLP (C) No. 12282 of 2016)
CIVIL APPEAL No. _________of 2016 (Arising out of SLP (C) No. 16142 of 2016)
CIVIL APPEAL No. _________of 2016 (Arising out of SLP (C) No. 16141 of 2016)
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J U D G M E N T
L. NAGESWARA RAO, J.
The above Appeals have been listed before us because
of an order dated 16.07.2008, by which there was a
reference to a Larger Bench in view of the importance of
the questions involved.
2. Civil Appeal No. 7906 of 2002 arises from the
judgment dated 23.11.2000 passed by the Madras High
Court in R.C. No. 01 of 1999. Civil Appeal No. 14689 of
2015 was filed by the Revenue against the judgment dated
26.11.2014 in Central Excise Appeal No. 21 of 2009.
Special Leave Petition (C) Nos. 18426 of 2015, 18423 of
2015, 18425 of 2015, 23722 of 2015, 12282 of 2016,
16142 of 2016 and 16141 of 2016 are filed against the
judgment of the Andhra Pradesh High Court in Central
Excise Appeal Nos. 21 of 2005, 9 of 2005, 51 of 2004, 10
of 2005, 44 of 2004, 38 of 2004 and 18 of 2005
respectively.
3. Civil Appeal No. 8488 of 2009 is filed against the
judgment dated 20.08.2008 passed by the Bombay High
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Court in Central Excise Appeal No. 100 of 2008 and
Special Leave Petition (C) No. 25055 of 2009 is filed by the
Union of India against the judgment dated 26.11.2008 of
the High Court of Rajasthan at Jodhpur in D.B. Central
Excise Appeal No. 34 of 2007.
4. Civil Appeal No. 7906 of 2002 will be taken as the
lead matter as SLP (C) Nos. 18426, 23722, 18425, 18423
of 2015 and 12282, 16141 and 16142 of 2016 and Civil
Appeal No. 14689 of 2015 were disposed of by the Andhra
Pradesh High Court by following the Madras High Court’s
impugned judgment in Civil Appeal No. 7906 of 2002.
Civil Appeal No. 8488 of 2009 and SLP No. 25055 of 2009
will be dealt with separately as the facts and the point
involved are slightly different.
Civil Appeal No. 7906 of 2002
5. The respondent in the above appeal is a
manufacturer of cutting tools. The respondent-Assessee
filed a refund claim for Rs. 40,22,133/- on 19.07.1988 and
a supplementary refund claim for Rs. 5,44,688/- on
15.06.1989 towards excise duty paid on various taxes and
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discounts such as turnover tax, surcharge, additional
sales discounts, transitory insurance, excise discounts,
additional discounts and turnover discounts. The said
claim was later on revised to Rs. 40,37,938/- on
17.08.1988. The claim of the Assessee was that the said
amount was deductable from the excise duty. The
Department was of the opinion that the refund towards
turnover discount and additional discount was to be
rejected as the Assessee was not eligible for deduction
from the wholesale price for determination of value under
Section 4 of the Central Excises & Salt Act, 1944. On
23.08.1989 a notice was issued to the respondent to show
cause as to why the refund claim involving turnover
discount and additional discount should not be rejected.
After hearing the Assessee, the Assistant Collector by an
order dated 06.12.1989 rejected the refund claim
amounting to Rs.26,37,462/- and Rs.17,17,808/- in
respect of turnover discount and additional discount
respectively on the ground that the quantum of discount
become known only at the year end. The Collector of
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Central Excise Appeals set aside the said order dated
06.12.1989 of the Assistant Collector by his order in
appeal dated 21.02.1990 and held that the Assessee was
entitled to refund.
6. As per the amendment made to Section 11-B of the
Central Excise Act, 1944, (hereinafter referred to as “the
Act”) an application filed for refund prior to the Central
Excises & Customs Laws (Amendment) Act 1991 shall be
deemed to have been made under the Amendment Act and
considered accordingly. The Assistant Collector of Excise
issued a show cause notice dated 13.02.1992, directing
the Assessee to produce evidence in support of the refund
claim. It was mentioned in the said notice that the burden
of proof to show that the full incidence of duty has not
passed on to the buyers is on the Assessee as per Section
12-B of the Act.
7. The Assistant Collector passed an Order-in-Original
dated 27.10.1992 holding that the Assessee is entitled for
the refund claimed by him. The Collector of Central Excise
by Order-in-Appeal dated 20.10.1993 rejected the appeal
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filed by the Revenue and upheld the order dated
27.10.1992 of the Assistant Collector of Central Excise,
Madras Vth Division. The Customs, Excise and Gold
(Control) Appellate Tribunal (CEGAT), South Zone Bench
of Madras allowed the appeal filed by the Revenue against
the order dated 20.10.1993 of the Collector of Central
Excise. The Tribunal held that the Assessee would be
entitled to grant of refund only if he had not passed on the
duty burden to his buyers. It was also held that the buyer
in turn, would be entitled to claim refund only if he has
not passed on the incidence of duty to any other person. It
was further held by the Tribunal that the event which
gives rise to cause of action for refund is payment of duty
made in respect of goods cleared from the factory and once
the duty burden has been passed on to the buyer at the
time of clearance, issuance of credit note at a later point of
time would not entitle the Assessee to claim any refund.
The Tribunal also held that burden of duty is normally
passed by the manufacturer and the dealer to the ultimate
consumer.
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8. The Assessee filed an application for reference of
questions arising out of the final order dated 07.12.1996.
The Tribunal referred the following questions for
consideration of the High Court by its order dated
28.08.1998, taking note of the fact of the existence of
divergent views on the point.
“1. Whether by passing on the duty element on the
discount to its dealers the applicant had satisfied
the requirements of proviso ‘d’ to sub Section 11-B
(2) of the Central Excise Act, 1944 and was
therefore, entitled to be paid the amount claimed
as refund?
2. Whether the Tribunal after finding that the
burden of duty was passed on by the applicant to
its various dealers by issue of credit notes was
right in concluding that the ingredients of Section
11-B were not satisfied.”
9. The High Court of Madras answered the reference in
favour of the Assessee by its judgment dated 23.11.2000.
The High Court held that the refund towards deduction of
turnover discount cannot be denied on the ground that
there was no evidence to show who is the ultimate
consumer of the product and as to whether the ultimate
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consumer had borne the burden of the duty. According to
the High Court, Section 11-B of the Act cannot be
construed as having reference to the ultimate Consumer
and it would be sufficient for the claimant to show that he
did not pass on the burden of duty to any other person. It
was further held by the High Court that the claim for
refund made by the manufacturer is not dependent on the
identification of the ultimate consumer. The word ‘buyer’
used in Section 12-B of the Act does not refer to ultimate
consumer and has reference only to the person who buys
the goods from the person who has paid duty i.e. the
manufacturer. The High Court concluded that the
Tribunal committed an error in holding that the Assessee
was not entitled for refund despite the Assessee proving
that the duty was not passed on to its buyers. Challenging
the legality and validity of the said judgment of the High
Court, the Commissioner of Central Excise, Madras has
filed Civil Appeal No. 7906 of 2002.
10. We have heard Mr. Atmaram N. S. Nadkarni,
Additional Solicitor General and Mr. K. Radhakrishnan,
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Senior Advocate for the appellant and Mr. N.
Venkatraman, Senior Advocate for the respondent. The
learned Additional Solicitor General submitted that a claim
for refund can be entertained only when the claimant has
not passed on the duty to any other person. By referring
to the statement of objects and reasons for the amendment
made to the Central Excises & Customs Laws
(Amendment) Act 1991, the learned Additional Solicitor
General submitted that the Act had given effect to the
recommendations of the Public Accounts Committee
whereby the refund of any duty was proposed to be made
only to the person who ultimately bears the incidence of
such duty. He submitted that it would be necessary for a
verification to be done to find out as to who actually bore
the burden of duty. According to him such verification
would not stop with the manufacturer and his buyer but
would extend to the ultimate buyer i.e. the consumer. He
submitted that there can be no claim for refund on the
basis of post clearance transactions. He further submitted
that there is a presumption, though rebuttable, that the
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full incidence of the duty has passed on to the buyer of the
goods. The learned Additional Solicitor General has
strongly relied upon Mafatlal Industries Ltd. and
Others Vs. Union of India And Ors., reported in (1997)
5 SCC 536 to support his contentions on unjust
enrichment.
11. Mr. N. Venkatraman, Senior Advocate appearing for
the Assessee contended that turnover discount is an
admissible deduction, the scheme of turnover discount
was known to the buyer even at the time of sale, discount
was given on the basis of the turnover of sales made by the
buyer and that the credit notes issued to the buyer
contains the discounts and the duty element. Though
there is a confusion from the pleadings and the order
passed by the High Court regarding the passing of the
incidence of duty, Mr. N. Venkatraman had fairly
submitted that the incidence of duty was originally passed
on to the buyer. He submitted that the turnover discount
should be allowed to be deducted from the sale price as
held in Union of India and Others Vs. Bombay Tyre
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International Pvt. Ltd. reported in (1984) 1 SCC 467
and (2005) 3 SCC 787. He contends that in the said
judgments it was held that trade discounts should not be
disallowed only because they are not payable at the time of
each invoice or deducted from the invoice price. He also
placed reliance on IFB Industries Ltd. Vs. State of
Kerala reported in (2012) 4 SCC 618 to support his
submission that to qualify for exemption, discounts need
not be shown in the invoice itself.
12. Mr.Venkatraman further submitted that the eligibility
of the Assessee for refund of amounts towards turnover
discounts is no longer in doubt as this Court by its
judgment dated 11.03.1997 in Addison & Company Ltd.,
Madras Vs. Collector of Central Excise, Madras
reported in (1997) 5 SCC 763 had held that turnover
discount is an admissible deduction. He stated that
Section 4 read with Section 11-B of the Act permits the
respondent to claim for refund of turnover discount given
after the sale, provided the scheme of discount has been
agreed upon prior to the removal of the goods. The
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Assessee while issuing a credit note for the turnover
discount has returned the duty component forming part of
the said discount. As the Assessee has not retained the
duty component of the turnover discount, he does not
stand to benefit from both ends and hence he is entitled
for claiming a refund of the excess duty paid. The refund
to which the Assessee is entitled to would not result in any
unjust enrichment. While referring to the relevant
provisions of Section 11-B, 12-A and 12-B of the Act,
Mr. Venkatraman submitted that the buyer mentioned in
the said provisions would be the buyer of the goods from
the manufacturer Assessee. He stressed upon Clauses ‘a’
to ‘f’ of the Proviso to Section 11-B (2) in support of his
submission that the only persons eligible to make a claim
for refund would be the manufacturer, his buyer and a
class of persons as notified by the Central Government.
On the basis of the above submission, he states that there
is absolutely no necessity for any verification to be made
as to who is the ultimate consumer and as to whether he
had borne the burden of the duty. According to him, if the
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manufacturer is entitled for a refund towards an
admissible deduction, such refund has to be given to him
if he did not retain the benefit. He also stated that the
judgment of this Court in Mafatlal Industries Ltd. & Ors.
Vs. Union of India (supra) which was relied upon by the
learned Additional Solicitor General would, in fact, support
his case. He further submitted that the identity of the
Excise duty is lost at the sales conducted downstream as
the duty becomes part of the price.
13. In reply to the submissions of Mr. Venkatraman, Sr.
Advocate, the Ld. Additional Solicitor General stated that
the verification to be done by the Department to enquire
about the ultimate buyer who has actually paid the duty is
not a futile exercise. He stated that the refund can be
granted only to the person who has paid the duty and not
to anyone else. If the ultimate consumer cannot be
identified, the amount would be retained in the Fund and
utilized for the benefit of Consumers.
14. We have considered the submissions made by the
Counsel carefully and examined the material on record. The
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questions that arise for consideration in this case are
whether the Assessee is entitled for a refund and whether
there would be unjust enrichment if the said refund is
allowed. It was held by the Special Bench of CEGAT, New
Delhi by its judgment dated 17.03.1994 in Collector of
Central Excise, Madras Vs. Addison & Co. Ltd. that the
turnover discount is not an admissible abatement on the
ground that the quantum of discount was not known prior
to the removable of the goods. In an appeal filed by the
respondent-Assessee, this Court by its judgment dated
11.03.1997 in Addison & Co. Ltd. Vs. Collector of Central
Excise, Madras (supra) held that the turnover discount is
an admissible deduction. This Court approved the normal
practice under which discounts are given and held that the
discount is known to the dealer at the time of purchase.
The Additional Solicitor General submitted that any credit
note that was raised post clearance will not be taken into
account for the purpose of a refund by the Department. We
do not agree with the said submission as it was held by this
Court in Union of India Vs Bombay Tyre International
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(supra) that trade discounts shall not be disallowed only
because they are not payable at the time of each invoice or
deducted from the invoice price. It is the submission of the
Assessee that the turnover discount is known to the dealer
even at the time of clearance which has also been upheld by
this Court. It is clear from the above that the Assessee is
entitled for filing a claim for refund on the basis of credit
notes raised by him towards turnover discount.
15. The following provisions of Central Excise Act, 1944
are relevant for appreciating the point of unjust
enrichment:-
SECTION 11B. Claim for refund of duty. — “(1) Any person claiming refund of any duty of excise may
make an application for refund of such duty to the [Assistant
Commissioner of Central Excise or Deputy Commissioner of
Central Excise] before the expiry of [one year] [from the
relevant date] [[in such form and manner] as may be
prescribed and the application shall be accompanied by such
documentary or other evidence (including the documents
referred to in section 12A) as the applicant may furnish to
establish that the amount of duty of excise in relation to which
such refund is claimed was collected from, or paid by, him and
the incidence of such duty had not been passed on by him to
any other person :
Provided that where an application for refund has been
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made before the commencement of the Central Excises and
Customs Laws (Amendment) Act, 1991, (40 of 1991), such
application shall be deemed to have been made under this
sub-section as amended by the said Act and the same shall be
dealt with in accordance with the provisions of sub-section (2)
as substituted by that Act :]
[Provided further that] the limitation of [one year] shall not
apply where any duty has been paid under protest.
* * * *
(2) If, on receipt of any such application, the [Assistant
Commissioner of Central Excise or Deputy Commissioner of
Central Excise] is satisfied that the whole or any part of the
duty of excise paid by the applicant is refundable, he may
make an order accordingly and the amount so determined
shall be credited to the Fund :
Provided that the amount of duty of excise as determined
by the [Assistant Commissioner of Central Excise or Deputy
Commissioner of Central Excise] under the foregoing
provisions of this sub-section shall, instead of being credited to
the Fund, be paid to the applicant, if such amount is relatable
to-
(a) rebate of duty of excise on excisable goods exported
out of India or on excisable materials used in the
manufacture of goods which are exported out of India;
(b) unspent advance deposits lying in balance in the
applicant’s account current maintained with the
[Commissioner of Central Excise];
(c) refund of credit of duty paid on excisable goods used as
inputs in accordance with the rules made, or any
notification issued, under this Act;
(d) the duty of excise paid by the manufacturer, if he had not
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passed on the incidence of such duty to any other person;
(e) the duty of excise borne by the buyer, if he had not
passed on the incidence of such duty to any other person;
(f) the duty of excise borne by any other such class of
applicants as the Central Government may, by
notification in the Official Gazette, specify :
Provided further that no notification under clause (f) of the
first proviso shall be issued unless in the opinion of the
Central Government, the incidence of duty has not been
passed on by the persons concerned to any other person.
(3) Notwithstanding anything to the contrary contained in any
judgment, decree, order or direction of the Appellate Tribunal
of any Court in any other provision of this Act or the rules
made thereunder or any other law for the time being in force,
no refund shall be made except as provided in sub-section (2).
(4) Every notification under proviso to sub-section (2) shall be
laid before each House of Parliament, if it is sitting, as soon as
may be after the issue of the notification, and, if it is not
sitting, within seven days of its re-assembly, and the Central
Government shall seek the approval of Parliament to the
notification by a resolution moved within a period of fifteen
days beginning with the day on which the notification is so
laid before the House of the People and if Parliament makes
any modification in the notification or directs that the
notification should cease to have effect, the notification shall
thereafter have effect only in such modified form or be of no
effect, as the case may be, but without prejudice to the validity
of anything previously done thereunder.
(5) For the removal of doubts, it is hereby declared that any
notification issued under clause f of the first proviso to
sub-section (2), including any such notification approved or
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modified under sub-section (4), may be rescinded by the
Central Government at any time by notification in the Official
Gazette.]
[Explanation. — For the purposes of this section, -
(A) “refund” includes rebate of duty of excise on excisable
goods exported out of India or on excisable materials used in
the manufacture of goods which are exported out of India;
(B) “relevant date” means, -
(a) in the case of goods exported out of India where a
refund of excise duty paid is available in respect of the goods
themselves or, as the case may be, the excisable materials
used in the manufacture of such goods, -
(i) if the goods are exported by sea or air, the date on
which the ship or the aircraft in which such goods
are loaded, leaves India,
or
(ii) if the goods are exported by land, the date on
which such goods pass the frontier,
Or
(iii) if the goods are exported by post, the date of
dispatch of goods by the Post Office concerned to a
place outside India;
(b) in the case of goods returned for being remade, refined,
reconditioned, or subjected to any other similar process, in any
factory, the date of entry into the factory for the purposes
aforesaid;
(c) in the case of goods to which banderols are required to be
affixed if removed for home consumption but not so required
when exported outside India, if returned to a factory after
having been removed from such factory for export out of India,
the date of entry into the factory;
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(d) in a case where a manufacturer is required to pay a sum,
for a certain period, on the basis of the rate fixed by the
Central Government by notification in the Official Gazette in
full discharge of his liability for the duty leviable on his
production of certain goods, if after the manufacturer has
made the payment on the basis of such rate for any period but
before the expiry of that period such rate is reduced, the date
of such reduction;
[(e) in the case of a person, other than the manufacturer, the
date of purchase of the goods by such person;]
(ea) in the case of goods which are exempt from payment of
duty by a special order issued under sub-section (2) of section
5A, the date of issue of such order;]
(eb) in case where duty of excise is paid provisionally under
this Act or the rules made thereunder, the date of adjustment
of duty after the final assessment thereof;]
(f) in any other case, the date of payment of duty.]
SECTION 12A. Price of goods to indicate the amount of duty paid thereon. — Notwithstanding anything contained in this Act or any other
law for the time being in force, every person who is liable to
pay duty of excise on any goods shall, at the time of clearance
of the goods, prominently indicate in all the documents relating
to assessment, sales invoice, and other like documents, the
amount of such duty which will form part of the price at which
such goods are to be sold.
SECTION 12B. Presumption that the incidence of duty has been passed on to the buyer. — Every person who has paid the duty of excise on any goods
under this Act shall, unless the contrary is proved by him, be
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deemed to have passed on the full incidence of such duty to
the buyer of such goods.
SECTION 12C. Consumer Welfare Fund. — (1) There shall be established by the Central Government a
fund, to be called the Consumer Welfare Fund.
(2) There shall be credited to the Fund, in such manner as may
be prescribed, -
(a) the amount of duty of excise referred to in sub-section (2) of
section 11B or sub-section (2) of section 11C or sub-section (2)
of section 11D;
(b) the amount of duty of customs referred to in sub-section (2)
of section 27 or sub-section (2) of section 28A, or sub-section
(2) of section 28B of the Customs Act, 1962 (52 of 1962);
(c) any income from investment of the amount credited to the
Fund and any other monies received by the Central
Government for the purposes of this Fund.
SECTION 12D. Utilisation of the Fund. — (1) Any money credited to the Fund shall be utilised by the
Central Government for the welfare of the consumers in
accordance with such rules as that Government may make in
this behalf.
(2) The Central Government shall maintain or, if it thinks fit,
specify the authority which shall maintain, proper and
separate account and other relevant records in relation to the
Fund in such form as may be prescribed in consultation with
the Comptroller and Auditor-General of India”.
16. In the instant case, the Assessee has admitted that the
incidence of duty was originally passed on to the buyer.
There is no material brought on record to show that the
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buyer to whom the incidence of duty was passed on by the
Assessee did not pass it on to any other person. There is a
statutory presumption under Section 12-B of the Act that
the duty has been passed on to the ultimate consumer. It is
clear from the facts of the instant case that the duty which
was originally paid by the Assessee was passed on. The
refund claimed by the Assessee is for an amount which is
part of the excise duty paid earlier and passed on. The
Assessee who did not bear the burden of the duty, though
entitled to claim deduction, is not entitled for a refund as he
would be unjustly enriched.
It will be useful to refer to the relevant para of Mafatlal
Industries Vs. Union of India (supra) in this connection.
“108. (iii) A claim for refund, whether made under the provisions of the Act as contemplated in Proposition (i)
above or in a suit or writ petition in the situations
contemplated by Proposition (ii) above, can succeed
only if the petitioner/plaintiff alleges and establishes
that he has not passed on the burden of duty to
another person/other persons. His refund claim shall
be allowed/decreed only when he establishes that he
has not passed on the burden of the duty or to the
extent he has not so passed on, as the case may be.
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Whether the claim for restitution is treated as a
constitutional imperative or as a statutory requirement,
it is neither an absolute right nor an unconditional
obligation but is subject to the above requirement, as
explained in the body of the judgment. Where the
burden of the duty has been passed on, the claimant
cannot say that he has suffered any real loss or
prejudice. The real loss or prejudice is suffered in such
a case by the person who has ultimately borne the
burden and it is only that person who can legitimately
claim its refund. But where such person does not come
forward or where it is not possible to refund the
amount to him for one or the other reason, it is just and
appropriate that that amount is retained by the State,
i.e., by the people. There is no immorality or impropriety
involved in such a proposition.
The doctrine of unjust enrichment is a just and
salutary doctrine. No person can seek to collect the
duty from both ends. In other words, he cannot collect
the duty from his purchaser at one end and also collect
the same duty from the State on the ground that it has
been collected from him contrary to law. The power of
the Court is not meant to be exercised for unjustly
enriching a person. The doctrine of unjust enrichment
is, however, inapplicable to the State. State represents
the people of the country. No one can speak of the
people being unjustly enriched”.
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17. Section 11-B (2) of the Act contemplates that the amount
of refund determined by the Authorities shall be credited to the
fund. The Proviso to Section 11-B (2) permits the refund to be
paid to the applicant instead of being credited to the fund if
such amount is relatable to the manufacturer, the buyer or
any other such class of applicants as notified by the Central
Government.
18. Mr. Venkatraman interpreted the said provision to mean
that the only persons who were entitled for claim of refund are
the manufacturer, his buyer and any other class of persons as
notified by the Central Government. There is no dispute about
the fact that no notification has been issued by the Central
Government as contemplated in Clause (f) to proviso to Section
11-B (2) of the Act. He contested that the claim for refund can
be made only by the manufacturer or his buyer and any
enquiry pertaining to unjust enrichment should be restricted
only to the manufacturer and his buyer. The ultimate buyer/
consumer will not figure in the scheme of Sections 11-B, 12-A,
12-B and 12-C of the Act. This submission was accepted by
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the High Court in the impugned judgment. We do not approve
the findings of the High Court in this regard.
19. The sine qua non for a claim for refund as contemplated in
Section 11-B of the Act is that the claimant has to establish
that the amount of duty of excise in relation to which such
refund is claimed was paid by him and that the incidence of
such duty has not been passed on by him to any other person.
Section 11-B (2) provides that, in case it is found that a part of
duty of excise paid is refundable, the amount shall be credited
to the fund. Section 2 (ee) defines Fund to mean the
Consumer Welfare Fund established under Section 12-C.
There is a proviso to Section 11-B (2) which postulates that the
amount of excise duty which is refundable may be paid to the
applicant instead of being credited to the fund, if such amount
is relatable to the duty of excise paid by the manufacturer and
he had not passed on the incidence of such duty to any other
person. Clause (e) to proviso of Section 11-B (2) also enables
the buyer to receive the refund if he had borne the duty of
excise, provided he did not pass on the incidence of such duty
to any other person. There is a third category of a class of
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applicants who may be specified by the Central Government by
a notification in the official gazette who are also entitled for
refund of the duty of excise. A plain reading of Clauses (d), (e)
and (f) of the proviso to Section 11-B (2) shows that refund to
be made to an applicant should be relatable only to the duty of
excise paid by the three categories of persons mentioned
therein i.e. the manufacturer, the buyer and a class of
applicants notified by the Central Government. Clause (e)
refers to the buyer which is not restricted to the first buyer
from the manufacturer. The buyer mentioned in the above
Clause can be a buyer downstream as well. While dealing with
the absence of a provision for refund to the consumer in the
rules this Court in Mafatlal Industries Vs. Union of India
(supra) held as follows:-
“98. A major attack is mounted by the learned counsel for petitioners-appellants on Section 11-B and its allied
provisions on the ground that real purpose behind them
was not to benefit the consumers by refusing refund to
manufacturers (on the ground of passing on the burden)
but only to enable the Government to retain the illegally
collected taxes. It is suggested that the creation of the
Consumer Welfare Fund is a mere pretence and not an
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honest exercise. By reading the Rules framed under
Section 12-D, it is pointed out, even a consumer, who
has really borne the burden of tax and is in a position
to establish that fact, is yet not entitled to apply for
refund of the duty since the Rules do not provide for
such a situation. The Rules contemplate only grants
being made to Consumer Welfare Societies. Even in the
matter of making grants, it is submitted, the Rules are
so framed as to make it highly difficult for any
consumer organisation to get the grant. There is no
provision in the Act, Shri Nariman submitted, to locate
the person really entitled to refund and to make over
the money to him. “We expect a sensitive Government
not to bluff but to hand back the amounts to those
entitled thereto”, intoned Shri Nariman. It is a
colourable device — declaimed Shri Sorabjee — “a dirty
trick” and “a shabby thing”. The reply of Shri
Parasaran to this criticism runs thus: It ill-becomes the
manufacturers/Assessees to espouse the cause of
consumers, when all the while they had been making a
killing at their expense. No consumers' organisation
had come forward to voice any grievance against the
said provisions. Clause (e) of the proviso to sub-section
(2) of Section 11-B does provide for the buyer of the
goods, to whom the burden of duty has been passed
on, to apply for refund of duty to him, provided that he
has not in his turn passed on the duty to others. It is,
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therefore, not correct to suggest that the Act does not
provide for refund of duty to the person who has
actually borne the burden. There is no vice in the
relevant provisions of the Act. Rules cannot be relied
upon to impugn the validity of an enactment, which
must stand or fall on its own strength. The defect in the
Rules, assuming that there is any, can always be
corrected if the experience warrants it. The Court too
may indicate the modifications needed in the Rules.
The Government is always prepared to make the
appropriate changes in the Rules since it views the
process as a “trial and error” method — says Shri
Parasaran”.
20. There was a further submission which was considered in
the said judgment about the convenience/difficulty for the
ultimate consumer to make applications for refund. In that
connection it was held as follows:-
“99. We agree with Shri Parasaran that so far as the provisions of the Act go, they are unexceptionable. Section
12-C which creates the Consumer Welfare Fund and
Section 12-D which provides for making the Rules
specifying the manner in which the money credited to the
Fund shall be utilised cannot be faulted on any ground.
Now, coming to the Rules, it is true that these Rules by
themselves do not contemplate refund of any amount
credited to the Fund to the consumers who may have borne
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the burden; the Rules only provide for “grants” being made
in favour of consumer organisations for being spent on
welfare of consumers. But, this is perhaps for the reason
that clause (e) of the proviso to sub-section (2) of Section
11-B does provide for the purchaser of goods applying for
and obtaining the refund where he can satisfy that the
burden of the duty has been borne by him alone. Such a
person can apply within six months of his purchase as
provided in clause (e) of Explanation B appended to Section
11-B. It is, therefore, not correct to contend that the
impugned provisions do not provide for refunding the tax
collected contrary to law to the person really entitled
thereto. A practical difficulty is pointed out in this behalf by
the learned counsel for appellants-petitioners: It is pointed
out that the manufacturer would have paid the duty at the
place of “removal” or “clearance” of the said goods but the
sale may have taken place elsewhere; if the purchaser
wants to apply for refund — it is submitted — he has to go
to the place where the duty has been paid by the
manufacturer and apply there. It is also pointed out that
purchasers may be spread all over India and it is not
convenient or practicable for all of them to go to the place of
“removal” of goods and apply for refund. True it is that
there is this practical inconvenience but it must also be
remembered that such claims will be filed only by
purchasers of high-priced goods where the duty component
is large and not by all and sundry/small purchasers. This
practical inconvenience or hardship, as it is called, cannot
be a ground for holding that the provisions introduced by
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the 1991 (Amendment) Act are a “device” or a “ruse” to
retain the taxes collected illegally and to invalidate them on
that ground — assuming that such an argument is
permissible in the case of a taxing enactment made by
Parliament. (See R.K. Garg [(1981) 4 SCC 675 : 1982 SCC
(Tax) 30 : AIR 1981 SC 2138] and other decisions cited in
paras 87 and 88.)”
21. That a consumer can make an application for refund is
clear from paras 98 and 99 of the judgment of this Court in
Mafatlal Industries (supra). We are bound by the said
findings of a Larger Bench of this Court. The word ‘buyer’ in
Clause (e) to proviso to Section 11-B (2) of the Act cannot be
restricted to the first buyer from the manufacturer. Another
submission which remains to be considered is the requirement
of verification to be done for the purpose of finding out who
ultimately bore the burden of excise duty. It might be difficult
to identify who had actually borne the burden but such
verification would definitely assist the Revenue in finding out
whether the manufacturer or buyer who makes an application
for refund are being unjustly enriched. If it is not possible to
identify the person/persons who have borne the duty, the
amount of excise duty collected in excess will remain in the
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fund which will be utilized for the benefit of the consumers as
provided in Section 12-D.
22. The High Court proceeded on an erroneous assumption of
fact as well. It was held by the High Court that there is no
unjust enrichment as the burden has not been passed on. The
High Court’s interpretation of Section 11-B is also not correct.
23. In view of the above findings, the judgment of the High
Court is liable to be set aside. The Assessee is not entitled to
refund as it would result in unjust enrichment. The Appeal is
allowed and the judgment of the High Court is set aside.
Special Leave Petition (C) Nos. 18426, 23722, 18423, 18425 of 2015 and 12282, 16141 and 16142 of 2016.
Leave granted.
24. Civil Appeals arising out of Special Leave Petition (C)
Nos. 18426, 23722, 18423 and 18425 of 2015 are filed by
Commissioner of Central Excise, Vishakapatnam,
challenging the legality of judgment dated 19.02.2014 of a
Division Bench of the High Court of Andhra Pradesh in
Central Excise Appeal Nos. 51 of 2004 and 10, 9 and 21 of
2005. Civil Appeals arising out of SLP (C) Nos. 12282,
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Page 31
16141 and 16142 of 2016 are filed by the Commissioner of
Central Excise, Vishakapatnam against the judgment
dated 01.07.2015 of a Division Bench of the High Court of
Andhra Pradesh in Central Excise Appeal Nos. 44 and 38
of 2004 and 18 of 2005. These three appeals were
disposed of by the High Court in terms of its earlier
judgment dated 19.02.2014.
25. The Assessee i.e. Andhra Pradesh Paper Mills Ltd.
manufactures Paper and Paper boards. There is no
dispute that excise duty is paid by the Assessee and the
same is passed on to its buyers. Applications were filed by
the Assessee for refund of amounts towards trade
discounts that were given to its buyers. The refund claim
is on the basis of credit notes raised by the Assessee
subsequent to the sale/removal of goods. The credit notes
that were raised by the Assessee were towards trade
discounts which included the component of excise duty.
The refund claims of the Assessees were rejected by the
Assistant Commissioner of Central Excise, Rajahmundry
Division. The Commissioner Customs, Central Excise
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(Appeals) Hyderabad confirmed the said orders in the
appeals filed by the Assessee. The Customs, Excise and
Service Tax Appellate Tribunal, South Zonal Division,
Bangalore dismissed the appeals filed by the Assessee.
26. The Assessee approached the High Court of Andhra
Pradesh by filing Central Excise Appeals. By a judgment
dated 19.02.2014, the High Court of Andhra Pradesh
allowed the Central Excise Appeal Nos. 9, 10 and 51 of
2004 and 21 of 2005. The appeals were allowed, as being
squarely covered by the judgment of the Madras High
Court in Addison and Company Ltd., Madras Vs.
Collector of Central Excise, Madras reported in (1997)
5 SCC 763.
27. The Revenue has filed Special Leave Petitions against
the said judgment dated 19.02.2014. Special Leave
Petition (C) Nos. 12282, 16141 and 16142 of 2016 were
filed by the Revenue against the judgment dated
01.07.2015 of the Division Bench of the Andhra Pradesh
High Court which followed its earlier judgment dated
19.02.2014. The issues involved in the above Civil
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Appeals are similar to that of Civil Appeal No. 7906 of
2002.
28. The Appeals filed by the Revenue are allowed, in
terms of the judgment in Civil Appeal No. 7906 of 2002.
Civil Appeal No. 14689 of 2015
29. The above Civil Appeal is filed by the Commissioner
of Central Excise and Customs challenging the judgment
of the Andhra Pradesh High Court in Central Excise
Appeal No. 21 of 2004. The Respondent-Assessee
manufactures Pesticide formulations which are used as
pesticides in agricultural farms. The Pesticides are sold at
the factory gate and also through depots. The Assessee
submitted an application for refund towards allowable
discounts after the removal of goods from the factory.
Credit notes were issued by the Assessee in favour of the
buyers towards trade discounts which also contained a
component of the excise duty. There is no dispute
regarding the fact of payment of the excise duty originally
by the manufacturer being passed on to his buyers. The
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refund claim of the Assessee was rejected by the Deputy
Commissioner vide Order-in-Original No. 58 of 2002 dated
30.12.2002. The above said order was reversed by the
Commissioner of Customs and Central Excise by his order
dated 12.03.2003.
30. The Revenue filed an appeal before the Customs,
Excise and Service Tax Appellate Tribunal, South Zonal
Division, Bangalore which was allowed. The Assessee
preferred an appeal to the High Court aggrieved by the
order of the Customs, Excise and Service Tax Appellate
Tribunal, South Zonal Division, Bangalore. The High Court
following its own judgment in Andhra Pradesh Paper Mills
Vs. Commissioner of Central Excise allowed the appeal.
The point in this appeal is identical to the issue in Civil
Appeal No. 7906 of 2002. The Appeal filed by the Revenue
is allowed in terms of the judgment in Civil Appeal No.
7906 of 2002.
Special Leave Petition (C) No. 25055 of 2009
Leave granted.
31. The Assessee is engaged in the processing of
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man-made fibre. Prior to 11.06.2001 the CENVAT credit
admissible on the declared inputs used in the
manufacture of process of man-made fibre was 45 per
cent. The net duty payable on the fibre was 55 per cent of
the effective duty. On 11.06.2001, a notification was
issued increasing CENVAT credit from 45 per cent to 50
per cent which resulted in the net duty payable being 50
per cent. The Assessee continued to pay the effective duty
at 55 per cent for a short period between 11.06.2001 to
13.06.2001. The effective duty of excise is 16 per cent and
the duty payable from the personal ledger account prior to
the notification dated 11.06.2001 was 8.8 per cent and
after 11.06.2001 the duty payable is 8 per cent. The
Assessee made an application for refund of Rs. 61,146/-
paid in excess on 31.07.2001. The said application for
refund was rejected by an Order-in-Original dated
12.08.2002 by the Assistant Commissioner, Bhilwara on
the ground that the Assessee was a job worker engaged in
the processing of grey fabric and that the said fabric was
returned to the owners of the fabric who sold the
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processed fabric in the market. It was also held that the
incidence of the duty was passed on to the ultimate
customers/consumers before the debit notes were raised
by the owners of the fabric. As the duty paid at 8.8 per
cent was passed on by the owner of the fabric to the
ultimate consumer the processor was not entitled for a
refund.
32. The Assessee approached the Commissioner Appeals,
II Customs & Central Excise, Jaipur by filing an appeal
which was rejected by an order dated 27.02.2003. The
Central Excise and Service Tax Appellate Tribunal by its
order dated 11.05.2005 allowed the appeal filed by the
Assessee on the ground that the incidence of duty was not
passed on by the Assessee to the customers. The
customers protested to the charging of the net duty
payable at 8.8 per cent instead of 8 per cent in spite of the
notification issued on 11.06.2001. This protest was made
without any delay so the question of passing the incidence
of duty by the owners of the fabric to their customers does
not arise.
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33. In Central Excise Appeal No. 34 of 2005 filed by the
Union of India through Commissioner of Central Excise,
Jaipur, the High Court of Judicature for Rajasthan at
Jodhpur confirmed the order of the Central Excise and
Service Tax Appellate Tribunal. Challenging the said
judgment of the High Court dated 26.11.2008, the Union
of India has filed the above Appeal. The contention raised
by the Revenue before the High Court regarding the
presumption under Section 12-B of the Act was rejected by
the High Court by holding that once the Assessee shows
that he has not passed on the duty to his buyer, then the
burden shifts to the Revenue. The submission that there
is a presumption of the duty being passed on to the
ultimate consumer was not accepted by the High Court.
The High Court held that the claim for refund should be
accepted once the Assessee shows that he has raised a
credit note regarding the excess duty. The High Court had
further held that passing on the burden of excise duty to
the ultimate buyer cannot be left in the realm of
presumption.
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34. In Civil Appeal No. 7906 of 2002, we have already
held that in the claim for refund of excess duty paid can be
allowed only in case where the burden of duty has not
been passed on to any other person, which includes the
ultimate consumer as well. The findings in the
Order-in-Original and the Order-in-Appeal are that the
excise duty paid originally at the rate of 8.8 per cent was
passed on from the Assessee-processor to the owner of the
fabric and later to the customers. The point in this Appeal
is also identical to that of Civil Appeal No. 7906 of 2002.
The above appeal of the Revenue is allowed.
Civil Appeal No. 8488 of 2009
35. The respondent-Assessee is a 100 per cent Export
Oriented Unit (EOU) manufacturing cotton yarn. The
respondent filed an application for refund of an amount of
Rs. 2,00,827/- on 14.08.2002 on the ground that it had
paid excess excise duty at the rate of 18.11 per cent
instead of 9.20 per cent. The Assessee initially passed on
the duty incidence to its customers. Later the Assessee
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returned the excess duty amount to its buyers which was
evidenced by a certificate issued by the Chartered
Accountant on 02.08.2002. The refund claim was rejected
by the Deputy Commissioner of Central Excise, Kolhapur
Division vide an order dated 24.09.2002 on the ground
that the Assessee did not submit either the credit notes or
the Chartered Accountant’s certificate at the time of filing
the refund application. Not satisfied with the genuineness
of the documents the Deputy Commissioner rejected the
refund claim. The Commissioner (Appeals) Central Excise,
Pune allowed the appeal filed by the Assessee by taking
note of the certificate issued by the Chartered Accountant
and the credit notes dated 29.07.2002. The Appellate
Authority accepted the Assessee’s contentions and held
that there was no reason to doubt the genuineness of the
documents produced. The Appellate Authority allowed the
appeal of the Assessee and the said order was confirmed
by the Central Excise and Service Tax Appellate Tribunal
vide judgment and order dated 06.10.2005. The said order
of Central Excise and Service Tax Appellate Tribunal was
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further confirmed by the High Court of Judicature at
Bombay in Central Excise Appeal No. 100 of 2008 filed by
the Revenue. The Revenue has filed the above Civil Appeal
challenging the validity of the judgment of the High Court
in Central Excise Appeal No. 100 of 2008.
36. Except for a factual dispute about the genuineness of
the certificate issued by the Chartered Accountant and the
credit notes raised by the Assessee regarding the return of
the excess duty paid by the Assessee, there is no dispute
in this case of the duty being passed on to any other
person by the buyer. As it is clear that the Assessee has
borne the burden of duty, it cannot be said that it is not
entitled for the refund of the excess duty paid. In view of
the facts of this case being different from Civil Appeal No.
7906 of 2002, the appeal preferred by the Revenue is
dismissed.
37. As held above, Civil Appeal Nos. 7906 of 2002 and
14689 of 2015 are allowed. Civil Appeals arising out of
Special Leave Petition (C) Nos. 18426 of 2015, 18423 of
2015, 18425 of 2015, 23722 of 2015, 12282 of 2016,
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Page 41
16142 of 2016, 16141 of 2016 and 25055 of 2009 are also
allowed in terms of the judgment in Civil Appeal No. 7906
of 2002. Civil Appeal No. 8488 of 2009 is dismissed. No
order as to costs.
................................J. [ANIL R. DAVE]
................................J. [AMITAVA ROY]
................................J. [L. NAGESWARA RAO]
New Delhi, August 29, 2016
41