Commnr.,central Excise, Madras Vs M/s. Adison & Co. Ltd.

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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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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

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