M/S. Tansi Watch Assembly Unit vs Cce, Salem

(Arising out of Order-in-Appeal No. 39/2007-CE dated 19.04.2007, passed by the Commissioner of Central Excise (Appeals), Salem).

For approval and signature

Honble Shri R. PERIASAMI, Technical Member

M/s. Tansi Watch Assembly Unit : Appellants

Vs.

CCE, Salem : Respondent

Appearance

Ms. Radhika Chandrasekaran, Adv., for the applicant

Shri R. Subramaniyan, AC (AR) for the respondent

CORAM

Honble Shri R. PERIASAMI, Technical Member

Date of Hearing : 23.03.2015 Date of Pronouncement:

FINAL ORDER No. 40356 / 2015

This appeal is arising out of the Order-in-Appeal No. 39/2007 dated 19.04.2007 passed by the Commissioner (Appeals).

2. The brief facts of the case are that consequent on the OIA No. 189/2003-CE dated 15.10.03, the provisional assessment was finalized and the appellant filed refund claim. In the said order the lower appellate authority allowed the additional trade discounts, cash discounts, performance incentives, payment of freight and insurance etc. The Asst. Commissioner vide order dated 20.10.2006 sanctioned the refund but credited the same to the consumer welfare fund, as the appellants failed to produce any evidence against unjust enrichment. On appeal, the Commissioner (Appeals) rejected their appeal and upheld the order of the adjudicating authority.

3. The Ld. Advocate for the appellant submits that they are engaged in the manufacture of watches falling under Chapter 99 on behalf of Titan Industries Ltd. They have been allowed various deductions by the principal manufacturer and they opted for provisional assessment. The department finalized the assessment for the year 1996-97 on 10.01.99, and while finalizing the assessment, Addl. trade discounts cash discounts and performance incentives, seasonal discounts, freight and insurance were disallowed. On appeal the Commissioner (Appeals) allowed their appeal except seasonal discounts. Both the adjudicating authority and the appellate authority had rejected their refund under unjust enrichment clause. The unjust enrichment clause is not applicable in their case as the goods are sold to ultimate consumers from the stock point and the discounts were given to the customers at the stock point itself and the discounts were known prior to the removal of goods. In their own case, the Commissioner (Appeals) allowed their refund for assessment year 1995-96 vide order dated 187/1999 dated 01/09/99. The Revenue filed appeal before the Honble Tribunal against the above order and the Honble Tribunal dismissed the Revenue appeal vide Final Order No. 1103 & 1104/2000 dated 11.08.2000. The department preferred CMA before the Honble High Court of Madras against the order of the Tribunal and the same was dismissed the Revenue appeal vide order dated 15.11.2006. She submits that the refund claim is not hit by unjust enrichment clause as the department allowed their refund for the earlier period. She relied upon the following case laws in support of her contention.

1. CCE Vs. TVS Suzuki Ltd.

2003 (156) ELT 161

2. Hindustan Lever Ltd. Vs. CCE, Nagpur 2011 (274) ELT 146

3. CCE, Visakhapatnam Vs. A.P Paper Mills Ltd.

2006 (198) ELT 237

4. Tata Motors Ltd. Vs. CCE, Pune-I 2014 (307) ELT 761

She further submits that the period involved in the present appeal is 1996-97 and the provisional assessment was finalized on 11.01.99. Whereas, Rule 9B(5) was amended only from 25.6.99 wherein the provisions of Section 11 B(2) was made applicable for provisional assessment. Since the period of provisional assessment is prior to 25.6.99, unjust enrichment clause is not applicable in their case.

4. The Ld. AR reiterates the findings of the adjudicating authority and OIA. He further submits that unjust enrichment is applicable in their case as Section 11B came into effect from 01.08.98 only Rule 9(B) was amended on 25.06.99. By virtue of Section 11B where the unjust enrichment was extended for finalization of provisional assessment, unjust enrichment will apply in their case. He relied on the following case laws.

1. CCE, Mumbai-II Vs. Standard Drum & Barrel MFG.Co.- 2006 (199) ELT 590 (Bom.)

2. Sahakari Khand Udyog Mandal Ltd. Vs. CCE 2005 (181) ELT 328 (S.C.)

5. Heard both sides.

6. I have carefully considered the submissions from both the sides. On perusal of the records I find that the short issue involved in this case relates to refund sanctioned after finalization of provisional assessment and credited to the consumer welfare fund, whether the refund claim is hit by bar of unjust enrichment clause. There is no dispute on the merits that the admissibility of deductions of various discounts was decided by the Commissioner (Appeals) in the OIA 189/03 dated 15.10.03. The period involved in the present case relates to the finalization of provisional assessment for the year 1996-97, which was finalized on 11.01.99. The adjudicating authority has sanctioned the refund on account of finalization of the provisional assessment as per the Commissioner (Appeals) above order, but credited to the consumer welfare fund. Both the adjudicating authority and the lower appellate authority held that the appellants failed to discharge the burden that they have not passed on the duty to their customers. I find that in the present case appellant manufacture watches on behalf of M/s. Titan Industries and these watches are sold to the ultimate consumers after allowing the discounts and these discounts are pre-determined and already known to the trade before removal of the goods. This fact was discussed by the Commissioner (Appeals) in their own case in the earlier order 189/03 dated 15.10.03. Para 6.3 is reproduced below:-

6.3 On going through the records and documents produced, it is evident that the Additional Trade Discount (AT Discount-AV Discount), cash discount and performance incentive are available to all dealers/franchisees as per the terms of Trade and known prior to the removal of goods. Hence, these discounts satisfy all the conditions stipulated in the Apex Court decision. Further, these discounts are allowable as per the decision of High Court at Bombay in the case of Goodlass Nerolac Paints Ltd. Vs. UOI reported in 1993 (65) ELT 186 (Bom.) which attained the finality in Honble Apex Court since the SLP filed by the Revenue was dismissed on merits as reported in 1994 (73) ELT A58 (SC).

From the above order it is very clear that these discounts were given to the ultimate consumers before clearance. In identical issue, the Tribunal in the case of Tata Motors Vs. CCE, Pune (supra) has held that the discounts given before clearance, unjust enrichment clause will not be applicable. Relevant portion of the order is reproduced as under:-

In this case, the fact that the discount given by the appellant to their dealers regarding clearance of old stocks/prompt payment were in the knowledge of the dealers before the clearance of the vehicle, is not in dispute. The appellant was having a system that the invoices are to be raised on the pre-discounted assessable value of the vehicle and if any discount is entitled to the dealer that will be passed on to the dealers by way of credit notes. In that situation, the claim of the appellant is that duty component in the discount has not been passed on the dealers as the amount of discount has been credited in the account of dealers. Similar situation came up before the Honble High Court of Madras in the case of Addision & Co. wherein the Honble High Court held that where the entitlement discount has already known to the buyers, in that case if discount is given by way of credit note, the bar of unjust enrichment is not applicable but the said decision has been challenged before the Honble Apex Court and there is no stay of the operation of decision of the Honble High Court of Madras. Therefore, the decision of the Honble High Court is still in force. I further gone through the case law relied upon by the learned AR, all hese cases have been considered by the Honble High Court of Andhra Pradesh and thereafter the Honble High Court relying on the decision of Addision & Co. (supra) held that in a situation, the entitlement of the discount is already known to the buyer, in such a situation bar of unjust enrichment is not applicable. Apart from that in this case the appellant has shown the amount of duty refunded to them in the balance sheet as Receivable and got the confirmation from the dealers that they have received the credit of the discount through Credit notes.

7. In these circumstance, I hold that the appellant has been able to pass on the bar of unjust enrichment. Therefore, the appellant is entitled for refund claims. In these circumstances the impugned orders are set aside and the appeals are allowed with consequential relief.

Further the Division Bench of this Tribunal in the case of CCE, Andhra Pradesh Paper Mills (supra) has also held that question of unjust enrichment does not arise in the case of stock transfer. Both the above case laws are squarely applicable to the facts of the present case. In the present case, unjust enrichment does not arise as the discounts were pre-determined and already known prior to the removal of goods. By respectfully following the above Tribunals decisions, I hold that unjust enrichment is not applicable in the present case. Accordingly, the order sanctioning the refund and credited to the Consumer Welfare Fund is set aside and the appeal is allowed with consequential relief.

(Order pronounced in the open Court on )

(R. PERIASAMI) TECHNICAL MEMBER

BB

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