M/S Transformers & Rectifiers (India) ... vs The Commissioner, Central Excise

[Arising out of OIA No. 167/2009(AHD-II)CE/ID/COMMR(A)AHD dated 31.3.2009 passed by the Commissioner (Appeals), Central Excise, Ahmedabad II]

M/s Transformers & Rectifiers (India) Ltd - Appellant (s)

Vs.

The Commissioner, Central Excise, - Respondent (s)

Ahmedabad II

Represented by:

Appellant (s) : Shri Dhaval Shah (Adv.) Respondent (s) : Shri J Nagori (AR)

For approval and signature :

Mr. P.K. Das, Honble Member (Judicial)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. P.K. Das, Hon.ble Member (Judicial)

Date of Hearing / Decision : 7/1/2015

ORDER No. A/10348 / 2015 dtd 7.1.2015

Per : Mr. P.K. Das,;

The relevant facts of the case, in brief, are that the appellants were engaged in the manufacture of Electrical Transformers classifiable under Chapter 85 of the First Schedule to the Central Excise Tariff Act 1985. They entered into a contract with Tamil Nadu Electricity Board (TNEB) for the supply of Transformers having capacity of 200 KVA to 150 MVA on ex-factory price of Rs 4,52,99,813/-. The goods were cleared upon payment of duty on ex-factory price as per contract. Subsequently, TNEB revised the price and reduced to Rs 4,21,30,638/-. Therefore, there is excess payment of duty of Rs 5,22,283/- as per price evaluation. The appellant filed refund claim of Rs 5,22,283/-. A Show Cause notice dtd 18.8.2008 was issued proposing to reject the refund paid mainly on the ground that the price fixed as per contract dtd 16/12/2006 for supply of 30 Numbers of auto transformers at a price of Rs 4,52,99,813/- and the price was reduced to Rs 4,21,30,638/- after the clearance of the goods and therefore refund is not permissible. The Adjudicating Authority rejected the refund claim holding that the value of goods under Section 4(1) of Central Excise Act 1944 has to be arrived at the time of delivery from place of removal. Any subsequent reduction in price would not in any way affect the payment of amount of duty. The refund claimed by the appellant was on reduction of price, subsequent to removal of goods cannot be accepted. The Commissioner (Appeals) rejected the appeal and upheld the adjudication order. It was held that the appellant failed to satisfy the principle of unjust enrichment.

2. Learned Advocate on behalf of the appellant submits that the appellant cleared the goods to M/s TNEB on the basis of the contract, which includes price variation clause. It is submitted that the price was reduced as per contract and therefore they are eligible for refund of excess duty paid by them. It is further submitted that the findings of the Commissioner (Appeals) is beyond the scope of adjudication order. It is contended that the contract and the payment particulars would clearly show that the excess amount of duty was not paid by M/s TNEB. The Learned Advocate submits that the appellant placed CAs certificate before the lower authorities, which was not considered. He strongly relied upon the decision of the Tribunal in the case of Sankhla Udyog vs CCE, Jaipur II [2014.TIOL.860. Cestat.Del] and CCE, Ghaziabad vs Mahavir Cylinders  [2013.TIOL.48. CESTAT.Del].

3. On the other hand the Learned Authorised Representative for the Revenue submits that the appellant had not opted provisional assessment under Section 9B of the Central Excise Act and therefore, they are not eligible for refund. He further submits that it is clearly evident from the statutory provision viz., Section 4(i) of the Act that duty is payable on the price at the time of place of removal. Any reduction of price after clearance of goods cannot effect the payment of duty on ex-factory price. He submits this issue is squarely covered in favour of the Revenue by the decision of Punjab & Haryana Honble High Court in the case of Mauria Udyog Ltd vs CCE  [2007(207)ELT.31 (P&H)]. In that case the Honble High Court followed the case of Metal Forgings vs UOI  [2002(146)ELT.241.SC]. He also relied upon the decision of the Tribunal as under:

a) Munjal Auto Industries vs CCE&ST, Vadodara  2014.TIOL.778 CESTAT.AHM

b) CCE Raipur vs Blastech (India) Pvt Ltd  2011(274)ELT.210 (Tri. Del)

4. After hearing both the sides and on perusal of the records, I find that the goods were cleared on the basis of agreement with M/s TNEB. For the purpose of proper appreciation of the case, the relevant portion of the agreement dtd 16.12.2006 is reproduced below:

c) The prices are exclusive of all State and Central taxes, Octroi and Excise duty and these elements costs will be paid as actual. The Excise duty will be paid only on Ex-works (including price variation increased/ decrease) against gate pass voucher/ authenticated suppliers invoice as per the circulars issued by the Central Excise Department. The present Excise duty applicable is 16%, Educational Cess on ED is 2%, Central Sales tax is 4% against form C on Ex-factory price plus Excise duty n cess.

d) The price variation is payable only on Ex-works price for transformer with OLTC alone vide clause 2, item 1(a) with a ceiling of +/- 30% and will be as per IEEMA formulae annexed herewith. The vase date shall be 01.11.2006. In the case of Supplies within, contractual delivery schedule, the price variation will be admitted at accruals.

5. The goods were cleared on payment of duty at the price as per the said agreement. Subsequently, ex-factory price was decreased to Rs 4,21,30,638/- as evident from the letter dtd 1.9.2007 of M/s TNEB. It is seen from the said letter that the appellants were requested to despatch the transformer to the sub-station site in co-ordination with the concerned Superintendent Engineer and carried out erection work. On perusal of the impugned order, I find that both the authorities below had not noticed that the price variation clause of the agreement. It is also clear from the letter dtd 1.9.2007 of M/s TNEB, where they requested the appellant to clear the transformer in the price of Rs 4.21 crores and it would cover the earlier consignment against the same contract. Thus, there is no clarity in the facts of the case and both the authorities below failed to appreciate the facts in proper manner.

6. The Tribunal in the case of Mahavir Cylinder (supra) held that refund can be granted to an assessee in a situation, where assessment were not made provisionally but the price of excisable goods were revised after clearance of goods as per price variation clause, which was in existence in the contract under which goods were cleared and the buyer adjusted the amount from sales price on the goods subsequently sold. In that case, the Tribunal passed the order relying on the decision of the Honble Supreme Court in the case of MRF Ltd vs CCE  1997(92)ELT.309(SC) and the decision of the Tribunal in the case of Universal Cylinders Ltd vs CCE Jaipur  2004.TIOL.1229.Cestat.Del. which was approved by the Honble Supreme Court as reported in 2005(179)ELT.A41.SC. The Tribunal in the case of M/s Mahavir Cylinders (supra) has observed as under:

 In the case of MRF Ltd the goods were not cleared under any agreement with the buyer incorporating price variation clause. Further the goods were of a type which were sold to an individual consumers whereas in this case the products are sold to an industrial consumer under an agreement having price variation clause. The decision of Tribunal in the case of Hindustan Wires relates to gas cylinders. Though in that case the claim was time barred Tribunal had examined the claim on merits and rejected by relying on the decision in each case of MRF (Ltd) (supra) without examining whether the clearance covered under an agreement with price variation can be considered on same footing as in the case of goods in the case of MRF Ltd. But later decisions of the Tribunal in similar matters is to the effect that refund can be granted in such cases as may be seen from the decision in the case of Universal Cylinders (supra) which was affirmed by the Apex Court as reported at 2005(179)ELT.A41-SC. So this issue is already decided in favour of the appellant to the extent it relates to claim which is not time barred.

7. In the present case, it transpires from the record that there was an agreement between the parties before the clearance of the goods. But it is not clear from the records that the letter dtd 1.9.2007 of M/s TNEB of reduction of the price would be applicable for the present clearance of goods, I find force in the submission of the Learned Advocate that the findings of the Commissioner (Appeals) is beyond the scope of adjudication order. The Adjudicating Authority had rejected the refund claim on the ground that the appellant is not eligible the refund on merits. After considering the decision of the Tribunal in the case of Mahavir Cylinders (supra), it is appropriate that the matter should be examined by the Adjudicating Authority in the light of the said decisions on merit and the issue of unjust enrichment, in the interest of justice.

8. In view of the above discussions, the impugned orders are set aside and remanded to the Adjudicating Authority to decide afresh after considering the above observations in accordance with the law. Needless to say that the adjudicating authority shall give proper opportunity of hearing to the appellant before passing of the order.

(Dictated and pronounced in the Court)

(P.K. Das) Member (Judicial)

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