Visaka Industries Ltd vs Cce, Bangalore-Ii Commissionerate

[Arising out of Order-in-Appeal No. 161/2012 dated 25/06/2012 passed by CCE(Appeals), Mangalore]

For approval and signature:

HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER

1 Whether Press Reporters 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 the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 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

Visaka Industries Ltd. Appellant(s)

Versus

CCE, Bangalore-II Commissionerate Respondent(s)

Appearance:

Shri S. R. Madhavamurthy, Advocate For the Appellant

Shri R. Gurunathan, Addl. Commissioner(AR) For the Respondent

Date of Hearing: 01/05/2015

Date of Decision: 

CORAM:

HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER

Final Order No. __________________

Per : ARCHANA WADHWA

After hearing both the sides, I find that the appellants, who are engaged in the manufactured of asbestos cement products falling under Chapter 68 of the Central Excise Tariff Act, 1985, filed refund claim of Rs.79,333/- for the period March 2006 to July 2006 on the ground that the duty originally paid by them was on the higher side inasmuch as subsequently they have issued credit notes to their distributors, to whom the goods were sold. They were issued a show-cause notice proposing rejection of the said refund claim on the ground of unjust enrichment. The matter was adjudicated by the original adjudicating authority rejecting the said refund claim on the ground that the appellant has not produced any documentary evidence to show that the benefits have been passed on to the ultimate customers.

2. The said order of the original adjudicating authority was upheld by Commissioner(Appeals). Thereafter an appeal was filed before Tribunal, who vide their Final Order No.939/2009 dt. 13/05/2009 took note of various decisions of the Tribunal and observed that there is no requirement to establish that the discount has reached the ultimate customers. As long as the persons who purchased the goods from the manufacturer have been given credit notes, the same would suffice the principles of unjust enrichment. The Tribunal took note of the decision in the case of CCE, Guntur Vs. Triveni Glass Ltd. [2006(72) RLT 353 (CESTAT-Bang.)] and Chennai Petroleum Corporation Ltd. Vs. CCE, Chennai [2004(168) ELT 395 (Tri. Chennai)]. The Tribunal further observed that inasmuch as the lower authorities have not taken note of the said decisions, the matter is fit for remand to the original adjudicating authority.

3. During remand proceedings, Assistant Commissioner again rejected the refund claim on the sole ground that the distributors are further selling the goods to the final consumer and there is no proof on record to show that the final consumer has been extended the benefit of low rate of duty. The said order of the Assistant Commissioner was impugned before Commissioner(Appeals), who upheld the same on the ground that the quantitative discounts offered by the appellant to the distributor subsequent to the sale of the goods cannot be allowed as deduction from the assessable value inasmuch as the said discounts were not known prior to the removal of the goods from the factory. As such, he held that the appellants claim of quantitative discounts cannot be entertained subsequent to the clearance of the goods and the duty paid at the time of clearances of the goods on the assessable value is the final duty, in the absence of any provisional assessments.

4. The said order of the Commissioner(Appeals) is impugned before Tribunal.

5. The contention of the learned advocate is that Commissioner(Appeals) has rejected their appeal on merits and on the ground which was not the subject matter of the show-cause notice. The proceedings out of the show-cause notice had travelled upto the Tribunal, when the matter was remanded only on the point of unjust enrichment and Commissioner(Appeals) has no jurisdiction to go beyond the scope of such proceedings and to reject the claim on altogether new issue.

As regards unjust enrichment, he submitted that there is no dispute about the credit notes having been issued to the distributors to whom the goods were sold. As such, for all purposes, distributor is the buyer of the goods and the credit notes having been issued to the said distributor, the principles of unjust enrichment stand fully satisfied. The Revenue is not within its jurisdiction to go further and find out as to whether the distributor has further recovered the disputed differential duty amount from their ultimate customers or not. For the said proposition, he relies upon the Honble High Court of Madras decision in the case of Addison & Co. Vs. CCE, Madras [2001(129) ELT 44 (Mad.)]. He also submitted that such credit notes were issued to the distributor before the sale of the goods by the distributor to the ultimate customers. As such, he pleaded that the refund cannot be held to be hit by the bar of limitation.

6. Learned DR appearing for the Revenue reiterated the reasoning of the authorities below.

7. After carefully considering the submissions made by both the sides, I find that admittedly show-cause notice was issued to the appellant for rejecting the refund claim on the point of unjust enrichment. The same was actually rejected by the Assistant Commissioner as also by the Commissioner(Appeals) on the said issue only. When the matter travelled upto Tribunal, the arguments were advanced by both the sides only on the point of unjust enrichment and the Tribunal remanded the matter to the lower authorities with directions to reconsider the issue of unjust enrichment based upon the declaration of law by various courts. The original adjudicating authority rejected the refund claim, in de novo proceedings on the basis of unjust enrichment only.

8. It is for the first time that when the appeal was filed before Commissioner(Appeals) against the rejection of the refund claim vide adjudication order passed in de novo proceedings that Commissioner(Appeals) examined the refund claim on merits. Though I find acceptance in the reasononings of Commissioner(Appeals) that when the quantitative discounts were not known at the time of removal of the goods and the duty was paid on the higher assessable value, subsequent reduction of the assessable value may not be in accordance with law, especially when the assessment was not provisional. Further I find force in the plea of the learned advocate that the issue on merits was never the subject matter of the proceedings and introduction of the same, for the first time, by Commissioner(Appeals), while deciding the remand proceedings, cannot be appreciated. Taking up the matter on merits, which were not subject matter of the show-cause notice, amounts to going beyond the show-cause notice. Not only that when the matter was addressed by the Tribunal for the first time, Revenue never raised the issue that the refund claim is not admissible even otherwise. The matter was argued only on the issue of unjust enrichment. As such, I fully agree that rejection of refund claim on merits by Commissioner(Appeals) is not proper and legal.

9. As regards unjust enrichment, Revenue is not disputing the fact of issuance of the credit notes to the distributors. The distributors have purchased the goods from the appellant and as such are buyers of the goods. The Honble High Court of Madras in the above referred case of Addison and Company has held that in Central Excise Act, duty is levied on the manufacturer and the quantum of duty is determined with reference to the price at which the manufacturer sells to the buyers, who in most cases will be a dealer and not on the price at which that buyer, in turn, sells to his sub-dealers or to the retailers or to the ultimate consumer. The dealer who had obtained the goods from the manufacturer may charge to his buyer the full amount of duty ignoring the duty receipt of the manufacturer and the said fact cannot be a ground for denying the refunds to the manufacturer. Apart from that I also note that the Tribunal while remanding the matter has taken the note of other decisions of the Tribunal. The original adjudicating authority in remand proceedings has not adverted to the said decisions and has rejected the refund claim on the same very limited ground, which was adopted by him in the first round of litigation.

10. It is not disputed that the appellant has given quantitative discounts to their distributors and have issued credit notes to them. The distributors are the buyers and for the purpose of unjust enrichment, they have to be considered so. There is no concept of not passing on the duty to the ultimate consumer and as long as the buyers had been passed on the benefit of reduction in duty, the same would satisfy the principles of unjust enrichment. Accordingly I hold that the appellant is entitled to the refund of duty. The impugned orders are set aside and the appeal is allowed with consequential relief, if any, to the appellant.

(Pronounced on .)

ARCHANA WADHWA JUDICIAL MEMBER Raja..

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