HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM
C.E.A No. 21 OF 2004
26-11-2014 BETWEEN M/s. Hyderabad Chemical Supplies Limited, A-24/25, APIE, Balanagar, Hyderabad – 500 037, rep., by its Manager – Stores & Co-ordination, Mr. P.S.N. Murthy …Appellant And The Commissioner of Central Excise Customs, Hyderabad-IV, Commissionerate, Posnett Bhavan, Ram Koti, Hyderabad – 500 029 …..Respondent HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM
C.E.A No. 21 OF 2004
JUDGMENT: (per the Hon'ble Sri Justice L. Narasimha Reddy)
This central excise appeal under Section 35G of the Central Excise Act, 1944 (for short, ‘the Act’) is filed by the manufacturer/assessee under that enactment.
The appellant is a manufacturer of pesticides and the product is covered by the provisions of the Act and the Central Excise Rules, 1944 (for short, ‘the Rules’). On 13-02-1995, an order of provisional assessment was passed by the Assistant Commissioner of Central Excise under Rule 9B of the Rules. It is stated that after the said order was passed, the appellant supplied the product to the wholesale distributors, and trade discounts were given to promote sales.
In the context of passing final order of assessment, the appellant submitted price declarations as required under Rule 173C of the Rules and RT 12 returns under Rule 173(4). On a verification of the facts and figures furnished by the appellant, the Deputy Commissioner passed an order dated 31-05-2002, taking the view that the discounts claimed by the appellant are allowable. Based upon the final order of assessment, the appellant submitted a claim for refund of the differential amount. On receipt of the same, the Deputy Commissioner issued a show cause notice dated 24-12-2002 requiring the appellant to explain as to why, the claim for refund be not disallowed on the ground that trade discounts were given after the clearance of the goods; and thereby, it does not fall within the ambit of Section 11B of the Act. Not convinced with the explanation offered by the appellant, the Deputy Commissioner passed order dated 30-12-2002 confirming the show cause notice and rejecting the claim for refund, by placing reliance upon the order passed by the Customs, Excise and Gold (Control) Appellate Tribunal, South Zone Bench (for short ‘the CEGAT’) in Addison & Company vs. Commissioner of
[1]
Central Excise, Madras .
Aggrieved by that order, the appellant filed appeal before the Commissioner of Customs & E. Excise (Appeals), Hyderabad. During the pendency of the appeals, the Madras High Court reversed the above order of the Tribunal, in Commissioner v.
[2]
Addison & Co . Taking the same into account, the Commissioner allowed the appeal through order dated 12-03- 2003. Based upon the order passed by the Commissioner, the Deputy Commissioner also accorded sanction for refund of the amount. Thereafter, the Department filed further appeal before the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Bangalore (for short, ‘the CESTAT’) against the order dated 12-03-2003 passed by the Commissioner. The CESTAT allowed the appeal through order 12-05-2004 relying upon the order passed by its predecessor in S.Kumar Ltd. vs.
[3]
Commissioner of Central Excise, Indore . The said order is challenged in this appeal.
Heard Sri S. Dwarakanath, learned counsel for the appellant and Sri V. Gopala Krishna Gokhale, learned counsel for the respondent.
Section 4 of the Act, as it stood at the relevant point of time, provided for the manner in which the excise duty is to be levied. Ascertainment of the value of the manufactured goods is one of the important steps. The provision took into account, not only the cost of the production but also the discounts, which the manufacturer may have given to the wholesale dealers. As regards the point of levy of duty, despatches from the depot were also recognised, in addition to the despatches from the place of manufacture.
In the instant case, the order of provisional assessment was made on 13-02-1995 and excise duty so determined was paid. At the stage of passing of final order of assessment, the appellant placed before the Deputy Commissioner, the particulars of the discounts given by it in the relevant forms. The Deputy Commissioner was satisfied about the permissibility of such discounts, having regard to the purport of the law, as it stood then. The order holding that the discounts are in accordance with law has become final. It is only at the stage of refund of the differential amount, that certain controversy has arisen.
On receiving an application for refund of the differential amount, the Deputy Commissioner issued a show cause notice requiring the appellant to explain as to why the refund shall not be disallowed. Ultimately, an order to that effect was passed on 30- 12-2002. The Commissioner of Appeals agreed with the contention of the appellant herein and reversed the order passed by the Deputy Commissioner. The CESTAT however reversed that.
Heavy reliance was placed by the CESTAT on the order passed by its predecessor i.e., the CEGAT in S.Kumar’s case (3 supra). The facts in that case are substantially different from those of the present case. The manufacturer was found to have collected the amount, representing the excise duty and when the question of refund on the basis of an order passed in the appeal arose, the plea as to unjust enrichment was taken into account. Once the manufacturer has collected the component of excise duty, refund on account of the adjudication at a subsequent stage was found to be linked with the feasibility of passing on the benefit to the end customer. Such a situation does not obtain in the instant case. The trade discount was given to a wholesaler and not in the course of any retail sale. Further, it was paid at the prescribed point of sale, namely, at the stage of removal of goods from the place of manufacture as well as the depot, in favour of the wholesaler. The order passed by the Deputy Commissioner on 30-12-2002 in this behalf, became final.
The hurdle in the context of refund, namely, identification of the end customer from whom the component of excise duty does not arise in this case. The particulars furnished under Rule 173C and 173G contained the names of the persons who were extended the trade discounts. Since it was in the form of a credit note, it becomes clear that the corresponding burden did not pass on to the end customer.
Recently, this Court in A.P Paper Mills Limited v.
[4]
Commissioner of Central Excise dealt with identical question and held that the refund in case of this nature cannot be denied on the basis of the principle of unjust enrichment. Further, the view taken by the Tribunal is contrary to the judgment of the Karnataka High Court in Sudhir Papers Ltd., vs. Commissioner of C.Ex.,
[5]
Bangalore .
We, therefore allow the appeal. The miscellaneous petitions pending in this appeal shall also stand disposed of. There shall be no order as to costs.
L. NARASIMHA REDDY, J CHALLA KODANDA RAM, J 26-11-2014 ks Note:
LR copy to be marked.
B/O ks
[1] 1997 (93) ELT 429
[2] 2001 (129) ELT 44 (Mad)
[3] 2002 (143) ELT 641
[4] 2014 (5) ALT 665
[5] 2012 (276) ELT 304