Commnr.
of Central Excise, Calcutta Vs. M/S. Panihati Rubber Ltd [2006] Insc 569 (8 September 2006)
S.B.
Sinha & Dalveer Bhandari
(Arising
out of SLP(C)No.17735/2004) S.B. Sinha, J.
Leave
granted.
The
respondent, which is a Company incorporated and registered under the Indian
Companies Act, manufactures 'Hose Pipe'. It supplies goods manufactured by it
to the Indian Railways. The goods are manufactured in terms of the
specifications of the railway administration.
Supplies
are, however, made against specific contracts. The respondents used to pay 30%
basic excise duty and 15% special duty. The goods came to be classified under
Sub-Heading 4009.92. The said classification was in dispute. The contention of
the manufacturers was that it is classifiable under Sub-Heading 4009.99. The lis
ended in favour of the respondent. It, however, obtained clearance of the goods
on payment of duties under protest as the products had been classified under
classification 4009.92. The respondent filed two applications for refund of
Rs.6.30 lakhs, which had already been paid by way of excise duty. The said
applications were rejected by the authorities under the Act (Central Excise and
Salt Act, 1944) opining that the same would amount to unjust enrichment. The
respondent preferred an appeal before the Customs, Excise & Gold (Control)
Appellate Tribunal, which was registered as Appeal No.E/R-79/98. The question,
which arose before the Tribunal, was : "As to whether the goods supplied
to the railway administration included the element of excise duty?" The
Tribunal for determining the issue went through the correspondences exchanged
by and between the contracting parties, as also the certificate issued by the
railway administration and held :
"I
have perused the records and considered the rival submissions. According to the
contract, the prices were inclusive of excise duty. The subsequent letter from
the railways indicated that no amount was provided towards excise duty while
pricing was worked out. One letter specifically stated "E.D.-Nil".
This would suggest that the price fixed under the contract did not provide for
an element towards the Central Excise duty." While arriving at the said
finding, the Tribunal relied upon its own (107) ELT 246 (Tribunal)], wherein it
was held :
"We
have given careful consideration to the rival submissions. The clue to the
problem in this case lies in a proper understanding of the provisions in the
work order particularly with reference to the rates. There is an apparent
conflict in what is stated in different parts of the schedule of rates. Thus,
as against a note that the rates are inclusive of all duties, taxes and to and
fro handling charges in one place there is another remark regarding the rates
under the caption condition of contract which is more elaborate than the
earlier referred to sentence. This reads as follows :
-
Rates The rates
are inclusive of all materials, labour, equipment, lifts, leads, Sales tax, octroi
required in connection with completion of work to the entire satisfaction of the
Corporation. All the materials are to be supplied by the Contractor unless
otherwise stated.
-
Rates shall be
valid till the entire work is 100% complete, and no escalation will be
considered at any stage." An application for reference was filed by the appellant
herein before the Calcutta High Court. The Tribunal was directed to refer to
the High Court the following questions:
-
"Whether or
not the bar of unjust enrichment will be attracted in a case where duty has
been passed on to the buyer of goods not separately as duty but by inclusion in
the price as one component of the same?
-
Whether the
Learned Tribunal was justified in holding that the bar of unjust enrichment
would not be attracted when the price is inclusive of duties and taxes
following the case of CIMMCO Ltd. Reported in 1999 (107) ELT 246 (Tribunal)?
-
Whether the Hon'ble
Tribunal was justified in passing the order ignoring the principles of law laid
down in the case of Mafatlal Industries reported in 1997 (89) ELT 247 (SC) and
the findings of the department indicated in the order in original?"
The
High Court, by its impugned judgment, affirmed the findings of the Tribunal, holding
:
"Having
regard to the definite view expressed by the learned Tribunal that the bar of
unjust enrichment was not attracted in the instant case the questions as framed
in our view do not require any answer since we agree that having paid the
excise duty under protest and there being a subsequent finding that no excise
duty was payable in respect of the goods, the respondent company was entitled
to refund and there was no question of unjust enrichment in the instant
case."
Mr. Harish
Chander, learned Senior Counsel appearing on behalf of the appellant submitted
that
-
The Tribunal and
consequently, the High Court committed an error in passing the impugned
judgment in so far as they failed to take into consideration that the question,
'As to whether the price included excise duty or not?', was a comprehensible
one, having regard to the terms of the contract.
-
Subsequent
correspondence by and between the respondent and the railway administration
were wholly irrelevant.
Mr.
K.V. Vishwanathan, learned counsel appearing on behalf of the respondent, on
the other hand, contended
-
The findings of
the Tribunal being findings of fact, this Court should not interfere therewith.
-
The question as
to whether the assessee has passed on the element of excise duty to its
customers, being essentially question of fact, this Court may not exercise its
jurisdiction under Article 136 of the Constitution of India.
It is
now well settled that despite levy of excise duty in a given situation being
held to be illegal, in the event it is found that the assessee in fact passed
on the burden of excise duty to its customers, applying the principle of unjust
enrichment, the Court would not ordinarily direct refund thereof.
The
question whether the excise duty had been passed on to the consumer, however,
is essentially a question of fact. It is not in dispute that prior to 1993
goods were being classified under the Sub-Heading 4009.92 of the Schedule
appended to the Central Excise Tariff Act, 1985 attracting @30% advalorem as
basic excise duty and 15% as special basic duty. It is furthermore not in
dispute that the Bombay High Court in the case of M/s.
Rubber
Products Ltd. vs. Union of India, reported in 1992 (43) ECR 520 held :
"The
duty was recovered from the Company on the basis that the product manufactured
attracts sub- heading 4009.92 of the Tariff and that was the basis of order
passed by the Assistant Collector. The order of the Assistant Collector was set
aside by the Appellate Collector and it was ordered that the duty is payable
under sub-heading 4009.99 of the Tariff. The order of the Appellate Collector
has acquired finality and, therefore, excess duty recovered by the Department
is liable to be refunded." In this case also, the respondent had, in view
of the decision rendered by the excise authorities as affirmed by the High
Court in M/s. Rubber Products Ltd. (supra), filed a revised classification
list. It is only during the pendency of the said application it received four
orders from the Railway Administration. The prices fixed for the goods were as under
:
"Order
Date Price per unit 16.02.1993 Rs. 48.90 p.
18.02.1993
Rs. 46.90 p.
06.04.1993
Rs. 47.90 p.
10.05.1993
Rs. 48.65 p."
The
excise duty was specified as 'Nil' in the order dated 10th May, 1993. So far as the order dated 6th April, 1993 is concerned, no excise duty was specified. However, in the
order dated 16th February, 1993 a stipulation was made by the Railway
Administration that the price was inclusive of duty, with a view to avoid the
claim made by the respondent at a later stage on the ground that a duty had to
be paid. It is also not in dispute that clarifications were obtained by the
respondent from the Railway Administration specifically in this behalf. The
railway administration by its letter stated :
"Assistant
Controller Controller of Stores Central Excise Department N. Rly. Khardah
Division Bonda House 4,Barabourne
Road New Delhi. Calcutta-700 001
Sub
: This Office
Purchase order of 07938759101595 Dt. 10.5.93 for the supply of Hose Pipe
VB-504/ M Fix 10,000.
Ref
: Firm Letter
No.BPE/Sales/M2 (19-D-11-7-01).
This
Office Purchase order 07923259101595 dated 10-5-93 for the supply of Hose Pipe
VB-504/M @Rs. 48.65 each and 4/CST E.DC Nil Spare copy of the same enclosed
for your ready reference :- Sd/- Illegible For Controller of Stores" A
certificate was also issued by the Railway Administration on 26.9.1994 stating
:
"This
is to certify that M/s. BAJORIA RUBBER INDUSTRIES LIMITED, CALCUTTA had supplied the full quantity of
7,000 Nos. of Vaccum Hose Pipe VB- 504/M at Rs.48.90 each (inclusive of Excise
Duty) plus CST 4%. It is confirmed that the firm has supplied the materials at
the ordered rate and payment has been arranged at contracted rate which was
always payable irrespective of the Central Excise Duty rate being NIL or
otherwise. No separate payment has been arranged for actual CED." In a
letter dated 18.7.1995, the Eastern Railway Administration furthermore
contended as under :
"To
Dated 18.7.95.
The
Assistant Collector Central Excise Khardah Division, 4, Braboune Road, Calcutta-700001.
Dear
Sir, Sub: Purchase from M/s. Bajoria Rubber Industries Ltd. 27, Bentinck Street Calcutta-1.
Ref: Letter No.
-
Case No.V(18)KDH/BRU/94/
2600 dt. 21.6.95.
-
Case No.V(18) 1KDH/BRU/
94/57 dt.4.1.95.
In
case of Purchase order No.11/98/23/4/1/81288 dated .4.93, the rate was Rs.47.90
each and WBST @ 4.6% extra, Ex. duty not mentioned in the said P/O payment was
made to the diem as purchasers of the P/O.
In
case of P.O. No. 11/93/2313/1/78290 dated 18.2.93, the rate was Rs. 46.90 each
inclusive of Excise duty and WBST @ 4.6% extra. Payment made accordingly."
If the price for supply of Hose Pipes in respect of the contract dated 10th May, 1993 being @ Rs. 48.65p. did not include
the element of excise duty, the same being 'Nil', the Tribunal may be correct
in its opinion that the question of excise duty having been passed by the
respondent to the Railway Administration would not arise. In respect of the
other three orders, wherein the rates quoted was Rs.46.90p., Rs.47.90p. and
Rs.48.65p. also the said question would not arise as the rate included the
element of excise duty.
The
respondents, in our opinion, rightly contended that as the Central Excise
Authorities were unwilling to accept the classification under the Sub- Heading
4009.99 with 'Nil' rate of duty, they had no other option but to clear the said
goods upon payment of duty under protest, wherein they were required to compute
the value in terms of Section 4(4)(d) of the Central Excise Act, 1944.
The
respondent, in his counter affidavit, categorically stated :
".....According
to the said provision, the value on which duty was payable did not include the
amount of excise duty payable. Accordingly, though the contract price did not
include any amount on account of duty, the respondent had to deduct from the
contract price the amount of duty it was required by the Central Excise
Authorities to pay under sub-heading No. 4009.92 in order to arrive at the
value and the amount paid under protest was worked out accordingly. In the
Central Excise gate-passes in form No. GP-1 and the Central Excise price-lists
filed under rule 173C of the Central Excise Rules, 1944 (hereinafter referred
to as "the Rules"), the respondent mentioned the assessable value and
duty in accordance with the provisions of Section 4(4)(d)(ii) by breaking up
the contract price although the same did not include any amount on account of
excise duty. In the invoices raised on the Railways, the respondent mentioned
the contract-price without any break-up. In this connection, specimen copies of
excise gate-passes in form GP-1 and corresponding invoices raised on the
Railways are annexed hereto and collectively marked "D"." It is
well settled that the findings of fact arrived at by the Tribunal should
ordinarily be accepted by this Court. It is not the case of the appellant that
while arriving at its finding that the respondent had not passed the amount of
excise duty, the Tribunal had not considered all relevant facts.
The
contention of the appellant herein that the railway administration colluded
with the respondent herein in issuing the aforementioned letters and certain
certificate is, in our considered opinion, wholly misconceived. We have no
hesitation to reject the same.
Our
attention has been drawn to a decision of this Court in Commissioner of Central
Excise, Mumbai-II vs. Allied Photographics India Ltd. [(2004) 4 SCC 34],
wherein this Court opined that the doctrine of unjust enrichment would be
attracted, although, the duty might have been paid under protest. In that case
the manufacturer has passed on the burden of duty to the distributor. The
question, therefore, which fell for consideration was : "Whether the
distributor in turn passed on a duty burden to its dealers?" It was in the
said factual matrix held :
".It
is important to note that M/s AGIL was the sole distributor of NIIL. Therefore,
it is highly improbable for a distributor to incur cost of purchase which
included 20% element of duty in addition to the purchase price without passing
on the burden to its dealers. From the record it appears that during the
disputed period 1974 to 1984, M/s AGIL was in trading which further supports
the above improbability. In the present case, there is no material placed on
record by M/s AGIL as to how it had accounted for the cost of purchase in its
books and the accounting treatment it gave to the said item at the time of
payment of the purchase price. No record as to costing of that item has been
produced. This material was relevant as in the present case NIIL conceded that
it had passed on the burden of duty to its distributor M/s AGIL (buyer) and it
was the buyer who claimed refund. It has been urged on behalf of the respondent
and which argument has been accepted by the authorities below that 20% of the
total price paid by M/s AGIL to NIIL represented total excess excise duty
levied and not the excess duty collected by NIIL in the form of sale price from
its distributor M/s NIIL. It was argued that excess duty collected by NIIL
represented only 1.62% of the total price. It was argued that resale price
charged by M/s AGIL to its dealers had no relevance to excess excise duty paid
by M/s AGIL to NIIL at the time of purchase as the sale price charged by M/s
AGIL to its dealers was based on the prevailing market price. We do not find
any merit in this argument. In the present case, the refund claim is made by a
buyer and not by the manufacturer.
The
buyer says that he has not passed on the burden to its dealers. The buyer has
bought the goods from the manufacturer paying the purchase price which included
cost of purchase plus taxes and duties on the date of purchase. In such cases,
cost of purchase to the buyer is a relevant factor. None of the authorities
below have looked into this aspect. Even the Appellate Tribunal has not gone
into this relevant factor. It has merely quoted the passages from the order of
the lower authority, whose order was impugned before it. Costing of the goods
in the hands of the distributor, the cost element and the treatment given to
purchases by the buyer in his own account were relevant circumstances which the
authorities below failed to examine. It was submitted that cost of purchase was
not a relevant factor. It was submitted on behalf of the respondent that the
resale price charged by the buyer was not a relevant factor. It was submitted
that since the sale price of the goods before and after the assessment remained
the same, the burden of excess duty was absorbed by the respondent. It was
submitted that in any event the sale price of the goods increased much less
than the amount of duty (differential) involved in this case and, therefore,
incidence of duty was not passed on to the consumers." The said decision,
therefore, was rendered on its own facts. We, however, as noticed hereinbefore,
are not in a position to agree with the contention of the appellant that the
finding of fact arrived at by the tribunal is based on no material.
There
is, thus, no merit in this appeal. It is accordingly dismissed.
The
appellant is directed to comply with the Tribunal's order within four weeks
from today. The appellant shall bear the costs of the respondent which is
assessed at Rs.10,000/-.
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