9911796707
TMI Blog2000 (12) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... 40 of 1991), the presumption that full incidence of duty of excise paid under this Act shall be deemed to have been passed on to the buyers of such goods shall be applicable unless the contrary is proved by them. He therefore, held that the refund claims filed by the appellants-assessee on the differential duty paid by them under protest during the period from 1-3-1986 to 31-12-1986 stand hit by the amended Section 11B of the Central Excises and Customs (Amendment) Act, 1991 (Act 40 of 1991). He, therefore, held that the amount of Rs. 3,52,03,339.03 (Three Crores, Fifty two lakhs, three thousand three hundred thirty nine and paise three only) which was the differential duty involved on account of re-classification of the product PCTR and duty paid by them during the said period i.e. 1-3-1986 to 31-12-1989 was not refundable to them as the same was hit by the doctrine of unjust enrichment in terms of the Customs and Central Excises (Amendment) Act, 1991 (Act 40 of 1991). He, therefore, ordered that the undisbursed amount of Rs. 3,52,03,339.03 which is covered under sub-section (2) of the amended Section 11B shall be deemed to have been passed in full to the buyers of such goods in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for tyres as per the Notification said above. In this regard please refer to your letter No. E/A/1.04/KJ, dated 29-10-1984 in which you have stated while giving write-up of pre-tread in price 1........" Rubber Compound is extruded in the shape of long flat strip and cut into the right length. These extruded strips are then moulded and cured to right dimensions with bottom plain and top with pattern. As such, the Pre-Tread manufactured in your factory is a cured, vulcanised rubber products and so you are not entitled to avail exemption as per Notification No. 47/86 accordingly. It is seen that you have been claiming the said Pre-Tread under NIL rate of duty. Hence you are hereby requested to clear the Pre-tread on payment of duty at the rate of 40% ad valorem with immediate effect. The above-said classification list are also returned herewith for making necessary correction to this effect and return the same to this office. Even if you are not agreeable to this reference, you are requested to pay duty under Protest until the matter is finalised by the Asst. Collector of Central Excise. It is relevant to add that I visited your factory and studied the manufacturing process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey desired to pay duty under protest on pre-tread under Chapter 40 under main heading 40.08 and sub-heading 4008.21 on the following grounds : (a) They had filed Classification list 2/85-86 for pre-tread, claiming exemption from duty under Notification No. 47/76, dated 9-3-1976 as amended by Notification Nos. 193/80 and 78/86, dated 10-2-1986. (b) The Supdt. of Central Excise, Arkonam Range vide his letter OC No. 1190/86, dated 27-6-1986 has returned their Classification List stating that they were not entitled to avail exemptions as per Notifications cited. He has also requested them to pay duty under protest if they were not agreeable to his decision. (c) As they were not agreeable to his reference they have decided to pay duty under protest. They also informed that they shall be making endorsement on all the copies of gate passes. PLA and RT-12 returns in terms of sub-rule (4) of Rule 233B of the CE Rules, 1944. The protest letter dated 1-7-1986 filed by M/s. MRF Ltd. is extracted herein below: MRF Limited, Arkonam-Thiruthani Road, lchiputtur-631 060 (Via) Arkonam, Tamil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E. Rules, 1944. 4. In the meanwhile classification of the product PCTR, was taken up by the department in order to maintain universal practice throughout the country under the harmonised Chapter heading No. 4008.21. During 11/89 the department decided to have classification of the PCTR under sub-heading 4016.99 on the ground that the goods in question emerge at the initial stages in the form of plate, sheets or strips as per the definition of plate, sheets, strips given under Note 9 of Chapter 40. Thereafter, the goods are moulded, edges are rounded and the shape of the cross-section becomes trapezoid. As a result the goods do not finally remain plates, sheets or strips as defined in Chapter Note 9 of Chapter 40. The elaborate processes carried out on the goods by the appellants could not be called mere 'surface working' as per Note 9 of Chapter 40. As a result the goods could not be classified under sub-heading 4008.21 but it would merit classification under sub-heading 4016.99 and consequently, there would be no question of extending the benefit of Notification No. 47/76 dated 9-3-1996 (sic) as amended on such goods. This position was further confirmed by the Govt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not preferred any appeal against the order-in-original dated 7-10-1991 passed by the Assistant Collector and therefore as per the then Assistant Collector vide his order dated 7-10-1991 they claimed only the differential duty involved on account of re-classification by the department and the present refund claim represents only Rs. 3.52 crores. Furthermore, it was ascertained that the percentage of Modvat credit taken/availed by M/s. MRF Ltd. on the said product worked out above was only 30% of the total duty payable. Thereby this percentage would have automatically merged in the duty apportioned by the appellants-assessee while re-working their claim towards payment of duty under Chapter 4017.00/4016.99. The appellants-assessee did not claim refund of full duty on the PCTR under chapter 4008.21 since they had worked out the duty liability involved on the subject PCTR for the period from 1-3-1986 to 31-2-1989 under chapters 4017.00 and 4016.99 as per the direction given by the then Assistant Collector vide his order dated 7-10-1991. Thereafter they filed revised refund claims as detailed above. Therefore, on merits, it was not disputed that their claim for an amount of Rs. 3.52 cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h effect from 1-7-1986 after following the procedure prescribed under Rule 233B of the CE Rules, 1944. 8. As regards the time limit, since the duty was paid under protest with effect from 1-7-1986 in terms of Rule 233B of the CE Rules, 1944 vide their protest letter dated 1-7-1986 which was acknowledged by the department on 1-7-1986 itself. Therefore, the question of time-limit applicability did not arise in their case. 9. The correctness of the claim was also duly verified at all levels and found to agree with the figures in the refund claim. Therefore the refund claim of Rs. 3,52,03,339.93 (Rupees Three Crores, fifty two lakhs, three thousand, three hundred thirty-nine and paise ninety-three only), passed this scrutiny both on merits as well as on time bar and there was no dispute on these two points. 10. In order to verify whether the said refund claim would attract the provisions of amended Section 11B, of the CE Act, 1944 for invoking the principles of unjust enrichment, M/s. MRF Ltd. (the appellants herein) were called upon to re-submit their claim in the prescribed format under Rule 173S of the CE Rules, 1944 which was inserted with effect from 20-9-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby solemnly and sincerely take oath and state as follows : I was on leave from 27th May, 1992 and rejoined a few days back. With reference to the intimation C. No. IV/10/65/90 RF (PF), dt. 5-6-1992, fixing the hearing on 16-6-1992, received in the office of MRF Ltd. on 10-6-1992, I produce and affirm as correct the relevant PCTR cost sheet for March, 1986 actuals, and will produce the supporting papers which are all available at the office/unit and are being gathered. The practice of MRF has been and is to prepare at each unit including the Arkonam unit, Budget cost and actual cost for each product under each product group. Material for this is also available and will be produced. Since the new tariff was to be introduced from 1-3-1986, actual cost for each product including PCTR inter alia for Arkonam unit had to be determined and prepared. As will be apparent from the cost sheet for the Arkonam unit (marked and attached as Annexure 'A'), where PCTR was manufactured, excise duty was not taken to computation for determining the Price. This was because of advice already received from MRF's Corporate Manager Indirect Taxes that PCTR being a non-curing rubber product, fell under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinuation of the Affidavit dated 15-6-1992 filed by Shri P. R. Anantharaman, enclosed a detailed Affidavit dated 2-7-1992 which is extracted herein below : BEFORE THE ASST. COLLECTOR OF CENTRAL EXCISE, MADRAS IX DIVISION, MADRAS 600 006 Further to my Affidavit dated 15th June, 1992, I produce copies of the following documents to support MRF's claim that excise duty was not passed on to consumers or any other person, namely : - (2) Consequent upon the Budget of 1986 revised classification lists were forwarded by MRF under cover of its letter dated 5-3-1986. The classification list No. 2/85-86, dated 5-3-1986 for the Arkonam factory showed inter alia "Pre Tread" (i.e. PCTR) under Chapter heading 40 and sub-heading 4008.21 - but claiming that it was exempted from duty vide Notification No. 47/76, dated 9-3-1976 as amended by Sl. No. 127 of Notification No. 78/86, dated 10-2-1986. The copy of the letter along 4with the relevant classification list are hereto annexed and marked as Annexure 'C'. (3) This classification list was however returned by the Office of the Superintendent of Central Excise, Arkonam Range ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty. The documents are :- (a) Gate Passes showing NIL duty for the period 1-3-1986 to 27-6-1986. Photocopies of first and last Gate Passes as specimens are annexed as Annexure 'G'. The total number of Gate Passes for clearance of PCTR during the period was thirty and they will be shown during the hearing. (b) Transfer Memos for the same period for transfer of PCTR from Arkonam factory to outside the factory. Photocopies of first and last such transfer memos for and during the period 1-3-1986 to 27-6-1986, as specimens, are annexed as Annexure 'H'. Thirty nos. of transfer memos which are in between will be produced at the time of hearing. (c) Invoices for clearances during the same period 1-3-1986 to 27-6-1986 also showed the selling price as Rs. 38/- per Kg. Invoice under date 19-3-1986 and Invoice dated 24-6-1986 as specimens are annexed as Annexure I and the invoices in between will be produced at the hearing. PCTR was cleared from 1-7-1986, (There were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the presumtion raised under Section 12B is fully rebutted based on the documents produced herewith along with the documents produced with the Affidavit dated 15-6-1992. The incidence of Excise Duty claimed and charged during the relevant period (without payment of which PCTR was not permitted to be cleared and hence was paid under protest) was not passed on to any other person/consumer. 13. In the meanwhile the Assistant Collector deputed few officers led by her Supdt. (Technical) to verify the genuineness of the Affidavit submitted by the appellants-assessee and the appellants informed the department that they have replied to all the queries during the two days of verification i.e. 20-7-1992 and 27-7-1992 and requested the department to send them refund Cheque for Rs. 3.52 crores as per their letter dated 3rd August, 1992 as the department allegedly completed the verification of the invoice of PCTR in respect of the first period in the Affidavit which is from 1-3-1986 to 27-6-1986 on 20-7-1992, at their Headquarters. They also admitted certain variance from the net billing price of Rs. 38 Per kg which was claimed by them. In reply vide letter No. C-IV/10/55/90/RF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HER TAX APPLICABLE WILL BE EXTRA." Therefore, it is proved to the fact that the Net Billing price quoted in those price list relating to all rubber products is cum-duty price only. The PCTR figured therein, is one among them. From the above it implies, without saying that the Management uniformly maintains a standard in built price for all the products irrespective of the duty aspect throughout the period wherein, the provision for all elements has been provided at the time of forming the price structure of a product. Of course, all the products are sold uniformly at standard rates without bearing a significant entry on the excise duty element in the sale documents. Wherever the duty is imposed on the product by the Government, the Management is apportioning and accommodating the duty element within the cum-duty price and wherever there is no burden of duty involved the same has been absorbed conveniently by them. To illustrate more on the above aspect, it could be seen from the records that when a product rate is maintained to be the same prior to imposition of a duty and after starting the payment of duty on a particular period and in similar way in the cases where the duty is wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-agement is hereby requested to pay a personal attention on the above para-graphs and furnish a reply immediately so as to enable this Office to proceed further on the subject issue. Yours faithfully Sd/-(Parvathi Kailasam)Assistant CollectorMadras IX Division 14. Since all the above points were required to be scrutinised in terms of the amended Section 11B of the Central Excise Act, 1944, which was inserted with effect from 20-9-1991, vide Section 3 of the Central Excise and Customs Laws (Amendment) Act, 1991 (Act 40 of 1991), the management was therefore, requested to furnish reply immediately on all the paras to enable the Assistant Collector to proceed further on their refund claim for Rs. 3.52 crores. This letter dated 4-8-1992 was replied by the appellants vide their letter dated 21-8-1992 which is extracted below : MRF Limited Regd. Office 124 Greams Road Madras 600 006 Phone 8252777 Grams TRANQUIL Telex 041-7062 & 7230 MRF IN Fax 866562 03/DF-19/SI 21st August, 1992 The Asst. Collector of Central Excise, Madras IX Division, Sire Mansion, 621, Mount Road (Model School Lane), Madras 600 006. Dear Madam, 'C/Ex.-Precured Tread Rubber - Refund Claim preferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 9-3-1987, 15-9-1987, 1-10-1988, 4-3-1989 and 24-7-1989 were on account of cost escalations and not on account of excise duty. This fact was also affirmed by Shri Anantharaman in his second Affidavit dt. 2-7-1992 and also proved by means of PCTR Cost Sheet Actuals for March, 1987, October, 1988, March, 1989 and July, 1989, marked as Annexure "M" Collectively. 3. After the hearing on 6-7-1992, you were convinced with the case presented by our Counsel and you directed MRF representatives to be ready for physical verification by your officers, of the complete series of invoices, gate passes and transfer memos, to confirm that the selling price of Rs. 38/- remained the same during the period when PCTR was cleared at NIL rate of duty and also during the subsequent period when MRF was forced to pay duty under protest from 1-7-1986. Apart from this, nothing else was required to be verified and your officers visited our Head Office on 20-7-1992 and on 27-7-1992 and did complete physical verification of the entire range of invoices, gate passes, transfer memos and Debit/Credit notes, which were brought from our factory at Arkonam and the 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial balance also will not be relevant to ascertain whether excise duty is collected or not. In para 3 of your letter dt. 4-8-1992, you have assumed that the amount claimed by MRF stands to be a liability to the Company and therefore, you have enquired whether the same is specified anywhere in the Balance Sheet. We would like to clarify that the amount claimed by MRF is not a liability to the Company; on the contrary, it is a refund receivable from the Government. If it is a liability "acknowledged by the company", we would have certainly provided for it. However, as already pointed out by us, vide our letter dt. 20-7-1992, this amount being a refund receivable from the Government will be accounted only on a receipt basis. In this connection, please see our Tax Auditor's certificate, extracted from the Tax Audit Report, forwarded to you together with detailed note on Method of Accounting, vide our letter dt. 20-7-1992. (iii) Balance Sheets for the years 1984-85, 1985-86 & 1986-87. The 3 points mentioned by you in para 4 of your le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LECTOR OF CENTRAL EXCISE : MADRAS IX DVN. III FLOOR : SIRE MANSION : 621, MOUNT ROAD : MADRAS : 600 006 C. No. IV/10/65/90-RF (PF. II) February 9th, 1993 M/s. MRF Ltd. Greams Road, Madras - 6. (Attn. Shri S. Ignatius, Corporate Mgr.) Sirs Sub : Refund claim for Rs. 3,52,03,339.93 - reg. - - Further to the Personal Hearing on the subject issue, a study was conducted by Assistant Director (Cost) of this Collectorate. Gist of the report is reproduced below since the said report is proposed to be taken on record. Please forward your further submissions if any in the light of the findings of Assistant Director (Cost) so that the same can be taken note of before an order is passed in this regard. You are requested to make your further submissions, if any within 10 days to enable this Office to finalise the matter. Yours faithfully Sd/- (Smt. Parvathi Kailasam) Assistant Collector, MS. IX DVN Gist of the Report given by Assistant Director (Cost) ........"The assessee vide his letter No. 03/DF-19/SI. dt. 5-11-1992 furnished the ratio of raw material conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.50 22.28 (2) Expen-ses Production Overhead + Admn Overhead + Selling and Distribution overhead Interest etc. 7.10 7.61 7.65 7.75 7.71 8.32 (3) Total expenses 26.67 27.83 28.37 28.47 29.21 30.60 (4) Excise duty 12.00 12.00 12.00 12.60 12.60 13.23 38.67 39.83 40.37 41.07 41.81 43.83 (5) Sale Price 38.00 40.00 41.00 42.00 42.65 45.65 (6) Margin -0.67 +0.17 +0.63 +0.93 +0.84 +1.82 In the above statement to arrive at the profit margin, no Modvat credit taken by the assessee is taken into consideration on the sale price. If we reduce the Modvat credit proportionately from the sale price the profit margin will further increase. Also the assessee informed that the practice of accounting in MRF is to arrive at the material cost after reducing the Modvat credit from the price of raw material. Though the information was not verified by us, we accepted the information and as such the raw material cost shown in the above table is net of Modvat Credit. The main contention of the assessee is that during the subject periods, the price was not adjusted or there was not much variation to accommodate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SI, dated 24th Feb. '93 Please refer to your letter cited above requesting to furnish the detailed cost working of PCTR which was arrived at by the Assistant Director (Cost). In this connection, attention is invited to paras 1 to 3 of the gist of Asst. Director (Cost)'s report furnished in this Office letter of even number dated 9-2-1993 wherein an elaborated tabulation was given with reference to the elements that are included in arriving at the cost of the PCTR (Period-wise). While arriving at the Sale Price and Profit Margin shown in the said tabulation, "No Modvat credit availed by the assessee" is taken into consideration. However, in the same report, there is another tabulation also furnished especially by giving the details of Net Profit earned by the assessee during the subject period by taking into consideration of Modvat Credit availed by them. In the said Asst. Director (Cost)'s report, it is briefly narrated the method adopted by the Department in ascertaining the cost of the PCTR and after thorough analysis, it is clearly established that the assessees' contention hitherto maintained that there was no transfer of burden of excise duty on the ultimate buyer is not su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para I for details) (b) Labour & Other Expenses: Total labour and other expenses as a percentage on net sales. The entire total expenses of the Company during relevant periods barring few items like Bad Debts, ST absorbed by Company, Divisional Trading Expenses, Royalty was considered and these expenses were expressed as a percentage on Net Billing price/Net Sales to arrive at the labour and overhead cost per kg. of PCTR. In reality though certain overhead expenditure will be comparatively lower for this product then other products of the manufacturer, the Department has fully allowed the expenditure as it is difficult to segregate the overheads for various products without sufficient data. Also please note that in our earlier letter dated Feb. 9th, 1993, the Department has shown the material cost net of Modvat as the Management informed that the material cost is arrived by the Company after deducting the Modvat Credit. Though the information was not verified, and based on assumption, there is no necessity to add back the Modvat credit to arrive at the Profit Margin and the Margin will be as shown below: - Mar '86 Mar '87 Sept '87 Oct '88 Mar '89 July '89 Profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general information provided at your request. Similarly, the raw material rates applied are average rates taken from the balance sheet. 4. Ours, is a process industry producing different products from the same raw material. The correctness of the cost working could be appreciated if one familiarises with the operations. For this reason alone, we had........... 5. Just to quote an example, we give below how an average rate for rubber alone can distort the picture. Rubber includes Natural Rubber, Synthetic Rubber, Butyl Rubber etc. and the average purchase rate includes the value of duty free imports for export production. This applies for all materials. We would like to emphasise that correct cost could be arrived at only by reckoning the technical specifications and the actual purchase prices (Actual purchase prices were provided to you by enclosing the invoices along with our affidavit filed on 2-7-1992). Details Asstt. Director's Calculation MRF's Calculation Qty (Kgs.) Rate (per Kg.) Value Qty. (Kgs.) Rate (per Kg.) Value Rs. p. Rs. p. Rs. p. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed that since the raw material and WIP are received from other factories only such other factories take Modvat credit and hence Modvat details separately for pre-cured tread rubber could not be furnished. This information was vital to know the actual raw material cost and to understand whether the incidence of duty has been passed on to the actual customers or not. All these factors were required by the AD (Cost) of the department to know the pricing of the product before and after the necessary changes. As the appellants were not able to satisfy with proof whether duty has been passed on by them to the customers or not, the AD (Cost) felt that appellants-company even sell the product at loss and compensate the loss in some other product by making additional profit. Pricing depends upon factors like demand of the product, supply of the product of the competitors, particularly product from the same competitors and the price at which their competitors are charging. He also gave an example of automobile industries and Heavy Engineering Industries which sell the vehicles at loss and make up the loss in spare parts. Therefore, the AD (Cost) did not agree with the contention of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for each product under each product group. Material for this is also available and will be produced. Since, the new Tariff was to be introduced from 1-3-1986, actual cost for each product including PCTR, inter alia, for Arakonam Unit had to be determined and prepared. As will be apparent from the cost sheet for the Arkonam Unit where PCTR was manufactured, excise duty was not taken to computation for determining the price. This was because of advice already received from MRF's Corporate Manager (Indirect Taxes) that PCTR being a non-curing rubber product fall under the terms of the exemption Notification No. 47/76, dated 9-3-1976. It will be apparent from all the documents and this will be explained at the ultimate hearing, if duty was payable as claimed by the authorities, on PCTR, MRF would not have embarked on the substantial expansion of the new project, PCTR. Since, Corporate Manager (Indirect Taxes)'s advice was that the contention of duty leviable under sub-heading 4008.21 was palpably erroneous, and that the duty was totally exempt under exemption Notification No. 47/76, dated 9-3-1976 and since the authorities were not allowing clearance and unless duty under Tariff item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 42 March, 1989 42.65 July, 1989 65.65 While concluding his statement in the last para of his letter dated 2-7-1992, it was stated that : "Thus, it is clear that the presumption raised under Section 12B is fully rebutted based on the documents produced herewith along with the documents produced with the affidavit dated 15-6-1992. The incidence of Excise Duty claimed and charged during the relevant period (without payment of which PCTR was not permitted to be cleared and hence was paid under protest) was not passed on to any other person/consumer." 17. On 6-7-1992, as proposed, a personal hearing was conducted. Shri F. S. Nariman, Advocate, Shri Ignatius, Corporate Manager (Indirect Taxes), Shri P.R. Anantharaman, Controller and other officials attended the personal hearing. They had reiterated their arguments putforth in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quested by the assessee to depute our Officers for verification as most of the invoices for the period subsequent to 8-3-1987 till 31-12-1989 are also available - but being spread in different invoice books located at 42 different branches all over India, the entirety of all relevant invoices (which are still being collected), can be inspected. 19. On 10-7-1992, M/s. MRF Ltd. had enclosed a detailed note on the methodology adopted for the preparation of cost sheets to indicate clearly that Excise Duty did not and could not have entered into computation of Cost (Selling Price) covering the period from 1-3-1986 to 31-12-1989, but separately for the periods 3-86/3-87/9-87/10-88/3-89 and 7-89, which comprised fully with costing basis. In addition to the above to a query raised by me as to how: Query MRF has treated the claim representing Duty Refund on PCTR in their Accounts for the period 1st March, 1986 to 31st December, 1989? Reply : Quotation from the Tax Audit Report under Section 44AB of the Income-tax Act, certified by the tax auditors of the Company which is submitted to the income-tax authorities every year, is given below. QUOTE : "METHOD OF ACCOUNTING Method of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und at the bottom of the price list pertaining to 1-10-1985 an endorsement to the extent that "THIS LIST SUPERSEDES ALL PREVIOUS LISTS. THE ABOVE PRICES ARE SUBJECT TO CHANGE WITHOUT NOTICE. SALES TAX, OCTROI AND ANY OTHER TAX APPLICABLE WILL BE EXTRA." This testified to the fact that the Net Billing Price quoted in those price list relating to all Rubber Products was inclusive of Central Excise Duty. The PCTR figuring therein was one among them. From the above it implies, without saying that the Management uniformly maintained a standard in built price for all the products irrespective of the duty aspect throughout the period wherein, the provision for all elements has been provided at the time of forming the price structure of a product. Of course, all the products are sale uniformly at standard rates without bearing a significant entry on the excise duty element in the sale documents. Wherever the duty is imposed on a product by the Government, the Management was apportioning and accommodating the duty element within the cum-duty price and wherever there is no burden of duty involved the same has been absorbed conveniently by them. To illustrate more on the above aspect, it coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from the assessee on 21-8-1992 wherein it was stated as below pointwise : (i) Price circulars containing remarks regarding sales tax, octroi and other taxes. "the "endorsement" contained in the price circulars, as pointed out by you, are usual terms mentioned in all price lists. In fact, the price list for tyres, though contains the same remarks, includes ADV tyres (similar to PCTR) where no excise is paid or recovered". (ii) Trial balance prepared from Arakonam Unit during the relevant period. "Since the practice of the Company is to account the sales without split up towards excise duty, if any, the Company's trial balance would not be relevant to ascertain whether excise duty is collected or not. The Arakonam Unit's trial balance being a unit level document, and entries therein being made before sales are effected, their trial balance also will not be relevant to ascertain whether excise duty is collected or not. In para 3 of your letter dated 4-8-1992, you have assumed that the amount claimed by MRF stands to be a liability to the Company and therefore, you have enquired whether the same is specified any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific information issue-wise by covering all aspects which are connected in or in relation to the concept of unjust enrichment. As it could be seen from the information so far furnished by the assessee and as quoted in the foregoing paras that the assessees are firmly contending with at every stage that the Net Billing Price maintained by them during the subject period in respect of the product PCTR does not include the element of duty and whatever duty paid on the product was borne by them. On a careful reading of all the information hitherto quoted above, it is pertinent to note that the assessees are not in a position to give a clear-cut answer. Instead they narrated so many other factors as they did not possess such information by which they could prove with clear documentary evidence to the Department in particular the non-inclusion of duty aspect on the cost price of the product or not passing on the duty burden to the ultimate buyer. 25. As the material supplied by the assessee on the cost structure arrived at for the subject product, based on their annual balance sheets was purely on the costing aspect, it was decided to seek an expert opinion on the costing of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a detailed cost working of the AD (Cost) to enable them to furnish a final reply. In order to ensure the principles of natural justice, again a reference was made on 24-3-1993 to the appellants-assessee and as requested by them a detailed report of the AD (Cost) was communicated comprising therein the method adopted by the AD (Cost) and the elements considered in arriving at the decision in an elaborate manner. In reply to the above, the appellants vide their letter dated 3-5-1993 expressed their disagreement with the method arrived at by the Department on the cost of the product. However, they could not establish their stand with factual information except by quoting a simple example on the cost details of Natural Rubber/Synthetic Rubber by which alone the entire issue cannot be decided. The observation made by the Assistant Collector from paras 28 to 29 of the order and her findings in paras 30 to 47 are reproduced below : "28. In reply to the above, the assessee sought for a detailed Cost working of the Assistant Director (Cost) to them to furnish a final reply. In order to maintain the principles of natural justice, again a reference was made on 24-3-1993 to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport year ending 30-9-1985, 30-9-1987, 31-3-1989 and 31-3-1991. (ii) Divisional Profit and Loss Account, Balance Sheet and trial balance for the period from 1-10-1985 to 31-3-1990. (iii) Annual Report for 1989-90. (iv) Ratio of major raw material content in one kg. of precured tread piece. (v) Total quantity of precured tread ordinary tread and other items manufactured/sold at Arakonam plant. (vi) Method adopted (i.e. details of technical evaluation) to apportion the manufacturing expenses to each product/unit. (vii) Details of Modvat credit availed on the said product during the relevant period. (viii) Copies of quarterly return filed in form RT-5 in respect of the raw materials used in the PCTR. (ix) Form IV Register maintained by them for the Raw Materials used in the PCTR. (x) Job cards relating to the said raw materials and along with the submissions already made by the assessee, reworked the cost construction statement as tabulated below : Mar'8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inized the statements of the assessee and has re-worked the cost estimation with the documents produced by the assessee in spite of the inability expressed by the assessee to submit certain documents in order to maintain the principles of natural justice. The assessee informed that there is no documentary evidence to prove that the Company has used the raw materials in a specific ratio. Though the information was vital, the Assistant Director (Cost) has assumed the same ratio for cost estimation with reservations. Mere submission of technical specifications does not form the basis for cost estimation. It must be backed by proper records. However, the Assistant Director (Cost) has gone through all the available information meticulously to form an opinion and no general information was taken as the only basis for deciding the case. Further, there is nothing wrong in relying upon a few general information when such information are collected from authenticated documents. 36. The Assistant Director (Cost) informed the assessee that he would like to peruse the documents like RT-5 returns, Form-IV register, bill of materials, material request note, job card, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were in short supply during the relevant period, those materials were imported by tyre manufacturers. The assessee cannot establish that imported raw materials were not used in PCTR manufacturing. The assessee would have used both indigenous and imported raw materials depending upon the market requirement for products and supply position of various raw materials. Hence, when the cost is averaged, inclusion of duty free imported material cost may not have any significant impact on the material cost. 40. A balance sheet with statement of accounts is an authoritative document and it is certified by independent Chartered Accountants. Using such authenticated information will not give hypothetical and distorted picture on the costs as submitted by the assessee. 41. A mere technical information of specification of raw material will not form the basis for determining the cost of a product. It has to be noted here that the Assistant Director (Cost) has arrived at the average cost of each type of major raw material and accordingly applied the rate on the quantum of raw material per kilogram of PCTR as declared by the assessee. It was not arbitrarily calculated on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cost estimation. 45. It is very clearly proved from the above observations the assessees' contention to the extent that they had not passed on the duty paid under protest in respect of the product PCTR to the ultimate buyer factually and actually is not borne out by facts. And, they are not in a position to prove the above aspect with clear documentary evidence to the Department. 46. At this stage, I would like to reiterate the conditions stipulated under the section 12B of Act 40 of 1991 of Central Excises and Salt Act, 1944 which says "that EVERY PERSON WHO HAS PAID THE DUTY OF EXCISE UNDER THIS ACT SHALL UNLESS THE CONTRARY IS PROVED BY HIM, BE DEEMED TO HAVE PASSED ON THE FULL INCIDENCE OF SUCH DUTY TO THE BUYER OF SUCH GOODS". 47. Under the above stated circumstances, M/s. MRF Limited's claim for refund on the differential duty paid by them under protest during the period from 1-3-1986 to 31-12-1989 stands hit by the amended Sections 11B and 12B of Act 40 of 1991 of Central Excises and Salt Act, 1944. ORDER I, therefore, hold that the amount of Rs. 3,52,03,339.03 claimed by M/s. MRF Ltd. as the differential duty involved on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturer cannot push his product into the market, when identical product is available at a cheaper price he would naturally out-down his margin of profit, and fix the price on par with the market price of identical product. In such cases, it can only be reasonably presumed that, the profit margin earned is less. Obviously, in this case, even after taking into account the element of excise, the appellant had clearly made profits consistently. Considering the nature of product, which is manufacture in a large scale by small-scale manufacturers, enjoying the exemption, and also taking into account that 'tread rubber' whether 'pre-cured' or 'uncured' is used for the same purpose of re-treading of wornout/bald tyres, there is every reason to presume that the appellant maintained the price structure without much changes, not with the intention of not passing on the incidence of duty but on account of market constraints. Even accepting the plea of the appellant for the sake of argument that the price did not vary much during the year 1986, prior to and after payment of duty, it would be relevant for the short period only, and will certainly not be of any relevance for the subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has also clearly established by facts and figures as to how, the price charged by the appellant also contained the element of excise duty, and certain margin of profit, yet another relevant fact to decide the issue is that the impugned 'tread rubber' is used only for the purpose of re-treading bold tyres, and in terms of Central Excise Tariff Act, 1985, retreading of tyres is not a process of manufacture warranting fresh levy of duty. Therefore, users of the tread rubber are not likely to be Central Excise assessees who would not mind paying the duty and avail the duty so paid under the Modvat scheme. Therefore, I am of the considered view that mere non-increasing the price at that particular point of time cannot be regarded as sufficient proof to take the view that the incidence of duty had not been passed as claimed by the appellant. On the other hand the incidence of duty could be deemed to have been passed on the buyers under the facts and circumstances of this case. 6. Following the land mark judgment rendered by the Honourable Supreme Court, in the case of M/s. Jain Spinners Ltd., reported in 1992 (61) E.L.T. 321 (S.C.) not only the constitutional valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning the price of PCTR in the month of March '86 which is apparent from the cost sheet, because MRF's Corporate Manager Indirect Taxes advised that the PCTR being a non-curing rubber product, fall under the terms of the exemption Notification No. 47/76, dt. 9-3-1976. (b) A second Affidavit of Shri P.R. Anantharaman, Controller, MRF Ltd., was filed on 2-7-1992, containing :- (i) The first Classification List dt. 5-3-1986 in which MRF claimed Nil rate of duty. (ii) Letter dt. 27-6-1986 of the Superintendent of Central Excise directing MRF to pay duty at 40%. (iii) Revised Classification List dt. 1-7-1986 showing duty at 40% ad valorem on PCTR. (iv) MRF's price list dt. 1-7-1986 showing price of PCTR as Rs. 38/- per kg. (v) Three sets of documents to prove that when there was Nil rate of duty on PCTR during the period from 1-3-1986 to 30-6-1986, the price remained at Rs. 38/- per kg : (a) Gate passes from 15-3-1986 to 27-6-1986 showing Nil rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s recorded the following :- "Shri Anantharman, Controller, has proved with the supportive documents namely, the statement indicating the actual material cost of PCTR per kg. and selling and distribution by way of producing the profit and loss account for the period under consideration. When it was questioned about the practice of MRF of the preparation of each Unit including Arkonam into budget cost and actual cost for each product under each produce group, it was contended that when cost sheet was prepared duty was not taken while computing the price." 4. The learned Asstt. Collector failed to rely upon the investigative reports submitted by her own officers after they had verified the gate passes, transfer memos and invoices in respect of the 2 periods, namely: 1-3-1986 to 27-6-1986 and from 1-7-1986 to 8-3-1987, which clearly proved that during the first period, when no duty was levied and paid, the price charged was Rs. 38/- per kg. of PCTR and during the second period, when duty was levied and paid at 40% ad valorem also, the price remained at Rs. 38/- per kg., which was the price charged. 5. The learned Asstt. Collector further failed to take into account th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by herself. 10. In para 26 of the order dt. 21-5-1993, the learned Asstt. Collector relied upon the opinion of the Asstt. Director (Cost) who stated that the contention of the appellant with reference to the selling price does not prove that they have not transferred the burden of excise duty to the customer. This is totally erroneous and does violence to the language employed in Section 12A read with sub-section (1) of Section 11B in so far as these two sections stipulate that the documents referred to in Section 12A shall be one of the documentary evidence, i.e. the invoice, showing the selling price. The learned Asstt. Collector failed to comprehend the correct............ 11. In para 29 of the order dt. 21-5-1993, the learned Asstt. Collector stated that, "except by quoting a simple example on the cost details of natural rubber/synthetic rubber by which alone the entire issue cannot be decided", the appellants did not establish their stand that the method arrived at by the Deptt. on the cost of the product was erroneous. It is submitted that MRF never intended that the entire issue can be decided by the two examples given by the Controller of MRF vide his Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Asstt. Collector. 14. The presumption in Section 12B could not be invoked retrospectively, i.e. for the period from 1-3-1986 to 31-12-1989 when Section 11B (as amended), Sections 11D, 12A, 12B and 12C were not on the statute book. In any case, the best evidence available was produced, namely, the sales invoices, transfer memos and gate passes. - Cost Audit for PCTR was not required by law to be undertaken (what was required by the law was Cost Audit for tyres). The learned Asstt. Collector ought to have held that the Cost Audit Report for the years ending 30-9-1985, 30-9-1987, 31-3-1989 and 31-3-1991, covered only tyers manufactured by the appellants and not the product, PCTR in respect of which no Cost Audit was conducted, neither any Cost Audit was required for the product PCTR. If Section 12B had been on the statute book for the relevant period of the refund claim, i.e. 1-3-1986 to 31-12-1989, MRF would have and could have maintained a separate Cost Audit, costing PCTR. 15. In para 36 of the order dt. 21-5-1993, the learned Asstt. Collector has mentioned erroneously that the Asstt. Director (Cost) informed the appellants to produce documents like RT-5 Return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of finding out the cost of a particular product in a multi-product factory. The learned Asstt. Collector failed to appreciate the basic fact that balance sheet heads are as per Company Law norms which requires the company to identify only the major raw materials and in groups like rubber, carbon black, tyre cord, chemicals and others. Rubber consists of natural rubber, various types of synthetic rubber, butyl and also various grades in these groups; there is a price difference between each group/each grade and they differ widely; also which of these grades (sub-grades) goes to any finished product depends on specification of each product, for e.g., butyl rubber is used only for tubes. In view of this, the appellants informed the learned Asstt. Collector that it is erroneous to apply the average material rate taken from the balance sheet which will distort the picture. In support of this, the appellants had given an example in their letter dt. 3-5-1993 to highlight the anomaly. That is why the appellants gave copies of suppliers' invoices for the raw materials that go into PCTR, along with the Explanatory Note to Annexure "A" in which also it was mentioned that specification sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular product. As indicated earlier, it is erroneous to work out the cost based on general information in a balance sheet. 18. The statement made in para 42 of the order dt. 21-5-1993 clearly establishes that the learned Asstt. Collector did not appreciate the purpose with which the appellants submitted evidence regarding their selling prices during the period when there was no levy of excise duty on PCTR and also during the period when there was a levy of excise duty on PCTR. While the appellants have established beyond doubt that the selling price was not increased when duty was imposed, this fact has been accepted as stated in para 42. 19. The statement made by the learned Asstt. Collector in para 43 of the order dt. 21-5-1993, namely that "proof of non-transfer of excise duty burden on customer lies in establishing that the total cost of the product plus profit margin is equal to selling price realised from customers", has not been backed by any statute nor any recognised principle. The appellants dispute the working of the Asstt. Director. The selling price is the only relevant factor which in turn is confirmed by the statutory provisions contained in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector (Appeals) failed to appreciate that the legend printed on the price list does not prove that excise duty is built-in into the price and therefore it is respectfully submitted that he came to a wrong conclusion to the effect that excise duty being an indirect tax, will normally be passed on to the buyers. The learned Collector (Appeals) grossly misunderstood the provisions of Section 11B which only provides for a presumption against the appellants and that presumption is a rebuttable presumption and it never provided that excise duty being an indirect tax, should normally be passed on to the buyers. 24. The learned Collector (Appeals) came to the wrong conclusion that the cost estimation conducted by the Asstt. Director (Cost) is based on authoritative documents because he failed to note the contention of the appellants that the learned Asstt. Director (Cost) did not even attempt to verify the evidence based on authoritative documents submitted by the appellants themselves. The learned Collector (Appeals) failed to appreciate the provisions of Section 3 of the Indian Evidence Act which provides that in order to "prove", it is only necessary that the court either believes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... later they have filed refund claim of Rs. 6 crores which was revised to Rs. 3.52 crores and the revision takes care of Section 11D of the CE Act, 1944. They had also filed price list and duty was paid under protest. He further submitted that the goods were required to be assessed at the rate of 15% whereas they were made to pay duty @ 40% adv. Since they were required to pay duty @ 15% at best, it may be presumed that they had passed on 15% duty to the customers and thus 25% of the duty cannot be treated to have been passed on and therefore, the presumption that duty is deemed to have been collected under Section 11D is not available to the department in respect of the whole duty of 40%, since vide order dated 7-10-1991, it was held finally that they were required to pay duty at the rate of 15% and tax collected from them was far in excess than what was leviable and the department had invoked Section 11D wrongly. They had collected only Rs. 38/- per kg of PCTR and this cannot be representing central excise duty. Therefore, difference of 25% duty (difference between 40% and 15%) representing the price cannot be presumed to have been passed on to the customers as incidence of duty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lants was cost sheet and the calculation chart which was based on the balance sheet and profit on the product of the Company were averaged. He therefore urged that the method of calculation attempted by the AD (Cost) was erroneous. Further, the AD (Cost) has not gone into the various submissions made by them. (d) The assessment that the price is on the basis of market price and not on the basis of cost has to be established for a particular period for a particular product. (e) The deponent of the affidavit has not been questioned at all and had he been questioned, the whole doubts would have been cleared. (f) The findings are based on no evidence and totally in disregard of the evidence given by the assessee before the authorities. (g) Even if the presumption under Section 12B has not been rebutted, they can be proved under Section 12B with regard to full incidence of duty leviable on which admittedly was 15% under Tariff Heading 4008.91 whereas the assessee has paid duty @ 40%. He has therefore, submitted that the provision under Section 12B would apply to a case where duty of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct was brought in for application in general and as such correlating the provisions of the Evidence Act with Section 12B, 12A of the Central Excise Act, 1944 is against the Rule of law. 1a. The appellant's contention that even where it is not shown to the satisfaction of a Court that a fact exists, that fact can still be said to be proved in law when its existance is so probable that a prudent man ought to act on the "supposition" that it exists is negatived by the very admission of the appellant in ground No. 15 where it has been categorically stated that it is impossible and impractical to maintain raw material account final product-wise and thus the supposition of a fact exist in law vanishes on the clear admission of appellants. 2. The respondent submits that the submission of the appellant that Section 12A, 12B, 12C, 12D of Central Excise Act, 1944 are not to be applied retrospectively when there is no retrospective effect given in the said provision is unacceptable in law since Section 12A, 12B, 12C, 12D constitutes a particular purpose with reference to Sec. 11B and 11BB and hence the above said Sections are to be read together and not in isolation hence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to the buyer of such goods and thus the duty to prove that no duty was passed on to the buyer lies at the first instance only on the "assessee" and if assessee failed to prove the same, in the second instance the excise authorities shall invoke the presumption that assessee deemed to have passed on the full incidence of such duty to the buyer of such goods and as such the Section 12B of the Central Excise Act, 1944 contemplates two stages in its application namely the first one is that assessee shall prove that no duty was passed on to the buyer and if he failed to prove in the second place the authorities shall invoke the presumption provided under Section 12B and rule that the assessee deemed to have passed on the full incidence of such duty to the buyer of such goods. 7. The appellant's contention that there is no variation in the price and as such it has to be assumed or presumed that no duty was passed on to the buyer is again a fallacious submission since the constant or static pricing is nothing to do with the passing on duty and in fact the excise duty being an indirect tax the legislature in its wisdom introduced Sec. 12B in the statute the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y being an indirect tax and always the burden could be passed on to the buyer unlike direct taxes like income tax. In fact Sec. 12A was enacted to indicate clearly on the face of the invoice that a specified amount has been collected as excise duty so that any refund claim could be supported by the clear documents and the fact of passing on the duty burden to the buyer. In the absence of any break up of the sale price to indicate the excise duty element, it proves beyond doubt that the duty burden has been passed on to the buyer. 9. The appellants failed to provide the ratio in which the input materials were consumed in the manufacture of Procured Tread Rubber (PCTR) a vital basic information since material cost could be determined only on 1. Quantity of inputs consumed and 2. Price per unit and when the appellant failed to maintain necessary record, the claim that the material was consumed in a particular ratio is a fact not proved. 10. The appellant has also not proved the overhead expenditure and merely quoting the published accounts of the company would be unacceptable in law since the overheads could be determined only on the basis of overheads attributable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid maintenance of the record and even prior to the existence of the above provisions in the Central Excise Act, 1944 there are obligations cast upon the appellant to maintain records to have a control over consumption of materials. 13. The appellant has stated that the subject goods Procured Tread Rubber (PCTR) was not liable to duty and hence the clearance documents did not indicate the excise duty element is not legally correct. The goods Procured Tread Rubber (PCTR) are liable for excise duty as per Central Excise Tariff Act, 1985 and there was an exemption notification for the subject products. When a commodity is exempted from excise duty, there is an obligation on the part of the manufacturer to indicate the rate of duty and amount of duty as "NIL" so that the buyer is clear that no excise duty has been charged on him. In the absence of such an indication, the price is the maximum sale price which includes all duty and tax elements. 14. The submission of the appellant that the expert opinion of the Assistant Director (costing) ought not have been sought for when they have produced balance sheet etc, is incorrect in law since the original authority felt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or indigenous procurements. In fact the imported goods prices are higher than the indigenous goods prices due to better quality and various post import cost and duty elements. If such variance are taken into account it could further establish that the appellant has passed on the duty burden to the buyer. It is submitted that failure on the part of the appellant only led the department to work out a cost sheet based on the available document like annual report and hence the appellant cannot claim that the working of cost sheet based on annual report is not in order. 16. In the case of consumer goods price means selling price to the buyer. A selling price is made up of cost of sales, profit margin and all the Central and State tax elements. Procured Tread Rubber (PCTR) is a consumer product and when the invoice indicates only sale price, it is always inclusive of the tax elements paid or anticipated to be paid. Hence the appellant cannot place an argument that the static price is exclusive of excise duty element. 17. The respondent submits that the original authority in para 34 of the order-in-original has only made certain observation regarding the constant price as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Modvat rules. Such exercises are possible only by maintaining records for input consumption on exempted product. Therefore the statements of the appellants that the records were not maintained due to various final product shall not be acceptable in law. 21. The respondent submit that Section 12B of the Central Excise Act, 1944, never contemplates any rebuttal evidence but only contemplate a deeming presumption in the absence of documents to prove that the duty was not passed on to the buyers. In the case of the appellant the department has while considering the documents has incidentally gone into the acceptability of the documents in all fairness so as to give more strength to the statutory language and the appellant cannot now turn around and say that he has given some facts and the departments is to act upon the supposition it exists since such an approach is clearly beyond the purview of the Section 12B of the Central Excise Act, 1944. 22. The respondent submits that both the original authority as well as the appellate authority rightly ruled that the appellant has not furnished required documentary evidences so as to prove that duty was not passed on to the buye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence to rebut the evidence of the AD (Cost). He further submitted that the legislature in its wisdom by virtue of Section 12B has given power to the authorities to invoke presumption that unless the contrary is proved by the assessee, the burden of duty should be deemed to have been passed on to the buyers. He invited our attention to para 46 of the order-in-original dated 21-5-1993 in which the learned Assistant Collector has held that the appellants were not able to produce complete cost of each product. He pointed out that the assessee had clearly admitted that they did not maintain any records about the cost of their materials. They have not led any expert opinion to controvert the opinion of the AD (Cost) and the adjudicating authority in such circumstances rightly relied upon the expert opinion available with the department. He submitted that the AD (Cost) had sought supporting evidence and documents, but the appellants were not able to produce the same. Therefore the AD (Cost) was forced to go by the average cost when the information sought for was not produced by the assessees. The Assistant Director (Cost) had gone into the limited scope as to whether the incidence of du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11B does not apply. 28. We have carefully gone through the case records, Order-in-Original No. 11/91 dated 7-10-1991 passed by the Assistant Collector, Ranipet Division, the Order-in-Original No. 1/93 dated 21-5-1993 passed by the Assistant Collector, Madras IX Division, the Order-in-Appeal No. 146/93 (M) dated 31-12-1993 passed by the Collector (Appeals), the grounds of appeal and other supporting records, the oral submissions made by Shri F.S. Nariman, learned Sr. Counsel for the appellants during the personal hearing before us, and the written and oral submissions made by Shri V. Veeraraghavan, learned ACGSC, on behalf of the Department. We observe that M/s. Madras Rubber Factory, Itchiputhur, Arakonam are manufacturers of rubber products, among others, they manufacture a product called PCTR for re-soling and retreading of tyres. They sought for classification of the said PCTR under TSH No. 4008.21 and claimed the duty exemption vide Notification No. 47/76 dated 9-3-1976 as amended by Notification No. 193/80 and 78/86 dated 10-2-1986 under their classification List No. 2/85-86 which was filed consequent upon the changes effected during the Budget 1986 with effect from 1-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imum of 15 minutes and at that time steam is passed. He, therefore, informed them that the pre-tread is cured vulcanised rubber. 30. We find that thereafter the assessees/appellants submitted a protest letter on 1-7-1986 extracted under Para 3.1 and marked as Annexure B (appearing at page 9 of the additional paper book No. 1) to the Assistant Collector, through the Supdt. of Central Excise, Arkonam Range. The Subject of this letter was - "Pre-tread - payment of duty "Under Protest" Excise duty on Pretread under Chapter 40 Rule 233B" and they informed the Assistant Collector that they desired to pay duty under protest on pre-tread under Chapter 40 under main heading 40.08 and sub-heading 4008.21 on the following grounds : (d) They had filed Classification list 2/85-86 for pre-tread, claiming exemption from duty under Notification No. 47/76 dated 9-3-1976 as amended by Notification No. 193/80 and 78/86 dated 10-2-1986. (e) The Supdt. of Central Excise, Arakonam Range vide his letter OC No. 1190/86 dated 27-6-1986 has returned their Classification List stating that they were not entitled to avail exemptions as per Notifications c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CE Rules, 1944. 33. As regards the time limit, we observe that the duty was paid under protest with effect from 1-7-1986 in terms of Rule 233B of the CE Rules, 1944 vide their protest letter dated 1-7-1986 which was acknowledged by the department on 1-7-1986 itself. Therefore, the question of time limit applicability did not arise in their case. 34. The correctness of the claim was also duly verified at all levels and found to agree with the figures in the refund claim. Therefore the refund claim of Rs. 3,52,03,339.93 (Rupees Three Crores, fifty two lakhs, three thousand, three hundred thirty nine and paise ninety three only) passed this scrutiny both on merits as well as on time bar and there was no dispute on these two points. 35. In order to verify whether the said refund claim would attract the provisions of amended Section 11B, of the CE Act, 1944 for invoking the principles of unjust enrichment, M/s MRF Ltd. were called upon to re-submit their claim in the prescribed format under Rule 173S of the CE Rules, 1944 which was inserted with effect from 20-9-1991. Accordingly they re-submitted their refund claim on 5-6-1992 in the prescribed format with the decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s at nil rate of duty and they were not entitled to the said exemption. They were therefore requested to clear the pretread on payment of duty @ 40% ad valorem, which the appellants started paying after lodging protest letter vide their letter dated 1-7-1986. Both these letters of the Supdt. of Central Excise as well as of the assessee-appellants to the Assistant Collector through the Supdt. of Central Excise have already been extracted above. From these two letters, it is very clear that the appellants had filed protest letter on 1-7-1986 in terms of the provisions as contained in Rule 233B of the CE Rules, 1944 which is extracted herein below : RULE 233B. Procedure to be followed in cases where duty is paid under protest. - (1) Where an assessee desires to pay duty under protest he shall deliver to the proper officer a letter to this effect and give grounds for payment of the duty under protest. (2) On receipt of the said letter, the proper officer shall give an acknowledgement to it. (3) acknowledgement so given shall, subject to the provisions of sub-rule (4), be the proof that the assessee has paid the duty under protest from the day on which the letter of protes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons for provisional assessment to duty, and the proper officer may direct after such inquiry as he deems fit, that the duty leviable on such goods shall be assessed provisionally at such rate or such value (which may not necessarily be the rate or price declared by the assessee) as may be indicated by him, if such assessee executes a bound in the proper form with such surety or sufficient security in such amount, or under such conditions as the proper officer deems fit, binding himself for payment of difference between the amount of duty as provisionally assessed and as finally assessed : Provided that all clearances in respect of excisable goods covered under such request by the assessee submitted with the proper officer under the dated acknowledgement shall be deemed to be cleared as provisionally assessed to duty at such rate or at such value as declared by the assessee, till the date when the direction of the proper officer is issued and communicated to the assessee : Provided further that the proper officer where he is satisfied that the self-assessment made by the assessee is not in order, he may direct him to resort to provisional assessment and on receipt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisional assessment and had the refund become payable as a result of adjustment at the time of final assessment under sub rule (5) of Rule 9B of the rules ibid, in that case alone, the provisions of doctrine of unjust enrichment were not applicable. Since in their case, it was a case of payment of duty under protest under Rule 233B of the Rules ibid, the provision with regard to doctrine of unjust enrichment is fully applicable and they have to satisfy with documentary evidence that they have not passed on the burden of duty to the consumers. 39. The Constitutional Bench of the Hon'ble Supreme Court in the case of Mafatlal Industries v. UOI reported in 1997 (89) E.L.T. 247 (S.C.) held that all claims for refund, except where levy is held to be unconstitutional, are to be preferred and adjudicated upon under Section 11B of the CE Act, 1944 and are subject to the claimant establishing that burden of duty has not been passed on to the third party. Favourable orders cannot result in automatic refund and the claimant has to prove that burden of duty has not been passed to the third party. It has also been held that the person ultimately bearing the burden of duty can legitimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the Revenue and appeal of the Revenue was dismissed on the ground that the doctrine of unjust enrichment was not available since duty was paid provisionally. While delivering the judgment the Tribunal followed the judgment of the Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. (supra). Since duty was paid under protest @ 40% adv from 1-7-1987, and since there was no provisional assessment under Rule 9B, the judgment rendered by the Tribunal in the case of CCE, Chennai v. TVS Suzuki, (supra) and other similar judgments are clearly distinguishable and is not applicable to the facts of this case. In the case of the appellants herein, since they have paid duty under protest under Rule 233B and not, repeat not, under Rule 9B of the Rules ibid, as claimed by the appellants, provisions of Section 11A or 11B are fully applicable in their case and they have to satisfy with documentary evidence that burden of duty has not been passed on to the third party. 40. The Collector (Appeals) while considering the case records as also the grounds urged by the appellants in their appeal as well as during the personal hearing has observed and held that the main plea of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants maintained a standard in-built price for all the products irrespective of the duty aspect throughout the period wherein the provision for all elements had been provided at the time of forming price structure of a product, has considerable force. Further excise duty being, an indirect taxation, all assessees paying it normally will pass on the duty incidence to the buyers. In this case no reason has been forthcoming from the appellants as to why they did not pass on the duty burden to the customers as claimed by them. We also observe that there is no correspondence between the appellants and the customers that incidence of duty has not been passed on to the buyers/customers and that the duty burden in turn has been borne by the appellants. The finding has been given by the Assistant Collector vide para 43 of her order dated 21-5-1993 wherein she has held that proof of the burden of non transfer of excise duty to the customer lies in establishing that the total cost of the product plus profit margin is equal to selling price realised from customers and it does not lie on the argument that sale price was stable over a period of time. The Cost estimation done by the AD (Cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Apex Court in para 91 of the said judgment have been discussed by us thoroughly in para 39 of this order wherein we have cited the judgment of the Hon'ble Apex Court wherein the Hon'ble Supreme Court has held that ordinarily no manufacturer will sell his goods less than the cost price plus duty and if he does so, he cannot survive in business and only in case of distress sale such a thing is understandable. Since distress sales are not normal feature and cannot therefore constitute the basis for judging the validity and reasonableness of a provision. Similarly no one will ordinarily pass on less excise duty than what is exigible and payable. It was also observed by the Hon'ble Supreme Court that a manufacturer may dip into his profits but would not further dip into excise duty components. Further, a perusal of the enclosure to the appellants' letter No. E/A/Refund/KJ/99 dated 9-1-1992 which is at page 107 of the additional paper book No. 1 by which they had submitted revised statement along with Revised Refund claim showing particulars of duty paid, rate of duty payable and the amount of differential duty to be refunded to them for the procured tread rubber cleared duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceding paragraphs. He also submitted that the Affidavit filed by Shri Anantharaman has not been investigated and no question has been asked to find out whether it was correct or false. He also submitted that officers of the Central Excise Department made verification with the records. This plea of the learned Sr. Counsel is not acceptable inasmuch as to verify the various contentions made in the Affidavit the Assistant Collector concerned, (as requested by the appellants) deputed a team of five officers led by the Supdt. of Central Excise to verify the records as could be seen from paras 20 onwards of her order dated 21-5-1993 which are extracted under para 20 (supra). No documents were shown that the incidence of duty has not been passed on to the customers or it has been borne by them. We also observe that the AD (Cost) wanted them to give him the cost of PCTR the Modvat credit availed etc. and other particulars which the appellants were not able to furnish. Appellants were not able to submit even very basic documentary evidence like Bin cards, Stores ledger, Production, Stores requisition slips, material issue slips etc. which alone could furnish the ratio in which the inpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the appellants was only cost sheet as the AD (Cost) has taken the average material cost based on the balance sheet and hence the computation made and relied upon by the department on the report of the AD (Cost) cannot be applied to the appellants. He therefore, urged that the method of calculation attempted by the AD (Cost) was erroneous and the AD (Cost) has not gone into the submissions made by the appellants. In this connection, we observe that the entire report of the AD (Cost) in the form of a gist which has been reproduced under para 15 of this order was sent to the assessee vide letter dated 9-2-1993 of the Assistant Collector of Central Excise, Madras IX Division and the report runs into more than two pages and except the Salutation, the whole report of the AD (Cost) was communicated to the assessee. In reply the appellants-assessee vide their letter dated 24-2-1993 (filed in page No. 74 of the Additional paper Book No. 2) requested the Assistant Collector to furnish the detailed working of PCTR as arrived at by the AD (Cost). The Assistant Collector vide her letter dated 24-3-1993 (which has been reproduced under para 16 of this order) has given a detailed reply to their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not on the basis of cost has to be established for a particular period for a particular product, is also not acceptable in the absence of any records whatsover furnished by the appellants to rebut the presumption under Section 12B ibid. It is also incorrect to say that the deponent of the affidavit has not been questioned at all and had he been questioned, the whole doubts would have been cleared, inasmuch as the whole exercise of verification of the various documents and deputing a team of departmental officers for verifying the cost of PCTR was done to verify the various averments made in the affidavit as well as in the refund claim filed by the appellants. The plea that the findings are based on no evidence or the evidence given by the appellants before the authorities was not looked into, is also not acceptable because the findings of both the original authority and the appellate authority are based on evidence which has been fully discussed and findings arrived at by them. The learned Sr. Counsel has also submitted that even if the presumption under Section 12B ibid has not been rebutted they can be proved under Section 12B with regard to full incidence of duty leviable on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order that duty payable was 15% under chapter sub-heading 4017.00 from 1-3-1986 to 28-2-1987 and under heading 4016.99 from 1-3-1987 to 28-2-1988. Therefore, the plea that only 15% has been passed on to the customers which was the duty payable is also not acceptable since duty @ 40% in full has been collected and the same has been fully passed on to the costomers. There is nothing to the contrary to prove that duty has not been passed on to the customers. We also observe that price of goods means selling price to the buyers and the selling price is made up of cost of sale, profit margin and duty payable or paid. 45. We further observe that the appellants' contention that Section 3 of the Evidence Act is to be considered while applying Section 12B of the CE Act, is not acceptable since Section 12B of the Act is very clear in its expression without giving any room for doubt in regard to the purpose for which the said Section has been introduced in the Statute. To appreciate the said facts, it is relevant to reproduce Section 12B: "12B Presumption that incidence of duty has been passed on to the buyer. "Every person who has paid the duty of excise on any goods under this Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of putting the entire burden only on the assessee to prove the fact that he has not passed on the burden of duty to the buyer and in case if he fails to prove the said fact the department has been given the power under the said Section to invoke the deeming provisions to presume that duty is passed on to the buyer by the assessee. We are, therefore, of the considered opinion that the original authority and the lower appellate authority have rightly ruled that the appellants have not furnished the required documentary evidence that burden of duty has not been passed on to the buyers and hence the deeming provisions as contained in Section 12B ibid have been correctly invoked and the amount of Rs. 3,52,03,339.93 (Rupees three corers, Fifty two lakhs, three thousand, three hundred thirty nine and paise ninety three only) has been rightly ordered to be credited to the Consumer Welfare Fund as established by the Govt. of India under Section 12C of the Central Excise Act, 1944. We, therefore, do not find any infirmity in the impugned order of the Collector (Appeals) calling for any interference at our hands. The impugned order is therefore, upheld and the appeal is rejected. Or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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