TMI Blog2016 (8) TMI 1071X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 - SUPREME COURT OF INDIA] that trade discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price. It is the submission of the Assessee that the turnover discount is known to the dealer even at the time of clearance which has also been upheld by this Court. It is clear from the above that the Assessee is entitled for filing a claim for refund on the basis of credit notes raised by him towards turnover discount. Unjust enrichment - incidence of duty was originally passed on to the buyer - Held that:- there is no material brought on record to show that the buyer to whom the incidence of duty was passed on by the Assessee did not pass it on to any other person. There is a statutory presumption under Section 12-B of the Act that the duty has been passed on to the ultimate consumer. It is clear from the facts of the instant case that the duty which was originally paid by the Assessee was passed on. The refund claimed by the Assessee is for an amount which is part of the excise duty paid earlier and passed on. The Assessee who did not bear the burden of the duty, though entitled to claim deduction, is not entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As it is clear that the Assessee has borne the burden of duty, it cannot be said that it is not entitled for the refund of the excess duty paid. In view of the facts of this case being different from Civil Appeal No. 7906 of 2002, the appeal preferred by the Revenue is dismissed. - Decided partly in favour of Revenue - Civil Appeal No. 7906 of 2002 with C.A. Nos. 8488 of 2009, 8382 of 2016, 8383-8386 of 2016, 8388 & 8390-8391 of 2016 and C.A. No. 14689 of 2015 - - - Dated:- 29-8-2016 - Anil R. Dave, Amitava Roy And L. Nageswara Rao CIVIL APPEAL No. 8488 of 2009 CIVIL APPEAL No. _________of 2016, CIVIL APPEAL No. 14689 of 2015 (Arising out of SLP (C) No. 25055 of 2009) (Arising out of SLP (C) No. 18426 of 2015) (Arising out of SLP (C) No. 18423 of 2015) (Arising out of SLP (C) No. 18425 of 2015) (Arising out of SLP (C) No. 23722 of 2015) (Arising out of SLP (C) No. 12282 of 2016) (Arising out of SLP (C) No. 16142 of 2016) (Arising out of SLP (C) No. 16141 of 2016) JUDGMENT L. Nageswara Rao, J. The above Appeals have been listed before us because of an order dated 16.07.2008, by which there was a reference to a Larger Bench in view of the importance of the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent to show cause as to why the refund claim involving turnover discount and additional discount should not be rejected. After hearing the Assessee, the Assistant Collector by an order dated 06.12.1989 rejected the refund claim amounting to ₹ 26,37,462/- and ₹ 17,17,808/- in respect of turnover discount and additional discount respectively on the ground that the quantum of discount become known only at the year end. The Collector of Central Excise Appeals set aside the said order dated 06.12.1989 of the Assistant Collector by his order in appeal dated 21.02.1990 and held that the Assessee was entitled to refund. 6. As per the amendment made to Section 11-B of the Central Excise Act, 1944, (hereinafter referred to as the Act ) an application filed for refund prior to the Central Excises Customs Laws (Amendment) Act 1991 shall be deemed to have been made under the Amendment Act and considered accordingly. The Assistant Collector of Excise issued a show cause notice dated 13.02.1992, directing the Assessee to produce evidence in support of the refund claim. It was mentioned in the said notice that the burden of proof to show that the full incidence of duty has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that there was no evidence to show who is the ultimate consumer of the product and as to whether the ultimate consumer had borne the burden of the duty. According to the High Court, Section 11-B of the Act cannot be construed as having reference to the ultimate Consumer and it would be sufficient for the claimant to show that he did not pass on the burden of duty to any other person. It was further held by the High Court that the claim for refund made by the manufacturer is not dependent on the identification of the ultimate consumer. The word buyer used in Section 12-B of the Act does not refer to ultimate consumer and has reference only to the person who buys the goods from the person who has paid duty i.e. the manufacturer. The High Court concluded that the Tribunal committed an error in holding that the Assessee was not entitled for refund despite the Assessee proving that the duty was not passed on to its buyers. Challenging the legality and validity of the said judgment of the High Court, the Commissioner of Central Excise, Madras has filed Civil Appeal No. 7906 of 2002. 10. We have heard Mr. Atmaram N. S. Nadkarni, Additional Solicitor General and Mr. K. Radha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the invoice price. He also placed reliance on IFB Industries Ltd. Vs. State of Kerala reported in (2012) 4 SCC 618 to support his submission that to qualify for exemption, discounts need not be shown in the invoice itself. 12. Mr.Venkatraman further submitted that the eligibility of the Assessee for refund of amounts towards turnover discounts is no longer in doubt as this Court by its judgment dated 11.03.1997 in Addison Company Ltd., Madras Vs. Collector of Central Excise, Madras reported in (1997) 5 SCC 763 had held that turnover discount is an admissible deduction. He stated that Section 4 read with Section 11-B of the Act permits the respondent to claim for refund of turnover discount given after the sale, provided the scheme of discount has been agreed upon prior to the removal of the goods. The Assessee while issuing a credit note for the turnover discount has returned the duty component forming part of the said discount. As the Assessee has not retained the duty component of the turnover discount, he does not stand to benefit from both ends and hence he is entitled for claiming a refund of the excess duty paid. The refund to which the Assessee is entitled to would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.03.1997 in Addison Co. Ltd. Vs. Collector of Central Excise, Madras (supra) held that the turnover discount is an admissible deduction. This Court approved the normal practice under which discounts are given and held that the discount is known to the dealer at the time of purchase. The Additional Solicitor General submitted that any credit note that was raised post clearance will not be taken into account for the purpose of a refund by the Department. We do not agree with the said submission as it was held by this Court in Union of India Vs Bombay Tyre International (supra) that trade discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price. It is the submission of the Assessee that the turnover discount is known to the dealer even at the time of clearance which has also been upheld by this Court. It is clear from the above that the Assessee is entitled for filing a claim for refund on the basis of credit notes raised by him towards turnover discount. 15. The following provisions of Central Excise Act, 1944 are relevant for appreciating the point of unjust enrichment:- SECTION 11B. Claim for refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such duty to any other person; (e) the duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other person; (f) the duty of excise borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify : Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government, the incidence of duty has not been passed on by the persons concerned to any other person. (3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal of any Court in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2). (4) Every notification under proviso to sub-section (2) shall be laid before each House of Parliament, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven days of its re-assembly, and the Central Government shall seek the approval of Parliament to the notification by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction; [(e) in the case of a person, other than the manufacturer, the date of purchase of the goods by such person;] (ea) in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of section 5A, the date of issue of such order;] (eb) in case where duty of excise is paid provisionally under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof;] (f) in any other case, the date of payment of duty.] SECTION 12A. Price of goods to indicate the amount of duty paid thereon. - Notwithstanding anything contained in this Act or any other law for the time being in force, every person who is liable to pay duty of excise on any goods shall, at the time of clearance of the goods, prominently indicate in all the documents relating to assessment, sales invoice, and other like documents, the amount of such duty which will form part of the price at which such goods ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be useful to refer to the relevant para of Mafatlal Industries Vs. Union of India (supra) in this connection. 108. (iii) A claim for refund, whether made under the provisions of the Act as contemplated in Proposition (i) above or in a suit or writ petition in the situations contemplated by Proposition (ii) above, can succeed only if the petitioner/plaintiff alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 11-B (2) provides that, in case it is found that a part of duty of excise paid is refundable, the amount shall be credited to the fund. Section 2 (ee) defines Fund to mean the Consumer Welfare Fund established under Section 12-C. There is a proviso to Section 11-B (2) which postulates that the amount of excise duty which is refundable may be paid to the applicant instead of being credited to the fund, if such amount is relatable to the duty of excise paid by the manufacturer and he had not passed on the incidence of such duty to any other person. Clause (e) to proviso of Section 11-B (2) also enables the buyer to receive the refund if he had borne the duty of excise, provided he did not pass on the incidence of such duty to any other person. There is a third category of a class of applicants who may be specified by the Central Government by a notification in the official gazette who are also entitled for refund of the duty of excise. A plain reading of Clauses (d), (e) and (f) of the proviso to Section 11-B (2) shows that refund to be made to an applicant should be relatable only to the duty of excise paid by the three categories of persons mentioned therein i.e. the manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who has actually borne the burden. There is no vice in the relevant provisions of the Act. Rules cannot be relied upon to impugn the validity of an enactment, which must stand or fall on its own strength. The defect in the Rules, assuming that there is any, can always be corrected if the experience warrants it. The Court too may indicate the modifications needed in the Rules. The Government is always prepared to make the appropriate changes in the Rules since it views the process as a trial and error method - says Shri Parasaran . 20. There was a further submission which was considered in the said judgment about the convenience/difficulty for the ultimate consumer to make applications for refund. In that connection it was held as follows:- 99. We agree with Shri Parasaran that so far as the provisions of the Act go, they are unexceptionable. Section 12-C which creates the Consumer Welfare Fund and Section 12-D which provides for making the Rules specifying the manner in which the money credited to the Fund shall be utilised cannot be faulted on any ground. Now, coming to the Rules, it is true that these Rules by themselves do not contemplate refund of any amount credite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the manufacturer. Another submission which remains to be considered is the requirement of verification to be done for the purpose of finding out who ultimately bore the burden of excise duty. It might be difficult to identify who had actually borne the burden but such verification would definitely assist the Revenue in finding out whether the manufacturer or buyer who makes an application for refund are being unjustly enriched. If it is not possible to identify the person/persons who have borne the duty, the amount of excise duty collected in excess will remain in the fund which will be utilized for the benefit of the consumers as provided in Section 12-D. 22. The High Court proceeded on an erroneous assumption of fact as well. It was held by the High Court that there is no unjust enrichment as the burden has not been passed on. The High Court s interpretation of Section 11-B is also not correct. 23. In view of the above findings, the judgment of the High Court is liable to be set aside. The Assessee is not entitled to refund as it would result in unjust enrichment. The Appeal is allowed and the judgment of the High Court is set aside. Special Leave Petition (C) Nos. 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 01.07.2015 of the Division Bench of the Andhra Pradesh High Court which followed its earlier judgment dated 19.02.2014. The issues involved in the above Civil Appeals are similar to that of Civil Appeal No. 7906 of 2002. 28. The Appeals filed by the Revenue are allowed, in terms of the judgment in Civil Appeal No. 7906 of 2002. Civil Appeal No. 14689 of 2015 29. The above Civil Appeal is filed by the Commissioner of Central Excise and Customs challenging the judgment of the Andhra Pradesh High Court in Central Excise Appeal No. 21 of 2004. The Respondent-Assessee manufactures Pesticide formulations which are used as pesticides in agricultural farms. The Pesticides are sold at the factory gate and also through depots. The Assessee submitted an application for refund towards allowable discounts after the removal of goods from the factory. Credit notes were issued by the Assessee in favour of the buyers towards trade discounts which also contained a component of the excise duty. There is no dispute regarding the fact of payment of the excise duty originally by the manufacturer being passed on to his buyers. The refund claim of the Assessee was rejected by the Deputy Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner Appeals, II Customs Central Excise, Jaipur by filing an appeal which was rejected by an order dated 27.02.2003. The Central Excise and Service Tax Appellate Tribunal by its order dated 11.05.2005 allowed the appeal filed by the Assessee on the ground that the incidence of duty was not passed on by the Assessee to the customers. The customers protested to the charging of the net duty payable at 8.8 per cent instead of 8 per cent in spite of the notification issued on 11.06.2001. This protest was made without any delay so the question of passing the incidence of duty by the owners of the fabric to their customers does not arise. 33. In Central Excise Appeal No. 34 of 2005 filed by the Union of India through Commissioner of Central Excise, Jaipur, the High Court of Judicature for Rajasthan at Jodhpur confirmed the order of the Central Excise and Service Tax Appellate Tribunal. Challenging the said judgment of the High Court dated 26.11.2008, the Union of India has filed the above Appeal. The contention raised by the Revenue before the High Court regarding the presumption under Section 12-B of the Act was rejected by the High Court by holding that once the Assessee shows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced. The Appellate Authority allowed the appeal of the Assessee and the said order was confirmed by the Central Excise and Service Tax Appellate Tribunal vide judgment and order dated 06.10.2005. The said order of Central Excise and Service Tax Appellate Tribunal was further confirmed by the High Court of Judicature at Bombay in Central Excise Appeal No. 100 of 2008 filed by the Revenue. The Revenue has filed the above Civil Appeal challenging the validity of the judgment of the High Court in Central Excise Appeal No. 100 of 2008. 36. Except for a factual dispute about the genuineness of the certificate issued by the Chartered Accountant and the credit notes raised by the Assessee regarding the return of the excess duty paid by the Assessee, there is no dispute in this case of the duty being passed on to any other person by the buyer. As it is clear that the Assessee has borne the burden of duty, it cannot be said that it is not entitled for the refund of the excess duty paid. In view of the facts of this case being different from Civil Appeal No. 7906 of 2002, the appeal preferred by the Revenue is dismissed. 37. As held above, Civil Appeal Nos. 7906 of 2002 and 14689 o ..... 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