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Commissioner of Central Excise, Madras Versus M/s Addison & Co. Ltd.

2016 (8) TMI 1071 - SUPREME COURT

Refund claim - excise duty paid on additional discounts and turnover discounts - eligibility for deduction from the wholesale price for determination of value under Section 4 of the Central Excises & Salt Act, 1944 - Held that:- this Court by its judgment dated 11.03.1997 in Addison & Co. Ltd. Vs. Collector of Central Excise, Madras Vs. Collector of Central Excise, Madras [1997 (3) TMI 98 - SUPREME COURT OF INDIA] held that the turnover discount is an admissible deduction. This Court approved th .....

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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 .....

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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 for a refund as he would be unjustly enriched. - Refund claim - on the basis of credit notes raised by the Assessee subsequent to the sale/removal of goods - trade discounts given to its buyers including the component of excise duty - Held that:- the appeals were allowed, as being squarely covered by t .....

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.2001 to 13.06.2001 after being a notification was issued on 11.06.2001 increasing CENVAT credit from 45 per cent to 50 per cent which resulted in the net duty payable being 50 per cent - effective duty of excise is 16 per cent and the duty payable from the personal ledger account prior to the notification dated 11.06.2001 was 8.8 per cent and after 11.06.2001 the duty payable is 8 per cent - Held that:- we have already held that in the claim for refund of excess duty paid can be allowed only in .....

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xcess excise duty paid at the rate of 18.11 per cent instead of 9.20 per cent - Assessee initially passed on the duty incidence to its customers. Later the Assessee returned the excess duty amount to its buyers which was evidenced by a certificate issued by the Chartered Accountant - Held that:- 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 As .....

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3-8386 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 .....

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dated 26.11.2014 in Central Excise Appeal No. 21 of 2009. Special Leave Petition (C) Nos. 18426 of 2015, 18423 of 2015, 18425 of 2015, 23722 of 2015, 12282 of 2016, 16142 of 2016 and 16141 of 2016 are filed against the judgment of the Andhra Pradesh High Court in Central Excise Appeal Nos. 21 of 2005, 9 of 2005, 51 of 2004, 10 of 2005, 44 of 2004, 38 of 2004 and 18 of 2005 respectively. 3. Civil Appeal No. 8488 of 2009 is filed against the judgment dated 20.08.2008 passed by the Bombay High Cour .....

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he Madras High Court s impugned judgment in Civil Appeal No. 7906 of 2002. Civil Appeal No. 8488 of 2009 and SLP No. 25055 of 2009 will be dealt with separately as the facts and the point involved are slightly different. Civil Appeal No. 7906 of 2002 5. The respondent in the above appeal is a manufacturer of cutting tools. The respondent-Assessee filed a refund claim for ₹ 40,22,133/- on 19.07.1988 and a supplementary refund claim for ₹ 5,44,688/- on 15.06.1989 towards excise duty pa .....

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duction from the wholesale price for determination of value under Section 4 of the Central Excises & Salt Act, 1944. On 23.08.1989 a notice was issued to the respondent 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 .....

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endment) 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 passed on to the buyers is on the Assessee as per Section 12-B of the Act. 7. The Assistant Collector passed an Order-in-Original dat .....

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. The Tribunal held that the Assessee would be entitled to grant of refund only if he had not passed on the duty burden to his buyers. It was also held that the buyer in turn, would be entitled to claim refund only if he has not passed on the incidence of duty to any other person. It was further held by the Tribunal that the event which gives rise to cause of action for refund is payment of duty made in respect of goods cleared from the factory and once the duty burden has been passed on to the .....

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fact of the existence of divergent views on the point. 1. Whether by passing on the duty element on the discount to its dealers the applicant had satisfied the requirements of proviso d to sub Section 11-B (2) of the Central Excise Act, 1944 and was therefore, entitled to be paid the amount claimed as refund? 2. Whether the Tribunal after finding that the burden of duty was passed on by the applicant to its various dealers by issue of credit notes was right in concluding that the ingredients of .....

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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 Cou .....

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an, Senior Advocate for the respondent. The learned Additional Solicitor General submitted that a claim for refund can be entertained only when the claimant has not passed on the duty to any other person. By referring to the statement of objects and reasons for the amendment made to the Central Excises & Customs Laws (Amendment) Act 1991, the learned Additional Solicitor General submitted that the Act had given effect to the recommendations of the Public Accounts Committee whereby the refund .....

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re is a presumption, though rebuttable, that the full incidence of the duty has passed on to the buyer of the goods. The learned Additional Solicitor General has strongly relied upon Mafatlal Industries Ltd. and Others Vs. Union of India And Ors., reported in (1997) 5 SCC 536 to support his contentions on unjust enrichment. 11. Mr. N. Venkatraman, Senior Advocate appearing for the Assessee contended that turnover discount is an admissible deduction, the scheme of turnover discount was known to t .....

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o be deducted from the sale price as held in Union of India and Others Vs. Bombay Tyre International Pvt. Ltd. reported in (1984) 1 SCC 467 and (2005) 3 SCC 787. He contends that in the said judgments it was held that trade discounts should not be disallowed only because they are not payable at the time of each invoice or deducted from 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 e .....

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t 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 .....

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f persons as notified by the Central Government. On the basis of the above submission, he states that there is absolutely no necessity for any verification to be made as to who is the ultimate consumer and as to whether he had borne the burden of the duty. According to him, if the manufacturer is entitled for a refund towards an admissible deduction, such refund has to be given to him if he did not retain the benefit. He also stated that the judgment of this Court in Mafatlal Industries Ltd. &am .....

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y is not a futile exercise. He stated that the refund can be granted only to the person who has paid the duty and not to anyone else. If the ultimate consumer cannot be identified, the amount would be retained in the Fund and utilized for the benefit of Consumers. 14. We have considered the submissions made by the Counsel carefully and examined the material on record. The questions that arise for consideration in this case are whether the Assessee is entitled for a refund and whether there would .....

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xcise, 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 .....

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ing provisions of Central Excise Act, 1944 are relevant for appreciating the point of unjust enrichment:- SECTION 11B. Claim for refund of duty. - (1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise] before the expiry of [one year] [from the relevant date] [[in such form and manner] as may be prescribed and the application shall be accompanied by such documen .....

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e deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) as substituted by that Act :] [Provided further that] the limitation of [one year] shall not apply where any duty has been paid under protest. * * * * (2) If, on receipt of any such application, the [Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise] is satisfied that the whole or any part of the duty of .....

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ut of India or on excisable materials used in the manufacture of goods which are exported out of India; (b) unspent advance deposits lying in balance in the applicant s account current maintained with the [Commissioner of Central Excise]; (c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act; (d) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other p .....

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n. (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 .....

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as the case may be, but without prejudice to the validity of anything previously done thereunder. (5) For the removal of doubts, it is hereby declared that any notification issued under clause f of the first proviso to sub-section (2), including any such notification approved or modified under sub-section (4), may be rescinded by the Central Government at any time by notification in the Official Gazette.] [Explanation. - For the purposes of this section, - (A) refund includes rebate of duty of .....

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aded, leaves India, or (ii) if the goods are exported by land, the date on which such goods pass the frontier, Or (iii) if the goods are exported by post, the date of dispatch of goods by the Post Office concerned to a place outside India; (b) in the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory, the date of entry into the factory for the purposes aforesaid; (c) in the case of goods to which banderols are required to be .....

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r 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 .....

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t, sales invoice, and other like documents, the amount of such duty which will form part of the price at which such goods are to be sold. SECTION 12B. Presumption that the incidence of duty has been passed on to the buyer. - Every person who has paid the duty of excise on any goods 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. SECTION 12C. Consumer Welfare Fund. - (1) There shall be established .....

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ome from investment of the amount credited to the Fund and any other monies received by the Central Government for the purposes of this Fund. SECTION 12D. Utilisation of the Fund. - (1) Any money credited to the Fund shall be utilised by the Central Government for the welfare of the consumers in accordance with such rules as that Government may make in this behalf. (2) The Central Government shall maintain or, if it thinks fit, specify the authority which shall maintain, proper and separate acco .....

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hat 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 for a refund as he would be unjustly enriched. It will be useful to refer to the relevant para of Mafatla .....

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d 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 suff .....

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on can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched . 17. Se .....

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e the manufacturer, his buyer and any other class of persons as notified by the Central Government. There is no dispute about the fact that no notification has been issued by the Central Government as contemplated in Clause (f) to proviso to Section 11-B (2) of the Act. He contested that the claim for refund can be made only by the manufacturer or his buyer and any enquiry pertaining to unjust enrichment should be restricted only to the manufacturer and his buyer. The ultimate buyer/ consumer wi .....

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to any other person. Section 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 man .....

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uses (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, the buyer and a class of applicants notified by the Central Government. Clause (e) refers to the buyer which is not restricted to the first buyer from the manufacturer. The buyer mentioned in the above Clause can be a buyer downstream as well. While dealing with the abs .....

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ested that the creation of the Consumer Welfare Fund is a mere pretence and not an honest exercise. By reading the Rules framed under Section 12-D, it is pointed out, even a consumer, who has really borne the burden of tax and is in a position to establish that fact, is yet not entitled to apply for refund of the duty since the Rules do not provide for such a situation. The Rules contemplate only grants being made to Consumer Welfare Societies. Even in the matter of making grants, it is submitte .....

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icism runs thus: It ill-becomes the manufacturers/Assessees to espouse the cause of consumers, when all the while they had been making a killing at their expense. No consumers' organisation had come forward to voice any grievance against the said provisions. Clause (e) of the proviso to sub-section (2) of Section 11-B does provide for the buyer of the goods, to whom the burden of duty has been passed on, to apply for refund of duty to him, provided that he has not in his turn passed on the d .....

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e 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 .....

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is perhaps for the reason that clause (e) of the proviso to sub-section (2) of Section 11-B does provide for the purchaser of goods applying for and obtaining the refund where he can satisfy that the burden of the duty has been borne by him alone. Such a person can apply within six months of his purchase as provided in clause (e) of Explanation B appended to Section 11-B. It is, therefore, not correct to contend that the impugned provisions do not provide for refunding the tax collected contrar .....

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purchasers may be spread all over India and it is not convenient or practicable for all of them to go to the place of removal of goods and apply for refund. True it is that there is this practical inconvenience but it must also be remembered that such claims will be filed only by purchasers of high-priced goods where the duty component is large and not by all and sundry/small purchasers. This practical inconvenience or hardship, as it is called, cannot be a ground for holding that the provisions .....

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(supra). We are bound by the said findings of a Larger Bench of this Court. The word buyer in Clause (e) to proviso to Section 11-B (2) of the Act cannot be restricted to the first buyer 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 t .....

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he 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. 18426, 23722, 18423, 18425 of 2015 and 12282, 16141 and 16142 of 2016. Leave granted. 24. Civil Appeals arising out of Sp .....

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f the High Court of Andhra Pradesh in Central Excise Appeal Nos. 44 and 38 of 2004 and 18 of 2005. These three appeals were disposed of by the High Court in terms of its earlier judgment dated 19.02.2014. 25. The Assessee i.e. Andhra Pradesh Paper Mills Ltd. manufactures Paper and Paper boards. There is no dispute that excise duty is paid by the Assessee and the same is passed on to its buyers. Applications were filed by the Assessee for refund of amounts towards trade discounts that were given .....

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Customs, Excise and Service Tax Appellate Tribunal, South Zonal Division, Bangalore dismissed the appeals filed by the Assessee. 26. The Assessee approached the High Court of Andhra Pradesh by filing Central Excise Appeals. By a judgment dated 19.02.2014, the High Court of Andhra Pradesh allowed the Central Excise Appeal Nos. 9, 10 and 51 of 2004 and 21 of 2005. The appeals were allowed, as being squarely covered by the judgment of the Madras High Court in Addison and Company Ltd., Madras Vs. C .....

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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 .....

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of 2002 dated 30.12.2002. The above said order was reversed by the Commissioner of Customs and Central Excise by his order dated 12.03.2003. 30. The Revenue filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Division, Bangalore which was allowed. The Assessee preferred an appeal to the High Court aggrieved by the order of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Division, Bangalore. The High Court following its own judgment in An .....

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f man-made fibre was 45 per cent. The net duty payable on the fibre was 55 per cent of the effective duty. On 11.06.2001, a notification was issued increasing CENVAT credit from 45 per cent to 50 per cent which resulted in the net duty payable being 50 per cent. The Assessee continued to pay the effective duty at 55 per cent for a short period between 11.06.2001 to 13.06.2001. The effective duty of excise is 16 per cent and the duty payable from the personal ledger account prior to the notificat .....

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the market. It was also held that the incidence of the duty was passed on to the ultimate customers/consumers before the debit notes were raised by the owners of the fabric. As the duty paid at 8.8 per cent was passed on by the owner of the fabric to the ultimate consumer the processor was not entitled for a refund. 32. The Assessee approached the Commissioner Appeals, II Customs & Central Excise, Jaipur by filing an appeal which was rejected by an order dated 27.02.2003. The Central Excise .....

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se. 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 .....

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the ultimate buyer cannot be left in the realm of presumption. 34. In Civil Appeal No. 7906 of 2002, we have already held that in the claim for refund of excess duty paid can be allowed only in case where the burden of duty has not been passed on to any other person, which includes the ultimate consumer as well. The findings in the Order-in-Original and the Order-in-Appeal are that the excise duty paid originally at the rate of 8.8 per cent was passed on from the Assessee-processor to the owner .....

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nt. The Assessee initially passed on the duty incidence to its customers. Later the Assessee returned the excess duty amount to its buyers which was evidenced by a certificate issued by the Chartered Accountant on 02.08.2002. The refund claim was rejected by the Deputy Commissioner of Central Excise, Kolhapur Division vide an order dated 24.09.2002 on the ground that the Assessee did not submit either the credit notes or the Chartered Accountant s certificate at the time of filing the refund app .....

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