2004 (4) TMI 477 - AT - Central Excise

Dismissal of Appeal Due to Failure to Prove Excess Duty Not Passed On

The appeal was dismissed as the refund claim under the Central Excise Act was found to be hit by Sec. 11B, as the appellants failed to prove that the ... Refund - Estoppel Issues:1. Refund claim hit by Sec. 11B of Central Excise Act.2. Interpretation of show cause notice regarding passing on the burden of duty.3. Doctrine of unjust enrichment and issuance of credit notes.4. Applicability of earlier judgments and binding precedents.5. Refund claim based on post-clearance adjustment.Issue 1: The appeal concerns a refund claim under the Central Excise Act, where the Commissioner (Appeals) noted that the claim of Rs. 1,05,734/- was hit by the terms of Sec. 11B as the appellants failed to prove that the excess duty paid was not passed on to any other person. The Commissioner emphasized the need for documentary evidence to establish that the duty incidence had not been transferred to buyers, especially in the context of the sale of zip fasteners manufactured using the polyester monofilament yarn. The appellants' failure to demonstrate this led to the rejection of the refund claim.Issue 2: The dispute also revolves around the interpretation of the show cause notice, with the appellant arguing that it was limited to whether the zip fasteners had passed on the excess duty and not about the issuance of credit notes. However, the Departmental Representative contended that the notice explicitly referenced the credit notes, indicating that the burden was on the appellants to prove that the duty incidence had not been passed on. The Tribunal found that since the appellants themselves claimed to have issued credit notes to buyers, it implied that the duty burden had indeed been transferred, leading to the dismissal of the appeal.Issue 3: The doctrine of unjust enrichment played a crucial role in the judgment, with the Tribunal citing the Larger Bench decision in S. Kumar's Ltd. case, which addressed the issue of post-clearance adjustments like credit notes and their impact on unjust enrichment. The Tribunal held that once the appellants admitted to issuing credit notes to buyers, it established that the duty burden had been passed on, justifying the direction to deposit the duty amount in the Consumer Welfare Fund.Issue 4: The judgment extensively discussed the applicability of earlier judgments and binding precedents, particularly referencing the decision in Sangam Processors (Bhilwara) Ltd. case, which was confirmed by the Apex Court. The Tribunal rejected the argument that the dismissal of an appeal by the Supreme Court does not create a binding precedent, emphasizing the importance of following established legal principles and rulings.Issue 5: Lastly, the case involved a refund claim based on post-clearance adjustments, where the appellants sought a refund after realizing that the duty paid was exempt under a notification. However, the Tribunal, guided by the principles of unjust enrichment and previous decisions, denied the refund claim, highlighting the significance of demonstrating that the duty burden had not been passed on to avoid unjust enrichment.