2008 (10) TMI 562 - AT - Central Excise

Tax Tribunal Upholds SSI Benefit, Rejects Revenue Appeal on Unjust Enrichment

The Tribunal held that the assessee was entitled to the benefit of the Small Scale Industry (SSI) notification. The Commissioner (Appeals) ruled in favor ... Refund - Unjust enrichment ISSUES PRESENTED AND CONSIDERED 1. Whether refund of excise duty paid under protest is admissible where assessee's invoices during the relevant period show composite prices (duty not indicated separately) but the assessable price before and after payment of duty remained the same. 2. Whether evidence other than invoice format-specifically prior written communication to the department stating that duty would be absorbed and accounting treatment showing duty remaining as an outstanding asset-can establish that the incidence of duty was not passed on to customers, thereby negating unjust enrichment and entitling the assessee to refund. 3. Whether the adjudicating authority was justified in transferring the claimed refund to the Consumer Welfare Fund on the ground of unjust enrichment despite tribunal findings favorable to the assessee concerning entitlement under the small-scale exemption notification. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Admissibility of refund where invoices show composite price and price uniformity before and after duty payment Legal framework: Refund of excise duty paid under protest is objectionable if the incidence of duty has been passed on to customers (unjust enrichment). A composite invoice (price inclusive of duty) gives rise to a presumption that duty may have been passed on, but this is not conclusive. Precedent treatment: The adjudicating and appellate authorities relied upon tribunal decisions holding that where sale price before and after the event remained the same and increase in price (if any) was less than the duty involved, the inference is that incidence was not passed on. Higher court authority holds that the composite invoice is not conclusive and other evidence may be considered to rebut the presumption. Interpretation and reasoning: The Tribunal accepted that composite invoices prima facie lead to a presumption of passing on the duty but emphasized that price uniformity (same sale price before and after payment) and comparison of price movements can rebut that presumption. The Tribunal further relied on the principle that the question of passing on is a factual enquiry to be resolved on the totality of evidence rather than invoice presentation alone. Ratio vs. Obiter: Ratio - Composite invoices raise a presumption but do not conclusively establish passing on; uniformity of price before and after duty payment can be probative to displace that presumption. Obiter - Reference to comparative quantum of price increase relative to duty amount as an indicium (illustrative of the factual inquiry). Conclusion: The Tribunal held that invoice format alone was insufficient to deny refund where other evidence supported non-passing of duty; therefore, refund may be admissible notwithstanding composite invoices when price uniformity and other evidence indicate the duty burden was absorbed by the assessee. Issue 2 - Reliance on contemporaneous written communication and accounting entries to prove non-passing of duty Legal framework: Evidence admissible to rebut unjust enrichment includes contemporaneous communications to revenue authorities indicating intention to absorb duty, ledger accounts, and audited balance-sheet entries showing duty paid under protest as recoverable by the assessee (or not recovered from customers). Precedent treatment: Authorities and courts have recognized that proof of non-passing can be established by documentary and accounting evidence in addition to invoice/pricing data. Interpretation and reasoning: The Tribunal placed weight on the assessee's letter to the department stating that duty paid under protest would be borne by the assessee and that prices were inclusive and unchanged, and on ledger and audited balance-sheet entries showing the duty paid under protest as an outstanding asset (loan & advances) carried forward across accounting periods. These contemporaneous records corroborated that the duty element remained an additional cost to the assessee rather than being recovered from customers. The Tribunal observed that such evidence is permissible and relevant under the legal principle that non-passing can be established by other evidence, as affirmed by higher authority. Ratio vs. Obiter: Ratio - Contemporaneous written protests to the department and consistent accounting treatment showing duty as an outstanding cost are admissible and persuasive evidence to rebut the presumption of passing on and to negate unjust enrichment. Obiter - None significant beyond application to facts. Conclusion: The Tribunal concluded that the combined weight of the letter of protest and the ledger/balance-sheet entries established that the incidence of duty was not passed on; these materials rebutted the presumption arising from composite invoices and supported allowance of refund. Issue 3 - Legitimacy of departmental action transferring refund to Consumer Welfare Fund for unjust enrichment where tribunal earlier allowed entitlement under exemption Legal framework: Where an assessee is held entitled to exemption/relief by an appellate authority, subsequent claims for refund of duty paid under protest may still be denied if the revenue proves unjust enrichment (i.e., the benefit passed to customers). The standard of proof for unjust enrichment requires cogent evidence that the duty burden was borne by customers. Precedent treatment: Revenue authorities have transferred refunds to the Consumer Welfare Fund when they concluded that the duty element was passed on; however, appellate bodies have reversed such transfers when evidence demonstrated non-passing. Interpretation and reasoning: The Tribunal examined the adjudicating authority's basis for transfer (reliance solely on composite invoices and presumption of passing-on) and found it inadequate because the adjudicating authority did not consider or rebut the written protest and accounting entries submitted by the assessee. The Tribunal further noted that revenue did not contest the appellate findings or produce rebuttal evidence to negate the assessee's documentation. Given absence of contrary proof, the adjudicating authority's transfer was unwarranted. Ratio vs. Obiter: Ratio - Transfer of refund to Consumer Welfare Fund on the ground of unjust enrichment is improper where the assessee produces contemporaneous communications and accounting records that reasonably demonstrate non-passing and revenue fails to rebut those records. Obiter - Emphasis that factual determination requires examination of all relevant records rather than mechanical reliance on invoice format. Conclusion: The Tribunal upheld the appellate authority's acceptance of the refund claim, finding no merit in the Revenue's refusal/transfer when the assessee had satisfactorily shown non-passing of duty and revenue did not effectively challenge that proof. Cross-references 1. The analysis of Issue 1 and Issue 2 are interlinked: the presumption raised by composite invoices (Issue 1) may be rebutted by contemporaneous communications and accounting entries (Issue 2), and the Tribunal relied on both lines of reasoning in resolving Issue 3 (propriety of refund transfer). 2. The Tribunal applied the principle that evidence of non-passing is not confined to invoice presentation and that the totality of contemporaneous documentary and accounting records is relevant and can be decisive where revenue fails to produce contrary evidence.