2009 (4) TMI 751 - AT - Central Excise

Tribunal decision: Manufacturers eligible for refund due to reclassification.

COMMISSIONER OF C. EX., TIRUPATHI Versus ELGI TYRES & TUBES (P) LTD.

The Tribunal remanded the matter for a fresh decision after the initial rejection of refund claims based on unjust enrichment. The Commissioner (Appeals) ... Refund claim - Unjust enrichment ISSUES PRESENTED AND CONSIDERED 1. Whether claimants are eligible for refund of duty following reclassification, subject to the statutory bar of unjust enrichment. 2. Whether a Cost Accountant's certificate (or Chartered Accountant's certificate) certifying non-passing on of incidence of duty constitutes sufficient evidence to discharge the claimants' burden of proving absence of unjust enrichment, or whether independent corroborative documentary evidence is mandatorily required. 3. What is the duty of the Adjudicating Authority when it finds himself unconvinced by a professional certificate - specifically, whether the authority must order inspection/verification of accounts under provisions of the relevant statute (CEA 1944) rather than summarily rejecting the certificate. 4. Whether the Adjudicating Authority's failure to follow earlier directions of the Tribunal to permit production and consideration of Cost Accountant's certificate and other evidence vitiates the rejection of the refund claim. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Eligibility for refund subject to unjust enrichment Legal framework: Refund of duty after reclassification is permissible unless refund would result in unjust enrichment; claimant bears the burden to prove that incidence of duty was not passed on to others. Precedent treatment: The Tribunal's prior directions and decisions cited by the reviewing authority (and relied upon in this judgment) treat the absence of passed-on incidence as a condition precedent to refund; these authorities were followed. Interpretation and reasoning: The Court focussed on whether the evidence produced established that the duty incidence remained with claimants. Given that the claimants produced a Cost Accountant's certificate stating that he had examined all accounts/records and concluded that duty was not passed on, and there being no contrary evidence by the revenue, the Court accepted that the condition (no unjust enrichment) was established. Ratio vs. Obiter: Ratio - where claimants produce credible professional certification and there is no contrary evidence, they satisfy the burden to show absence of unjust enrichment and are eligible for refund. Obiter - none supervening beyond evidentiary treatment noted. Conclusion: Claimants entitled to refund as they crossed the unjust-enrichment hurdle on the record before the adjudicator of appeals; the Adjudicating Authority's contrary conclusion was unsustainable. Issue 2 - Evidentiary value of Cost Accountant's certificate and need for corroboration Legal framework: Evidence in support of absence of passing-on may include professional certificates. The law permits acceptance of a licensed professional's certificate as material evidence; false certification attracts professional and penal consequences for the certifier. Precedent treatment (followed/distinguished): The Commissioner (Appeals) relied on earlier Tribunal decisions which held that Cost/Chartered Accountant certificates are evidence in themselves and do not necessarily require independent corroboration; those decisions were followed by the Court. Interpretation and reasoning: The Adjudicating Authority rejected the certificate on the ground that it was not corroborated by fresh documents, but the Court observed that such a summary rejection is improper where the certificate expressly states that the certifier examined all company accounts/records. The Court emphasised that the authority cannot dismiss the certificate by invoking speculative inferences unsupported by facts. Ratio vs. Obiter: Ratio - a Cost Accountant's certificate that is specific and based on examination of records is admissible and, absent contrary evidence, can suffice to establish non-passing of duty; merely demanding further corroboration is not warranted without specific defects or contrary material. Obiter - suggestion that in case of doubt an inspection under statutory powers is the appropriate mechanism. Conclusion: The Cost Accountant's certificate was sufficient evidence on the record to establish that incidence of duty was not passed on and, without contrary material, justified allowance of the refund claim. Issue 3 - Duty of Adjudicating Authority to inspect records under statutory provisions before rejecting certificate Legal framework: Adjudicating Authorities possess statutory powers (under the CEA 1944) to inspect and verify records and accounts; such powers are the proper course when documentary or certificate evidence raises doubt. Precedent treatment: The Commissioner (Appeals) and this Court applied the rule that where an authority cannot arrive at a conclusion based on a professional certificate, the proper step is to order inspection/verification rather than flatly rejecting the certificate for want of corroboration. Interpretation and reasoning: The Court held that if the Adjudicating Authority truly doubted the veracity or basis of the Cost Accountant's certificate, he should have exercised inspection powers to verify the accounts/records. The absence of any such exercise and the summary rejection of the certificate amounted to procedural impropriety and unsupported inference. Ratio vs. Obiter: Ratio - when a professional certificate is challenged or dubiously backed by facts in the record, the adjudicator must use statutory inspection/verification powers rather than summarily rejecting the certificate; failure to do so is reversible. Obiter - discussion as to how inspection should be conducted was not necessary to decide the appeal. Conclusion: The Adjudicating Authority erred in not invoking inspection/verification provisions; rejection of the refund claim on the sole ground of alleged non-corroboration without directing inspection was unsustainable. Issue 4 - Effect of earlier Tribunal direction to produce evidence and failure of the Adjudicating Authority to consider produced evidence Legal framework: Directions by a superior tribunal remanding matters for fresh adjudication require the lower authority to consider and decide in accordance with law after giving opportunity and considering directed evidence. Precedent treatment: The remand order expressly required production and consideration of the Cost Accountant's certificate and other evidence; the adjudicator's duty upon remand was to consider those materials. Interpretation and reasoning: The Court reviewed the remand direction, found that the claimants complied by producing the Cost Accountant's certificate and records, yet the Adjudicating Authority summarily rejected the claim without proper consideration. This non-compliance with remand directions and failure to consider evidence rendered the Adjudicating Authority's order erroneous. Ratio vs. Obiter: Ratio - failure to comply with explicit remand directions and to consider produced evidence vitiates the adjudicatory order; such orders must be set aside where the adjudicator ignores the evidence specifically ordered to be produced. Obiter - none beyond corrective principle. Conclusion: The Adjudicating Authority's order was vitiated by non-consideration of the evidence produced pursuant to the Tribunal's direction; the Commissioner (Appeals) correctly allowed the appeal and set aside that order. Overall Conclusion On the record - a Cost Accountant's certificate, certifying non-passing of duty after examination of accounts, coupled with absence of contrary evidence and the failure of the Adjudicating Authority to verify records under statutory powers or to consider the evidence produced pursuant to a remand - leads to the conclusion that the refund claim should be allowed. The order of the Commissioner (Appeals) allowing the refund was held to be legal and correct; the appeal by revenue was rejected.