2007 (1) TMI 31 - HC - Central Excise

Refund of Central Excise Duty upheld after courts reject Revenue's claim of passing burden to buyer

COMMISSIONER OF C. EX., CHANDIGARH-I Versus MODI OIL & GENERAL MILLS

The Commissioner (Appeals) and CEGAT allowed the refund of Central Excise Duty, rejecting the Revenue's claim of passing on the duty burden to the buyer. ... Unjust enrichment – Revenue alleged that assessee recovered the duty from their buyers and if refund given to them would lead to unjust enrichment – after considering the details revenue allegation were rejected. Issues:1. Whether CEGAT erred in allowing refund of Central Excise Duty without proving non-passing of duty incidence to the buyerRs.2. Whether the refund claimed by the assessee due to excess duty payment was admissibleRs.3. Whether the Revenue's request for a reference under Section 35G of the Central Excise Act should be acceptedRs.Analysis:Issue 1:The Revenue sought a reference under Section 35G of the Central Excise Act to challenge CEGAT's decision allowing a refund of Central Excise Duty. The dispute revolved around whether the duty incidence had been passed on to the buyer, as required by Section 11B and Section 12B of the Act. The dispute arose from the Assistant Commissioner's conclusion that the duty had been recovered from the buyers, leading to unjust enrichment. The Deputy Commissioner upheld this view, directing the refund amount to be credited to the Consumer Welfare Fund under Section 12C of the Act. However, the Commissioner (Appeals) overturned this decision, stating that the duty amount was paid by the assessee from its own pocket, making the refund admissible.Issue 2:The assessee's appeal before the Commissioner (Appeals) challenged the Revenue's assertion that the duty incidence had been passed on to the buyer. The Commissioner (Appeals) found that the duty payment made by the assessee from its own funds, after goods clearance, indicated that the duty burden had not been transferred to the buyer. This finding led to the acceptance of the refund claim for the duty amount deposited by the assessee. The CEGAT upheld the Order-in-Appeal, emphasizing that the duty payment made by the assessee from its own funds supported the conclusion that the duty incidence had not been passed on to the buyer, justifying the refund.Issue 3:The High Court dismissed the Revenue's request for a reference under Section 35G of the Act, stating that the question of whether the duty incidence had been passed on to the buyer was a factual matter. Both the Commissioner (Appeals) and CEGAT had made factual findings that the duty burden had not been shifted to the buyer post-clearance, thus negating the presumption under Section 12B of the Act. The Court concluded that no legal question necessitating a reference to the Court existed, as the factual findings supported the denial of the Revenue's application.This detailed analysis of the judgment highlights the central issues involved, the arguments presented by the parties, and the legal reasoning behind the decisions rendered by the authorities.