2008 (4) TMI 670 - AT - Central Excise

Refund of Duty Paid Under Protest by 100% EOU to DTA Purchasers

The duty on clearances made by a 100% EOU to DTA purchasers after obtaining permission from the Development Commissioner against payment in foreign ... 100% EOU – DTA clearance – who is liable to pay duty – held that:- It is also significant to note that under para 9.26 of the Handbook of Procedures, all duties and taxes on clearances by EOU into DTA under para 9.10 of the Exim Policy were to be borne by the purchaser in DTA. The expression used is “all duties and taxes” and not merely “all taxes”. The specific use of the word “duties” is quite clearly intended to inter alia cover central excise duty. If the stand of the Revenue is accepted, it would man that Central excise duty could be charged from the EOU under rule 7 of the Central Excise Rules, 1944 and also from the DTA purchaser under para 9.26 of the Handbook of Procedures. Tax cannot be collected on the same taxing event from two persons. Duty on clearances by the appellants, a 100% EOU, into DTA after obtaining requisite permission from the Development Commissioner is to be recovered from the DTA buyer on the basis of paragraph 9.26 of the Handbook of Procedures, 1997-2002 and Tribunal’s judgement in Interdrill Asia vs. CCE, Belapur [2005 (7) TMI 245 - CESTAT, MUMBAI] Regarding refund – unjust enrichment – held that:- The submission that selling price shown in the invoice of Rs.42.89 is equivalent to the contract price of US $0.80 and duty payable is separately shown on the invoice and, therefore, the appellants could not be held to have recovered any duty from the customers, is not sufficient to discharge the burden of proving that the incidence of duty had not been passed on by the appellants to their customers. Issues Involved:1. Duty liability on clearances by a 100% EOU into DTA.2. Nature of assessments (provisional or not).3. Application of the doctrine of unjust enrichment for refund claims.Issue-wise Detailed Analysis:1. Duty Liability on Clearances by a 100% EOU into DTA:The learned Member (Judicial) concluded that the duty on clearances by the appellants, a 100% EOU, into DTA after obtaining requisite permission from the Development Commissioner, should be recovered from the DTA buyer. This conclusion is based on paragraph 9.26 of the Handbook of Procedures, 1997-2002, and the Tribunal's judgment in Interdrill Asia vs. CCE, Belapur 2006 (193) ELT 440. The Member emphasized that EOUs are governed by the EXIM policy and the Handbook of Procedures, which are self-contained codes in this regard, as upheld by the apex court in UOI vs. Asian Food Industries 2006 (204) ELT 8 (SC) and Hindustan Granites vs. UOI 2007 (211) ELT 3 (SC). By a legal fiction, clearances from EOU into DTA against remittances in foreign exchange are deemed exports, making the purchaser the deemed importer liable to pay duty equivalent to customs duty on like goods.Conversely, the learned Member (Technical) argued that the provisions in Chapter VA of the Central Excise Rules mandate that duty on DTA clearances must be paid by the EOU. He contended that the EXIM policy and Handbook of Procedures do not have the authority to alter the manner of duty collection prescribed by the Central Excise Act and the Customs Act. He further argued that the principle of generalia specialibus non derogant does not apply as the Central Excise Act and Rules also constitute a composite scheme.The Vice President found that the interpretation of the learned Member (Technical) would render paragraph 9.26 of the Handbook of Procedures otiose, which should be avoided. The EOU scheme, governed by the EXIM policy, deems clearances into DTA against foreign exchange as exports, with the duty payable by the deemed importer as per paragraph 9.26. The Vice President emphasized that Rule 7 of the Central Excise Rules does not apply to clearances under paragraph 9.10(b) of the EXIM policy. The judgment in Sahajanand Technologies upheld the grant of exemption to clearances by an EOU to an EPCG license holder, reinforcing the view that the duty liability on such clearances lies with the DTA purchaser.2. Nature of Assessments (Provisional or Not):The Vice President concurred with the learned Member (Technical) that the clearances were not provisional. The appellants failed to establish that the assessments were provisional.3. Application of the Doctrine of Unjust Enrichment for Refund Claims:The Vice President agreed with the learned Member (Technical) that there was insufficient material to rebut the presumption that the incidence of duty had been passed on to the customers. The appellants' argument that the selling price shown in the invoice was equivalent to the contract price and that duty payable was separately shown on the invoice was not sufficient to prove that the incidence of duty had not been passed on.Majority Order:1. The duty on clearances made to DTA purchasers after obtaining requisite permission from the Development Commissioner against payment in foreign exchange need not be discharged by the 100% EOU. The duty is to be discharged by the DTA purchasers. As the duty payable is held not to be payable by the 100% EOU and has been paid 'Under Protest', the EOU is eligible for a refund of the duty, along with interest, subject to filing a refund claim and satisfaction of the doctrine of unjust enrichment.2. The clearances of the EOU in this case are not provisional.3. Since the assessments are held not to be provisional, the aspect of unjust enrichment must be considered, and a suo motu refund cannot be sanctioned.