2023 (6) TMI 539 - AT - Central Excise

Supreme Court classifies Tuberculin PPD under CETH 30.02, denies refund claim based on unjust enrichment doctrine.

Span Divergent Limited Versus Commissioner of Central Excise & ST, Surat-I

The Supreme Court remanded a case involving the classification of Tuberculin PPD by the appellant, ultimately finalizing its classification under CETH ... Refund claim - Duty paid under protest - Doctrine of unjust enrichment - Dispute relating to classification was resolved in favor appellant assessee - Classification of goods - Tuberculin PPD - products are directly sold to the customer - HELD THAT:- The facts of the appellant have been examined in detail and a report has been given by jurisdictional range office which shows that any majority of cases the burden of duty has been passed to the buyers of the product. It has also been verified and established from the scrutiny of annual profit and loss accounts of the appellant that excise duty paid by them has not been shown in the annual accounts for the financial year beginning from 2002-03 to 2008-09 as a amount receivable from the Government which means that the excise duty paid by the appellant has been included as a part of expenditure for the product. From the scrutiny of the invoice, it can be seen that excise duty has been charged in the invoice from the buyers of their product. Since the annual accounts of the company are nothing but total of such invoice and once the amount which have been shown on the invoice as excise duty which is the part of the value of the product, same has to be recovered from the buyer as the principles of accounting and is rightly been done. Thus, as per the report submitted by the jurisdictional range officer after examining the appellant’s books of accounts for the relevant period, wherein it has been reported that the appellant have shown excise duty in their invoice while clearing the goods from the factory as per ledger in majority cases the invoice value including excise duty has been recovered from the customers. This fact clearly shows that duty was paid by the appellant even though under protest has become an integral part of the total sales value and therefore the excise duty so paid by the appellant was collected from their customers. For the purpose of deciding whether element of unjust enrichment are present in a particular case or not, the only fact need to be ascertained is whether the duty paid by the assessee irrespective of under protest or otherwise was passed on to any other person. From the facts as mentioned in the preceding paragraphs, it can easily be ascertained that incidence of central excise duty has clearly been passed on to the buyers of the appellant’s product. In view of above facts, the appellant has passed on the burden of the excise duty to their customers and therefore they are hit by provisions of unjust enrichment - The appellant has passed on the burden of the excise duty to their customers and therefore they are hit by principles of unjust enrichment. The principles of unjust enrichment in this case is clearly applicable and the appellant has failed to discharge its burden of proving that burden of duty has not been passed on to the customer - since incidence of the duty has been passed on to the buyers therefore, the refund is hit by the principles of unjust enrichment. Appeal dismissed. Issues Involved:1. Classification of goods.2. Refund claim and unjust enrichment.Summary:1. Classification of Goods:The appellant, engaged in the manufacture of Diagnostic Reagents, classified Tuberculin PPD under CETH 30.02 with a nil rate of central excise duty. However, the jurisdictional Assistant Commissioner reclassified it under CETH 3005.90, attracting a 15% ad valorem duty. The Commissioner (Appeals) initially ruled the goods as cultures of microorganisms, not Diagnostic Reagents. The Tribunal upheld this classification, leading the appellant to pay duty under protest and appeal to the Supreme Court. The Supreme Court remanded the case, and the Assistant Commissioner, upon re-adjudication, classified the product under CETH 30.02. This reclassification was not appealed by the department, finalizing the classification.2. Refund Claim and Unjust Enrichment:The appellant filed a refund claim for the excise duty paid under protest from 2001 to 2008. The Deputy Commissioner sanctioned the refund but credited the amount to the Consumer Welfare Fund, citing the doctrine of unjust enrichment, as the burden of proof against it was not satisfactorily discharged by the appellant. The Commissioner (Appeals) partially allowed the refund, leading to the current appeal.The appellant argued that the burden of excise duty was not passed to consumers, supported by buyer statements, Chartered Accountant certificates, and consistent product pricing before and after December 2001. However, the Tribunal found that the excise duty was shown in invoices and included in the product's sale price, indicating the duty was passed on to customers. The Tribunal cited the Supreme Court's decision in Mafatlal Industries Ltd. and other relevant cases, concluding that the refund claim was barred by the principles of unjust enrichment.Conclusion:The Tribunal held that the appellant passed on the burden of excise duty to customers, thus the refund was hit by the principles of unjust enrichment. The appeal was dismissed, upholding the impugned Order-in-Appeal.