2000 (11) TMI 146 - HC - Central Excise

Section 11B denies refunds to those who passed the duty on; claimant must prove it retained the duty burden

HC held that Section 11B aims to prevent unjust enrichment by denying refund to a person who has passed the duty burden to others; the claimant must ... Claim for refund of duty - Unjust enrichment - period of limitation prescribed in Section 11B - interpretation of Section 11B - rebut the presumption contained in Section 12B - HELD THAT:- Section 11B is intended to prevent a person who has paid duty or borne it initially from receiving the refund of a part or whole of the duty if he has already passed on that burden of the duty paid by him to another as that would result in unjust enrichment. It is that amount which is required to be credited to the Consumer Welfare Fund. The fact that the Consumer Welfare Fund has been constituted does not on that score require the authorities dealing with refund claims to start an enquiry as to the price at which the goods had been sold to the ultimate consumer after the dealer who purchases the goods from the manufacturer, sells to its sub-dealer who in turn may sell to a retailer who in turn ultimately may sell the same to the actual consumer. The enrichment of the person, who has paid the duty and seeks refund would be unjust if he even while not suffering the burden of duty after having passed on the same to another obtains refund and retains such refund with him. There would be nothing unjust where the person who has paid duty and has not passed on that burden to another receives refund thereby reducing the burden which he was not required to bear but had bore. The language employed in Section 11B therefore is not capable of being construed as having reference to the ultimate consumer of the product. What has to be demonstrated by the claimant is that the burden of the duty paid had not been passed on by him to any other person. The passing on will occur only if the person who claims refund of duty as shifted the burden to another. There can be no passing on of the incidence of the duty if he merely reduces his burden by receiving the refund. The possibility that the dealer who has obtained goods from the manufacturer may charge to his buyer the full amount of the duty ignoring the refund received by the manufacturer cannot be a ground for denying refund to the manufacturer. The primary object of the provision which is intended to deter or prevent unjust enrichment is to prevent enrichment of the person who has paid duty and who seeks refund of the same. It is not directed at the buyer who has entered into arms length transactions with manufacturer and has sold the goods to sub-dealers, retailers or consumers. The Tribunal therefore was clearly in error in holding that despite the assessee having proved that it had not passed on the incidence duty to it's buyers, it was not entitled to the refund even when all the other conditions required to be satisfied under Section 11B had been satisfied. We answer the question referred to us regarding the correctness of the view taken by the Tribunal in favour of the assessee and against the Revenue. Issues involved: Claim for refund of duty paid based on discount given to dealers, interpretation of Section 11B of the Central Excise Act, determination of entitlement to refund for a manufacturer.Summary:The assessee, a manufacturer of cutting tools, claimed a refund of duty paid by providing credit notes to its dealers. The claim was made within the prescribed period under Section 11B of the Central Excise Act. The Tribunal initially disallowed the claim, stating that the turnover discount did not affect the assessable value. However, the Supreme Court later held that the turnover discount is an admissible deduction. The refund was granted by the Assistant Commissioner, subject to re-deposit if the Tribunal ruled against the assessee.The Tribunal denied the refund, claiming the burden of duty had been passed on to the consumer without evidence of the same. Section 11B sets conditions for refund claims, requiring proof that duty incidence was not passed on. The Act does not focus on the ultimate consumer but on preventing unjust enrichment for the person who paid the duty. The claimant must show that the duty burden was not shifted to any other person to qualify for a refund.The Tribunal's decision was deemed erroneous as the assessee had met all conditions under Section 11B. The Act aims to prevent unjust enrichment for the duty payer seeking a refund. The term 'buyer' in the Act does not necessarily refer to the ultimate consumer but to the purchaser from the duty payer. The Tribunal's denial of the refund despite the assessee proving non-passage of duty burden to buyers was incorrect.In conclusion, the Tribunal's decision was overturned, and the assessee was found entitled to the refund as per the provisions of Section 11B of the Central Excise Act.