1993 (2) TMI 211 - AT - Central Excise

Refund u/s 11C denied where excise duty passed to buyers despite later credit notes and earlier Section 11B claims

The CEGAT dismissed the assessee's appeals seeking refund of excise duty on man-made fabrics under s.11C of the Central Excises and Salt Act. It held ... Refund of duty u/s 11C - man-made fabrics containing polyester viscose - duty incidence to customers and the issuance of credit notes - non-fulfilment of condition u/s 11C(2) - Notification 35/88 issued u/s 11C, only waived requirement of payment of higher duty during the relevant period - HELD THAT:- The appellants do not deny the fact that during the relevant period they had passed on the duty incidence to the customers and their claim is that the incidence of duty so passed on had since been made good by the appellants granting credit notes to the customers as verified by the Assistant Collector in his second order during de novo proceedings and that thereby they have fulfilled the condition in Sec. 11C(2). It is not possible to accept the contention because a plain reading of Sec. 11C(2) would show what is required thereunder is that the person claiming refund should apply within six months of the issue of 11C Notification with satisfactory proof to show that duty incidence has not been passed on to `any other person’. Such is not the case here because in these cases the appellants have admittedly passed on the incidence at the time of clearance of the goods on payment of duty and had filed the refund claims under Sec. 11B in 1986 and at much later stage, apparently, after the insertion and coming into force of sub-sec. (2) to Sec. 11C from 1-7-1988, and even before the issue of notification under Sec. 11C on 21-12-1988 in respect of their goods, the appellants have sought to show that the duty incidence passed on had been remedied by issue of credit notes to customers. It is not possible to interpret sub-sec. (2) of Sec. 11C to accommodate such situations and to say that even when duty has been passed on to the customers at the time of clearance the assessee can still claim refund under Sec. 11C(2) of Central Excises and Salt Act by issuing credit notes. The Tribunal decision in the case of Collector of Central Excise v. Mahavir Spg. Mills [1987 (11) TMI 185 - CEGAT, NEW DELHI] does not also advance the case of the appellants as it was a decision relating to a demand of duty and not a refund claim rendered in the context of Sec. 11C prior to introduction of sub-sec. (2) thereto. In the result, there is no reason to interfere with the order passed by the Collector (Appeals) and the appeals are rejected. Issues:The judgment involves determining the eligibility of the appellants for refund of duty under Sec. 11C of the Central Excises & Salt Act, 1944 based on the passing on of duty incidence to customers and the issuance of credit notes.Issue 1: Refund Claims and Duty ClassificationThe appellants filed refund claims based on the reclassification of man-made fabrics under Heading 55.12 CETA through the Finance Bill, 1986. The dispute arose regarding the duty levied and subsequent amendments to the Bill affecting duty rates. The Assistant Collector rejected the claims initially, citing Sec. 11C provisions. The Collector (Appeals) remanded the cases for further consideration, leading to conflicting decisions on whether duty incidence had been passed on to customers.Issue 2: Compliance with Sec. 11C(2)The appellants argued that they fulfilled the conditions for exemption under Sec. 11C(2) by issuing credit notes to customers, thus bearing the duty incidence themselves. The Assistant Collector approved the refund claims based on this argument. However, the Collector (Appeals) disagreed, stating that duty had been collected from customers at the time of clearance, and issuing credit notes did not absolve the duty incidence passing on.Issue 3: Interpretation of Sec. 11C(2)The judgment analyzed the applicability of Sec. 11C(2) in the context of refund claims made before the issuance of Notification 35/88 under Sec. 11C. It emphasized that the requirement to prove non-passing of duty incidence to any other person within six months of the notification was not met by the appellants. Despite issuing credit notes post-amendment to Sec. 11C, the duty incidence had already been transferred to customers at the time of clearance, rendering the refund claims ineligible.In conclusion, the judgment rejected the appeals, affirming that the appellants did not satisfy the conditions of Sec. 11C(2) for refund claims, as duty incidence had been passed on to customers prior to the issuance of relevant notifications and subsequent issuance of credit notes did not alter this fact. The interpretation of the law precluded refund eligibility in such circumstances, as clarified by the Collector (Appeals) decision.