ORDER
P.S. Bajaj, Member (T)
1. In this appeal which has been filed by the appellants against the impugned Order-in-Appeal, the controversy centres round the question as to whether the principle of unjust enrichment is attracted to the refund claim of the appellants or not. By applying this principle, the Commissioner (Appeals) has rejected the refund claim of the appellants and affirmed the Order-in-Original of the adjudicating authority through the impugned order.
2.1 The facts, out of which this controversy has arisen, may be briefly stated as under:
2.2 The appellants during the period in dispute (October 1987 to September 1990) were engaged in the manufacture of Glass Wool Mats and articles of Glass Wool. They claimed exemption from payment of duty on these goods falling under sub-heading 7014 of the CETA but the Superintendent of the Range vide letter dated 1.10.1987 directed them to pay the duty not only on the past clearances of February 1987 to August 1987 but also to clear the goods in future on payment of duty. They accordingly, paid the duty but informed the department that it would be paid under protest. The adjudicating authority also later on disallowed them exemption and held that they were liable to pay duty on the goods. The Commissioner (Appeals) upheld that order of the adjudicating authority. However, the CESTAT set aside the Order-in-Appeal, and remanded the matter to the Commissioner (Appeals) for fresh decision. After remand, the Commissioner (Appeals) vide Order dated 31.8.1990, held that the goods were exempt from payment of duty. Consequently, the appellants filed the refund claim for the refund of the duty paid during the period in question. The adjudicating authority through Order-in-original rejected the refund claim of the appellants by holding that it was hit by principle of unjust enrichment as the appellants had passed on the incidence of duty to the ultimate buyers. That order had been affirmed by the Commissioner (Appeals).
3. The sole ground on which the correctness of the impugned order has been contested by the learned Counsel before us is that the principle of unjust enrichment is not attracted to the case of the appellants for two reasons : firstly, that the claim was made prior to the amendment of Section 11-B of the Act and secondly, that the goods during the period in dispute, had been sold by the appellants at the cost, less than the cost of production. These grounds, on the other hand, have been refuted by the learned SDR, who has contended that passing of incidence of duty by the manufacturer to the buyer does not depend on his profitability in the sale of the goods and that on whatever price the appellants sold the goods, the duty element was included therein and they had shown the duty element even separately in their sale invoices. Therefore, it cannot be said that the appellants had not passed on the incidence of duty to the buyers.
4. We have heard both sides and gone through the record.
5. So far as the first ground of the learned counsel regarding non-applicability of the principle of unjust enrichment to the case of the appellants, as the refund pertains to the period prior to the amendment of Section 11-B is concerned, the same is wholly mis-conceived. The Apex Court in the case of Mafatlal Indus. Ltd. v. UOI, 1997 (89) ELT 247 in para 96 page 326 has categorically ruled that “every decision favourable to an assessee/manufacturer, whether on the question of classification, valuation or any other issue, does not automatically entail refund. Section 11-B of the Central Excise Act and Section 27 of the Customs Act, whether before or after 1991 amended as interpreted by us, makes every refund claim subject to proof of not passing on the burden of duty to others. Unless the claimant for refund establishes that he has not passed on the burden of duty to another, he would not be entitled to refund.” In view of these observations of the Apex Court, the ground put forth by the learned counsel that the principle of unjust enrichment will not apply to the case of the appellants as the refund claim pertains to the period prior to the amendment of Section 11-B of the Act, does not survive.
6. This takes us to the second ground.
The learned Counsel has very vehemently contended that since the goods were sold at the cost less than the cost of manufacture during the period in dispute, it must be presumed that the incidence of duty was not passed on by the appellants to the buyers. He has referred to the certificate of the Chartered Accountant in this regard and sought strength to his arguments from the observations of the Apex Court in para 91 of the Mafatlal Industries Ltd. case supra as well as the ratio of law laid down in Living Media India Pvt. Ltd. v. Union of India, 1998 ELT (104) 3 (SC), Shakun Overseas v. CCE, Chennai, 2002 (140) ELT 444, Panayama Cements v. CCE, Belgaum, 2004 (64) RLT 697, Paradeep Phosphate Ltd. v. CCE, Calcutta, 2004 (63) RLT 892 and Cimmco Ltd. v. CCE, Jaipur, 1999 (107) ELT 246. But in our view, this contention of the counsel is also wholly mis-conceived based on mis-interpretation of law laid down in the above referred cases. The relevant observations of the Apex Court relied upon by the learned Counsel in para 91 of the Mafatlal Industries Ltd. case (supra) read as under:
“It is next contended that in a competitive atmosphere or for other commercial reasons, it may happen that the manufacturer is obliged to sell his goods at less than its proper price. The suggestion is that the manufacturer may have to forego not only his profit but also part of excise duty and that in such a case levy and collection of full excise duty would cease to be a duty of excise; it will become a tax on income or on business. We are unable to appreciate this argument. Ordinarily, no manufacturer will sell his products at less than the cost price plus duty. He cannot survive in business if he does so. Only in case of distress sales, such a thing is understandable but distress sales are not a normal feature and cannot, therefore, constitute a basis for judging the validity or reasonableness of a provision. Similarly, no one will ordinarily pass no less excise duty than what is eligible and payable. A manufacturer may dip into this profits but would not further dip into the excise duty competent. He will do so only in the case of distress sale again. Just because duty is not separately shown in the invoice price, it does not follow that the manufacturer is not passing on the duty. Nor does it follow therefrom that the manufacturer is absorbing the duty himself. The manner of preparing the invoice is not conclusive. While we cannot visualize all situations, the fact remains that, generally speaking, every manufacturer will sell his goods at something above the cost price plus duty. There may be a loss making concern but the loss occurs not because of the levy of the excise duty — which is uniformly levied on all manufacturers of similar goods — but for other reasons. No manufacturer can say with any reasonableness that he cannot survive in business unless he collects the duty from both ends. The requirements complained of (prescribed by Section 11-B) is thus beyond reproach — and so are Sections 12A and 12B. All that Section 12A requires is that every person who is liable to pay duty of excise on any goods, shall, at the time of clearance of the goods, prominently indicate in all the relevant documents, the amount of such duty which will form part of the price at which the goods are to be sold, while Section 12-B raises a presumption of law that until the contrary is proved, every person who has paid the duty of excise on any goods shall be deemed to have passed on the full incidence of such duty to the buyer of such goods. Since the presumption created by Section 12B is a rebuttable presumption of law and not a conclusive presumption there is no basis for impugning its validity on the ground of procedural unreasonableness or otherwise. This presumption is consistent with the general pattern of commercial life. It indeed gives effect to the very essence of an indirect tax like the excise duty/customs duty. In this connection, it is repeatedly pointed out by the learned Counsel for the petitioners-appellants that the levy of duty is upon the manufacturer/assessee and that he cannot disclaim his liability on the ground that he has not passed on the duty. This is undoubtedly true but this again does not affect the validity of Section 12A or 12B. A manufacturer who has not passed on the duty can always prove that fact that if it is found that duty was not leviable on the transaction, he will get back the duty paid. Ordinarily speaking, no manufacturer would take the risk of not passing on the burden of duty. It would not be an exaggeration to say that whenever a manufacturer entertains a doubts, he would pass on the duty rather than not passing it on. It must be remembered that manufacturer as a class are knowledgeable persons and more often than not have the benefit of legal advice. And until about 1992, at any rate, Indian market was by and larger a sellers’ market.”
7. These observations of the Apex Court do not impliedly much less expressly suggest or warrant an inference that where a manufacturer sells the goods at a cost lower than the cost of manufacture, the presumption of law under Section 12-B that every person who has paid the duty of excise on the goods shall be deemed to have passed on the full incidence of duty to the buyers of such goods, shall stand refuted. Rather, it can be safely concluded from the view expressed by the Apex Court in the above-said para that every manufacturer of the excisable goods normally and invariably would pass on the incidence of duty to the buyers. Under the self-removal procedure (SRP), the manufacturer has to give all full particulars of the price, assessable value, rate of duty and duty actually paid, in the invoices. The appellants admittedly in the instant case gave all these details in the invoices. They indicated the price of goods sold, rate of duty and duty actually paid on the goods, while preparing the invoices at the time of clearance of the goods to the buyers. They had also collected the price and the duty on the basis of these invoices. Therefore, they cannot be legally permitted to aver that they had not passed on the incidence of duty. The element of excise duty is to be presumed to have been incorporated in the sale price of the goods, by the appellants irrespective of the fact that the sale price fixed by them was below their cost of production or more than that. The duty element is correlated to the price of the goods as declared by the manufacturer and it is to be presumed to be integral part of the price.
8. The Apex Court in CCE v. Maruti Udyog, 2002 (141) ELT 3, has also observed that sale price realized by the assessee from the sale of goods has to be regarded as a normal wholesale price and element of duty must be regarded to be incorporated in the sale price. While declaring the price of their goods, the appellants had also separately indicated the duty payable thereon in the invoices, as observed above, and this fact has not been disputed by them before the lower authorities. It is difficult to accept that since the price declared/charged by the appellants from the buyers was less than the cost of production, they cannot be said to have passed on the incidence of duty to them. The fixation of the price of the goods is always in the hand of a manufacturer. He may fix keeping in mind the quality of the goods, the price even lower than the cost of production, where he finds that his goods being not of good quality, will not fetch more price. When he is indicating the duty paid on that cost in the invoices separately while clearing the goods to the buyers, it can be safely presumed that he is passing on the incidence of duty to the buyers. For instance, if he has declared the price of a particular goods at Rs. 100 being not of good quality, although his cost of production may be more than that, and also indicated the duty of Rs. 10 payable on that price of Rs. 100 in the invoices, and had in all charged Rs. 110 from the buyer, he cannot be said to have not passed on the incidence of duty of Rs. 10 to the buyer, simply because he has sold the goods at a loss. If we accept the argument of the learned counsel as advanced by him, detailed above, it would only lead to the conclusion that the occasion for passing on the incident of duty by the manufacturer to the buyer will arise only if he sells the goods at profit and not otherwise. But such a conclusion would have the effect of distortion of the provisions of Section 11-B as well as the law laid down by the Apex Court in the case of Mafatlal Indus. Ltd., supra. The appellants in this case have sought the refund of that amount of duty which they indicated in their invoices separately, besides the price of the goods, and charged from the buyers. Therefore, they cannot be permitted to enrich themselves from both ends i.e. from the buyers as well as the Government by simply alleging that they had suffered loss by selling the goods at a cost less than the cost of production. The observations of the Apex Court in para 91 of the Mafatlal Industries’ case, detailed above do not in any manner help the appellants, for by-passing the principle of unjust enrichment and to collect the duty from both the sides.
9. The ratio of the law laid down in Living Media India Ltd. case, (supra) is not attracted to the case of the appellants. In that case, it was submitted by the assessee that the cost of production of the news magazine exceeded the retail price and the newspaper/magazine depended upon the advertisements for their survival. The Apex Court in these circumstances, directed the Government to refund the customs duty which formed the part of the cost of production, on the glazed newsprint imported during the period in question. Moreover, the refund claim in that case arose out of a settlement between the assessee and the Government, but such are not the facts and circumstances in the present case.
10. Similarly, the law laid down in Shakun Overseas Ltd. case, supra, cannot be made applicable to the case of the appellants. That was a case where the sale of the goods was made at a price less than the landed cost and for that reason, the Tribunal observed that incidence of duty was not passed on to the buyer. That case was under the Customs Act where the customs duty became part of the price of the goods imported and for that reason, the principle of unjust enrichment was not made applicable. The law laid down in the cases of Panjan Cement and Minerals Ltd., and Pradeep Photostat Ltd., supra, is not attracted to the case of the appellants in the light of facts detailed above and the law laid down by the Apex Court in the case of Mafatlal Indus., supra. The law laid down in Simco Ltd., supra, is not applicable to the case of the appellants as there was no evidence in that case to prove that the incidence of duty had been passed on by the assessee to the buyer. Moreover, the law laid down in that case, in the light of the Apex Court judgment in Mafatlal Indus., cannot be preferred and made applicable to the case of the appellants.
11. In the light of the discussion made above, we do not find any illegality in the impugned order of the Commissioner (Appeals) and the same is upheld. The appeal of the appellants is dismissed.