ORDER
Gowri Shankar, Member (T)
1. Ahmedabad Packaging Industries Ltd., the respondent before us, was engaged in the manufacture of inter alia of tapes and fabrics of high density polyethylene. We are concerned in this appeal with the claim for refund that was filed on duty paid in excess on clearances of such tapes made between April 1986 and March 1992. The assessee had sought classification of these goods under Heading 39.20 of the tariff as tapes of plastic. The department was of the view that tapes were correctly classifiable under Heading 54.06 of the tariff as woven fabrics. The rate of duty on goods classifiable under tariff Heading 54.06 at the relevant time was higher than the duty payable on goods classifiable under Heading 39. The assessee paid the duty at higher rate after recording its protest.
2. The assessee also appealed the classification that the department has decided. The Commissioner (Appeals), whose order was confirmed by the Tribunal, on appeal, held the goods to be rightly classifiable under Heading 39.20. The assessee filed on 15-9-1994 a refund claim of the duty paid in excess. The Assistant Commissioner found that the duty has been paid in excess and concluded that it had not been shown that the incidence of duty had been passed on, and it ordered to be credited to the Consumer Welfare Fund. On appeal from this order, the Commissioner (Appeals) noted the contention of the claimant that the tapes, which were the subject matter of the refund claim, were used captively in the manufacture of sacks fabrics applied the ratio of the Bombay High Court’s judgment in Solar Pesticides Pvt. Ltd. v. Union of India – 1992 (57) E.L.T. 201, and held that the principles of unjust enrichment incorporated in Sub-section (2) of Section 11B would not apply to such goods and ordered the refund to be paid to the assessee. Hence, this appeal by the Commissioner.
3. The ground in the appeal is that the judgment of the Madras High Court CC v. The Indo Swiss Synthetic Gem Manufacturing Co. Ltd. & Anr. -1996 (13) RLT 379 holding that the principles of unjust enrichment is applicable to even in the case of goods captively consumed is in favour of the department. The Bombay High Court’s judgment in Solar Pesticides Pvt. Ltd. v. Union of India – 1992 (57) E.L.T. 201 has been reversed by the Supreme Court in its judgment in 2000 (116) E.L.T. 401. The Commissioner (Appeals)’s conclusion is no longer true and his order would have to be set aside.
4. The Counsel for the respondent however, raises a fresh point before us. This is that, as a result of the classification of the goods by the Department under Chapter 54, the benefit of Modvat credit which was available to goods of Chapter 39 has been wrongfully withheld. Modvat scheme was extended to textile and textile articles only in 1996. Therefore, by the department’s wrong classification, the assessee has been denied the Modvat facility, which it would otherwise have been entitled to. If the Modvat credit was available, it would have paid the duty by utilisation of such Modvat credit. Only because it was not available, the duty was paid from the funds in the personal ledger account. Therefore, what is sought to be refunded is the refund of Modvat credit not allowed. Since Clause (c) under Sub-section (2) of Section 11B includes the applicability of the provisions of unjust enrichment of credit of duty paid on inputs, the assessee is entitled to the refund. He relies upon the decision of the Tribunal in CCE v. Kanpur Plastipack Ltd. – 2001 (127) E.L.T. 826.
5. We have several objections to the claim which the Counsel for the respondent is not able to answer. Firstly, even if duty is paid out of Modvat credit, the provisions of Section 11B(2) of the Act relating to unjust enrichment would still apply. It is not as if these provisions apply only to cases where duty is paid out of personal ledger account and paid not out of Modvat credit at the disposal of the manufacturer. To this, the answer of the Counsel for the respondent is that since Modvat credit was not available, the duty was paid out of the personal ledger account and therefore it is deemed that Modvat credit is claimed as refund. While we have, for the sake of clarity, attempted to reproduce the actual words the Counsel uses, we must confess to a certain sense of bewilderment. It appears to us, the Counsel for the assessee is not clear as to the identity of the amount of refund which he claims. At one point, he stated it to be Modvat amount and at another stage stated to be to the amount unspent advances of personal ledger account. We are not able to see that any nexus is established between these two items.
6. The duty paid on any commodity by its manufacturer becomes Modvat credit at the hands of its subsequent purchaser who uses it as an input for manufacture of other goods. That amount is to be utilised towards payment on goods that he manufactures. The moment this is done it becomes the duty of excise and is no longer identifiable as credit of duty paid on excisable goods available at the point of that manufacture. The credit of duty referred in Clause (c) of the second proviso under Sub-section (2) of Section 11B of the Act therefore cannot be the duty that has been paid out of the Modvat account by the manufacturer. The provisions of unjust enrichment would equally apply to duty, whether paid out of Modvat credit or the personal ledger account at the disposal of the manufacturer.
7. The decision of the Tribunal in CCE v. Kanpur Plastipack Ltd. -2001 (127) E.L.T. 826 concludes that the issue before it was the refund of credit of duty. The Counsel for the respondent however, was not able to show the factual basis upon which such conclusion is based. It does not appear to us that the considerations that has weighed with us, that what was claimed as refund was duty (by whatever means paid), and not as unutilised amount of Modvat credit, was not raised before the Bench. Therefore, we do not feel ourselves bound by that decision.
8. The assessee, as we have noted, had paid duty under protest. It did not however, protest with regard to the fact that it should have paid duty under Modvat account. The reason is very simple and obvious. It is that at the relevant time the Modvat scheme had not been extended to the goods under consideration. It was only in 1996 Modvat was extended to these goods. The assessee did not go into this aspect at all in the refund claim. All it asked was for refund of the duty paid earlier on the tapes. It did not raise the various hypotheses that are now urged before us. Nor was the claim covered before the Commissioner (Appeals). We do not find any reason to go into the ground that has not been raised before the two authorities now raised before us.
9. The Counsel for the respondent says that the Assistant Commissioner has accepted that Modvat credit was wrongly denied. We do not find this to be the case. The Assistant Commissioner, in his order, refers to some Modvat set off was available but concludes that as a result of set off Rs. 2.27 lakhs is recoverable from the assessee. His consideration of this Modvat claim therefore obviously did hot relate to the duty which was claimed as refund.
10. The Counsel for the respondent next cited the judgment of the learned single judge of the Bombay High Court in Deccan Sales Corporation and Another v. R. Parthasarathy and Others 1982 (10) E.L.T. 885, The ratio of this judgment is that where, as a result of the department’s actions, the assessee was wrongly deprived of the benefit of the proforma credit because of delay, the credit that was otherwise available did not deny to the appellant. We do not see how this ratio applies to the facts before us. The question before the department at no time was any aspect of Modvat account; it was only the classification of the goods. There is nothing at all to show that in deciding upon the classification, the department consciously or unconsciously looked into any aspect of Modvat account. It is therefore not possible for us, on the facts before us, to say that the department’s action has deliberately resulted in denial of Modvat credit between April 1986 to March 1992. We
must note here that when the classification was ordered and the duty paid on major part of the period April 1986 to March 1992, neither the departmental officers nor any one else was aware that the provisions of refund would be qualified by the amendment that was made to Sub-section (2) of Section 11B of the Act in September 1991. It is really as a result of the applicability of the amendments carried out therein, that these contentions are now being urged before us. The claim now being canvassed is analogous to a claim, that since the assessee has been denied its refund claim by amendment to Section 11B, that amendment should be disregarded.
11. We, therefore, do not find any merit in the contentions raised before, by the respondent. However, the assessee has not been given an opportunity to establish that the incidence of duty has not been passed on. Its claim both before the Assistant Commissioner and the Commissioner (Appeals) was that this was not required, the claim before the latter being based upon the judgment of the Bombay High Court. It is therefore, appropriate that it be given an opportunity to show now if it could, that the incidence of duty has not been passed on. Solely for this purpose, we remand the matter to the Assistant Commissioner. He shall consider the submissions and the evidence that be made available in support only of this point and the evidence that may be adduced by the department within three months from the receipt of this order and pass orders on this aspect in accordance with law.