ORDER
U.L. Bhat, J. (President)
1. Appellant, engaged in the manufacture of excisable goods such as deflection Yoke, Flyback transformers in the factory in Karnataka, imported Epoxy Resin under Bill of Entry, dated 28-3-1992, bonded the same in the Customs Bonded Warehouse on deposit of 50% of the duty payable in terms of Section 59A(1) of the Customs Act, 1962 and subsequently cleared the goods. It was found that the duty payable was much less than the amount deposited intially. The duty paid already was adjusted towards duty finally found payable. Appellant filed a refund claim for the amount of deposit less the duty found payable and adjusted. All these transactions took place subsequent to the amendment of Section 27 of the Act.
2. The Asstt. Commissioner rejected the claim on the ground that the Modvat documents and evidence to show that the burden of duty had not been passed on to the buyers had not been produced. The Collector (Appeals) sustained the order on the ground of “unjust enrichment”, relying on the decision of the Division Bench of the High Court of Madras in the case of Indo Swiss Synthetic Gem Manufacturing Co. Ltd. -1996 (13) RLT 370 (Mad. HC). The High Court had declined to follow a contrary decision of a division bench of the High Court of Bombay in Solar Pesticides Pvt. Ltd. – 1992 (57) E.L.T. 201 (Bom. HC). This order is now challenged.
3. Under the amended provisions of Section 27 of the Act, the amount shall, instead of being credited to the Consumer Welfare Fund, be paid to the applicant, if, inter alia, the amount is relatable to duty paid by the importer, if he had not passed on the incidence of such duty to any other person. According to the appellant, the question of burden of duty being passed on to the (sic) buyers would not arise, if in a case like the present one, where inputs were not sold to (sic) buyers but consumed in the process of manufacture of the final product.
4. In support of this contention, the ld. Counsel relied on the decision of High Court of Bombay in Solar Pesticides Pvt. Ltd. -1992 (57) E.L.T. 201 and that of High Court of Calcutta in East Anglia Plastics (India) Ltd. -1994 (74) E.L.T. 29.
5. Shri R. Victor Thiagaraj, ld. SDR relied on the decision in Indo Swiss Synthetic Gem Manufacturing Co. Ltd. -1996 (13) RLT 379.
6. In Solar Pesticides Pvt. Ltd., Mrs. Sujata Manohar learned Justice of the High Court of Bombay as she then was, after examining the provisions of Section 27 and other relevant provisions of the Act held that the scheme is designed for a situation where the importer sells the imported goods, either directly passes on the incidence of duty to the buyer or does not and only in the latter case refund will be made. If the duty is passed on to the buyer the right to recover the duty is also passed on to the buyer, provided, that the buyer has not in turn, sold the goods and passed on the burden of duty to a next buyer. It cannot arise, in a case where the imported goods have been used in the manufacture of other goods and the burden of duty has not been passed on directly. Taking note of the circumstances that the import duty paid on the input may become a part of the cost of manufacture of the final product, the Court indicated the difficulty in ascertaining how much of the original import duty had been passed on to the buyer of the final product and in what proportion. The kind of documentation required under the scheme would also be not available in such a case.
7. The High Court of Calcutta followed this view in East Anglia Plastics (India) Ltd. A ld. Single Judge of the High Court of Madras had taken a view similar to the one taken by High Courts of Bombay & Calcutta and this view has been overruled by a Division Bench of the High Court of Madras in Indo Swiss Synthetic Gem. Mfg. Co. Ltd. declining to follow the view of the High Court of Bombay, after noticing that the word “directly” or “indirectly” does not find a place in the statutory provision. The decision overcame the difficulty contemplated by the High Court of Bombay by observing that no manufacture will be charitable enough to exclude the Customs duty paid on the raw material in the price of the final product.
8. Going by the decision in Madura Coats v. Collector – 1996 (13) RLT 186 (Tribunal), since the High Court of Karnataka is the jurisdictional High Court for the assessee and that the court has not expressed any view on the aspect, we have to consider the decisions of the other High Courts and take a view which appears to be in consonance with the statutory provisions and the scheme. Having considered the reasonings contained in the decisions of the three High Courts, we follow the reasoning and conclusion of the High Court of Bombay in the decision referred to above.
9. In this view, we hold that the doctrine of unjust enrichment recognised in Section 27 of the Act will not apply to the present case where the imported input was used in the manufacture of another product and was not sold to any buyer. That being so, the appellant would be entitled to have refund claim considered free from trammels of “unjust enrichment” contained in Section 27 of the Act.
10. We, therefore, set aside the impugned orders and remand the refund claim to the jurisdictional authority for verification of the amount in question and for passing fresh order untrammelled by the doctrine of “unjust enrichment” in Section 27 of the Act. The appeal is allowed.