IMPORTANT POINT
In a case of claim for refund of excise duty question whether excise duty had been passed on to the customer is a question of fact and findings of fact arrived at by Tribunal should ordinarily be accepted by Court.

Headnote:Central Excise and Salt Act, 1944 —Application for refund of excise as goods classified under Sub-Heading 4009.92 finally came to be classifiable under Sub-Heading 4009.99—Authorities rejected the application opining that same would amount to unjust enrichment—Question before Appellate Tribunal was whether goods supplied to railway administration (customer) included element of excise duty—Tribunal went through correspondences exchanged between contracting parties and held in favour of respondent—High Court affirmed the findings of Tribunal—Appeal—Question whether excise duty had been passed on to the consumer was essentially a question of fact—Finding of fact arrived at by Tribunal should ordinarily be accepted—No case of appellant that while arriving at its findings, Tribunal had not considered all relevant facts—No interference was warranted.
       Held : It is now well settled that despite levy of excise duty in a given situation being held to be illegal, in the event it is found that the assessee in fact passed on the burden of excise duty to its customers, applying the principle of unjust enrichment, the Court would not ordinarily direct refund thereof.
       The question whether the excise duty had been passed on to the consumer, however, is essentially a question of fact. It is not in dispute that prior to 1993 goods were being classified under the Sub-Heading 4009.92 of the Schedule appended to the Central Excise Tariff Act, 1985 attracting @30% advalorem as basic excise duty and 15% as special basic duty. It is furthermore not in dispute that the Bombay High Court in the case of M/s. Rubber Products Ltd. vs. Union of India, reported in 1992 (43) ECR 520 held :
       "The duty was recovered from the Company on the basis that the product manufactured attracts sub-heading 4009.92 of the Tariff and that was the basis of order passed by the Assistant Collector. The order of the Assistant Collector was set aside by the Appellate Collector and it was ordered that the duty is payable under sub-heading 4009.99 of the Tariff. The order of the Appellate Collector has acquired finality and, therefore, excess duty recovered by the Department is liable to be refunded."
       In this case also, the respondent had, in view of the decision rendered by the excise authorities as affirmed by the High Court in M/s. Rubber Products Ltd. (supra), filed a revised classification list. It is only during the pendency of the said application it received four orders from the Railway Administration. The prices fixed for the goods were as under:
       "Order DatePrice per unit
       16.02.1993Rs. 48.90 p.
       18.02.1993Rs. 46.90 p.
       06.04.1993Rs. 47.90 p.
       10.05.1993Rs. 48.65 p."
       The excise duty was specified as Nil in the order dated 10th May, 1993. So far as the order dated 6th April, 1993 is concerned, no excise duty was specified. However, in the order dated 16th February, 1993 a stipulation was made by the Railway Administration that the price was inclusive of duty, with a view to avoid the claim made by the respondent at a later stage on the ground that a duty had to be paid. It is also not in dispute that clarifications were obtained by the respondent from the Railway Administration specifically in this behalf.(Paras 8 to 11)
       If the price for supply of Hose Pipes in respect of the contract dated 10th May, 1993 being @ Rs. 48.65p. did not include the element of excise duty, the same being Nil, the Tribunal may be correct in its opinion that the question of excise duty having been passed by the respondent to the Railway Administration would not arise. In respect of the other three orders, wherein the rates quoted was Rs.46.90p., Rs.47.90p. and Rs.48.65p. also the said question would not arise as the rate included the element of excise duty. The respondents, in our opinion, rightly contended that as the Central Excise Authorities were unwilling to accept the classification under the Sub-Heading 4009.99 with Nil rate of duty, they had no other option but to clear the said goods upon payment of duty under protest, wherein they were required to compute the value in terms of Section 4(4)(d) of the Central Excise Act, 1944.(Paras 14 and 15)
       It is well settled that the findings of fact arrived at by the Tribunal should ordinarily be accepted by this Court. It is not the case of the appellant that while arriving at its finding that the respondent had not passed the amount of excise duty, the Tribunal had not considered all relevant facts. The contention of the appellant herein that the railway administration colluded with the respondent herein in issuing the aforementioned letters and certain certificate is, in our considered opinion, wholly misconceived. We have no hesitation to reject the same.(Para 17)
       There is, thus, no merit in this appeal. It is accordingly dismissed. The appellant is directed to comply with the Tribunals order within four weeks from today.(Para 20)

JUDGMENT

S.B. Sinha, J.—Leave granted.

2. The respondent, which is a Company incorporated and registered under the Indian Companies Act, manufactures Hose Pipe. It supplies goods manufactured by it to the Indian Railways. The goods are manufactured in terms of the specifications of the railway administration. Supplies are, however, made against specific contracts. The respondents used to pay 30% basic excise duty and 15% special duty. The goods came to be classified under Sub-Heading 4009.92. The said classification was in dispute. The contention of the manufacturers was that it is classifiable under Sub-Heading 4009.99. The lis ended in favour of the respondent. It, however, obtained clearance of the goods on payment of duties under protest as the products had been classified under classification 4009.92. The respondent filed two applications for refund of Rs.6.30 lakhs, which had already been paid by way of excise duty. The said applications were rejected by the authorities under the Act (Central Excise and Salt Act, 1944) opining that the same would amount to unjust enrichment. The respondent preferred an appeal before the Customs, Excise & Gold (Control) Appellate Tribunal, which was registered as Appeal No. E/R-79/98. The question, which arose before the Tribunal, was : "As to whether the goods supplied to the railway administration included the element of excise duty?" The Tribunal for determining the issue went through the correspondences exchanged by and between the contracting parties, as also the certificate issued by the railway administration and held :

"I have perused the records and considered the rival submissions. According to the contract, the prices were inclusive of excise duty. The subsequent letter from the railways indicated that no amount was provided towards excise duty while pricing was worked out. One letter specifically stated "E.D.-Nil". This would suggest that the price fixed under the contract did not provide for an element towards the Central Excise duty."

3. While arriving at the said finding, the Tribunal relied upon its own judgment in Cimmco Ltd. Vs. Collector of Central Excise, Jaipur [1999 (107) ELT 246 (Tribunal)], wherein it was held :

"We have given careful consideration to the rival submissions. The clue to the problem in this case lies in a proper understanding of the provisions in the work order particularly with reference to the rates. There is an apparent conflict in what is stated in different parts of the schedule of rates. Thus, as against a note that the rates are inclusive of all duties, taxes and to and fro handling charges in one place there is another remark regarding the rates under the caption condition of contract which is more elaborate than the earlier referred to sentence. This reads as follows :

(1) Rates

The rates are inclusive of all materials, labour, equipment, lifts, leads, Sales tax, octroi required in connection with completion of work to the entire satisfaction of the Corporation. All the materials are to be supplied by the Contractor unless otherwise stated.

(2) Rates shall be valid till the entire work is 100% complete, and no escalation will be considered at any stage."

4. An application for reference was filed by the appellant herein before the Calcutta High Court. The Tribunal was directed to refer to the High Court the following questions:

"(i)Whether or not the bar of unjust enrichment will be attracted in a case where duty has been passed on to the buyer of goods not separately as duty but by inclusion in the price as one component of the same?

(ii)Whether the Learned Tribunal was justified in holding that the bar of unjust enrichment would not be attracted when the price is inclusive of duties and taxes following the case of CIMMCO Ltd. Reported in 1999 (107) ELT 246 (Tribunal)?

(iii)Whether the Honble Tribunal was justified in passing the order ignoring the principles of law laid down in the case of Mafatlal Industries reported in 1997 (89) ELT 247 (SC) and

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Judicial Analysis

SupremeToday

2006 Supreme(SC) 825

IMPORTANT POINTIn a case of claim for refund of excise duty question whether excise duty had been passed on to the customer is a question of fact and findings of fact arrived at by Tribunal should ordinarily be accepted by Court.

Cases Referred (2)

Judicial Analysis

IMPORTANT POINT
In a case of claim for refund of excise duty question whether excise duty had been passed on to the customer is a question of fact and findings of fact arrived at by Tribunal should ordinarily be accepted by Court.