Addison and Co. vs Commissioner of C. Ex.

R. Jayasimha Babu, J.—Assessee is a manufacturer of cutting tools. It''s claim for refund of duty paid was on the ground that it had given

credit notes to its dealers who were the purchasers of those goods. The fact that such discount was given as also the fact that discount given

included the duty element is not disputed.

The claim for refund was made on 19-7-1988 and 15-6-1989. The claims were made within the period of limitation prescribed in Section 11B

of the Central Excise Act.

Such claims were allowed by the Asstt. Collector and that order was affirmed by the Collector of Customs. On further appeal by the Revenue,

the Tribunal disallowed the claim on the ground that the turnover discount could not be regarded as having any effect on assessable value and

would not constitute an admissible deduction. The assessee having carried the matter on appeal to the Supreme Court, the Supreme Court by its

Order dated 11-3-1997 held that the turnover discount is an admissible deduction. In the meanwhile, the Assistant Commissioner had directed

refund of the amounts in view of the fact that the Tribunal had not stayed the order of the Commissioner who had confirmed the Order of the

Assistant Collector, directing refund. The refund was granted subject to the condition that the amount should be re-deposited in the event of the

Tribunal holding against the assessee. After the Tribunal made the Order against the assessee, the money was re-deposited by the assessee with

the Government.

The Order directing refund was carried in appeal. Commissioner agreed with the Asstt. Commissioner. That Order of the Commissioner having

been reversed by the Tribunal, this reference has come up before us at the instance of the assessee.

The fact that the assessee is a manufacturer; that it had sold the goods to its dealers, that the price at which goods were sold was a cum duty

price; that it was known to the dealer that the turnover discount would be allowed even at the time of sale, that such discounting was in fact given

after the sale based on the turnover achieved by the dealer; and that the discounts so given included the duty element, are undisputed.

The Tribunal declined to grant refund on the sole ground that it had not been established by the assessee that the burden of the duty paid by it

initially had not been passed on to the consumer. There was no evidence whatsoever before the authority or before the Tribunal as to the price at

which the goods were sold by the dealer who had bought the same from the manufacturer and from which it could be inferred that the ultimate

buyer had been asked to bear the burden of the full extent of the duty initially paid by the manufacturer.

Section 11B of the Central Excise Act which was introduced with effect from 17-11-1980, and was amended on 20-9-1991, sets out the

conditions subject to which refund can be claimed. Application for refund made prior to 20-9-1991 are also required to be dealt with in

accordance with amended provisions is required by proviso to 11B(1). Apart from requiring that claim be filed within the time allowed under the

provisions of Act which is six months from the relevant date; that the application be in the prescribed form that it be accompanied by document or

other evidence to establish that the amount of duty of excise in relation to which refund is claimed was collected from or paid by the claimant and

incidence of such duty had not been passed on by the claimant to any other person; the claimant is also required to rebut the presumption

contained in Section 12B of the Act which provides that it shall be presumed unless contrary is proved that the incidence duty had been passed on

to the buyer.

It is significant that neither Section 11B nor Section 12B of the Act refers to the consumer or the ultimate user or the last purchaser. The

condition which the claimant for refund must fulfil among other conditions is that he must not have passed on incidence of the duty to ""any other

person"".

Section 11B(2) in the proviso thereunder entitles the claimant to receive refund if the amount relatable to any of the items set out in Clauses (a)

to (f) under that proviso. Section 11B(2) refers to the Fund. The Fund referred to therein is the one created u/s 12C, which provides that the

Central Government shall credited a Fund called Consumer Welfare Fund. Section 12C Sub-section 2(a) provides that to that fund shall be

credited the amount of duty of excise referred to in Sub-section (2) of Section 11B or Sub-section (2) of Section 11C or Sub-section (2) of

Section 11D. Section 12D deals with the utilisation of the fund. It requires the Central Government to use the fund for the welfare of the

consumers.

The amount that can be credited to the fund u/s 11B(2) are the amounts which are not relatable to any one of the Sub-Sections (a) to (f) under

the proviso. The amounts which are relatable thereto cannot be credited to the fund having regard to the imperative language employed in the

proviso which sets out that the amount as of the duty of the excise has determined by the Assistant Collector u/s 11B(1) ""shall instead of being

credited to the fund, be paid to the applicant...."".

Where the claimant is a manufacturer the clause applicable would be Clause (d) of the proviso to Section 11B(2). That clause refers to ""duty

of excise paid by the manufacturer if he had not passed on incidence of such duty to any other person"".

The claim made by the manufacturer here is required to be considered under that provision. That provision has, of course, to be read along

with the presumption provided in Section 12B. If the manufacturer can be said to have rebutted the presumption u/s 12B and has fulfilled the

condition set out in Clause (b) of proviso to Section 11B(2) manufacturer would be entitled to refund. Such refund cannot be denied on the ground

that there was no evidence to show as to who the ultimate consumer of the product was and as to whether the ultimate consumer had been asked

to bear the burden of the duty which had been initially paid by the manufacturer.

Although, the consumer is referred to in the Consumer Welfare Fund, constituted u/s 12C, the Excise Act is not primarily concerned with the

actual consumer of the manufacture and product on which duty is levied. The duty is levied on the manufacturer and the quantum of duty is

determined with reference to the price at which the manufacturer sells to the buyer, who, in most cases will, be a dealer, and not on the price at

which that buyer in turn sells to his sub-dealer or to the retailer to the ultimate consumer.

Section 11B is intended to prevent a person who has paid duty or borne it initially from receiving the refund of a part or whole of the duty if he

has already passed on that burden of the duty paid by him to another as that would result in unjust enrichment. It is that amount which is required to

be credited to the Consumer Welfare Fund. The fact that the Consumer Welfare Fund has been constituted does not on that score require the

authorities dealing with refund claims to start an enquiry as to the price at which the goods had been sold to the ultimate consumer after the dealer

who purchases the goods from the manufacturer, sells to its sub-dealer who in turn may sell to a retailer who in turn ultimately may sell the same to

the actual consumer. The enrichment of the person, who has paid the duty and seeks refund would be unjust if he even while not suffering the

burden of duty after having passed on the same to another obtains refund and retains such refund with him. There would be nothing unjust where

the person who has paid duty and has not passed on that burden to another receives refund thereby reducing the burden which he was not

required to bear but had bore.

The language employed in Section 11B therefore is not capable of being construed as having reference to the ultimate consumer of the

product. What has to be demonstrated by the claimant is that the burden of the duty paid had not been passed on by him to any other person. The

passing on will occur only if the person who claims refund of duty as shifted the burden to another. There can be no passing on of the incidence of

the duty if he merely reduces his burden by receiving the refund. The possibility that the dealer who has obtained goods from the manufacturer may

charge to his buyer the full amount of the duty ignoring the refund received by the manufacturer cannot be a ground for denying refund to the

manufacturer.

The word ''buyer'' used in Section 12B also cannot be construed as referring to the ultimate consumer. The buyer referred to therein in the

normal circumstances is the buyer who buys the goods from the person who has paid duty.

The primary object of the provision which is intended to deter or prevent unjust enrichment is to prevent enrichment of the person who has

paid duty and who seeks refund of the same. It is not directed at the buyer who has entered into arms length transactions with manufacturer and

has sold the goods to sub-dealers, retailers or consumers.

The Tribunal therefore was clearly in error in holding that despite the assessee having proved that it had not passed on the incidence duty to it''s

buyers, it was not entitled to the refund even when all the other conditions required to be satisfied u/s 11B had been satisfied.

We answer the question referred to us regarding the correctness of the view taken by the Tribunal in favour of the assessee and against the

Revenue.