Commissioner of Central Excise, Mumbai-II vs Allied Photographics India Ltd.

S.H. Kapadia, J.—Finding inconsistencies between two decisions of three-Judge Benches of this Court in the case of Sinkhai Synthetics and Chemicals Pvt. Ltd. Vs. Collector of Central Excise, and Commissioner of Central Excise, Chennai Vs. T.V.S. Suzuki Limited, Hosur, on one hand and the decision of nine-Judge Constitution Bench in Mafatlal Industries Ltd. and Others Vs. Union of India (UOI) and Others, on the other, a two-Judge Bench of this Court vide order dated 13.11.2003 has referred the following question of law involved in this civil appeal to a larger Bench and accordingly the matter has come before this court.

"Whether a claim for refund after final assessment is governed by Section 11B of the Central Excise Act 1944?

FACTS:

New India Industries Ltd. (NIIL) is incorporated under the Companies Act 1956 and carries on business of manufacturing photographic printing paper which became chargeable to excise duty vide tariff item No. 37-C(2) of the Central Excise Act 1944 (hereinafter referred to as "the Act") with effect from March 1, 1974. NIIL had entered into distribution agreement with a firm, Agfa Gevaert (India) Ltd. (M/s AGIL) for supply of goods. On 8.5.1974 the Department served show cause notice on NIIL (Manufacturer) to explain why prices declared by the company vide letter dated 7.3.1974 should not be rejected as wholesale cash price and why prices charges by M/s AGIL to its dealers should not be approved in terms of section 4(a) of the said Act. On 13.12.1974 the Department confirmed the show cause notice and directed NIIL to pay excise duty on the prices charges by M/s AGIL to its dealers. In pursuance of the said order, a notice of demand dated 3.1.1975 was served on NIIL demanding excise duty of Rs. 99,631/- for the period 1.3.1974 to 20.5.1974 which NIIL paid, Under Protest, and carried on appeal to the Appellate Collector. On 8.1.1976 the said appeal was dismissed. NIIL moved the High Court under Article 226 of the Constitution of India vide Misc. Petition No. 841 of 1976 challenging the order holding that the liability of NIIL to pay excess duty should be ascertained by the price charged by M/s AGIL to its dealers. The petition was subsequently withdrawn. On 15.9.1975, NIIL addressed a latter to the Department submitting a declaration stating that M/s AGIL is not related to NIIL in terms of Section 4(a) of the said Act. On 1.10.1975, the said Section 4 of the Act was amended and the concept of "related person" was introduced. On 11.11.1975, NIIL was asked by the Department to pay excise duty on the price charged by M/s AGIL to its dealers. NIIL went in appeal which was dismissed on 21.9.1979. On 31.10.1984 the Department approved the ex-factory price of NIIL instead of the price list of M/s AGIL to its dealers. therefore, from 1.11.1984, NIIL started paying excise duty on the ex-factory price charged by NIIL to M/s AGIL and not on price charged by M/s AGIL to its dealers. ON 11.8.1986, NIIL filed refund claims for Rs. 60,19,238.65 for recovery of excise duty between the period 1.11.1981 to 31.10.1984. On 29.9.1986 another refund claim for Rs. 42,77,358.59 was lodged for recovery of excise duty during the period 1.11.1978 to 31.10.1981. Similarly on 7.4.1987 another refund claim was lodged for excise duty paid in excess during the period 1.3.1974 to 31.10.1978 by NIIL amounting to Rs. 22,38,391.72. These refund claims were made in view of judgment of this Court in the case of Union of India (UOI) and Others Vs. Bombay Tyre International Ltd. and Others, , On 7.4.1987, NIIL made a consolidated refund claim of Rs. 1,25,34,988.97 for the entire period from 1.3.1974 to 31.10.1984. In respect of these refund claims the Department served a show cause notice and ultimately the Assistant Collector granted refund to NIIL only for two months preceding e cost of purchase in its books and the accounting treatment it gave to the said item at the time of payment of the purchase price. No record as to costing of that item has been produced. This material was relevant as in the present case NIIL conceded that it had passed on the burden of duty to its distributor M/s AGIL (buyer) and it was the buyer who claimed refund. It has been urged on behalf of the respondent and which argument has been accepted by the Authorities below that 20% of the total price paid by M/s AGIL to NIIL represented total excess excise duty levied and not the excess duty collected by NIIL in the form of sale price from its distributor M/s NIIL. It was argued that excess duty collected by NIIL represented only 1.62% of the total price. It was argued that resale price charged by M/s AGIL to its dealers had no relevance to excess excise duty paid by M/s AGIL to NIIL at the time of purchase as the sale price charged by M/s AGIL to its dealers was based on the prevailing market price. We do not find any merit in this argument. In the present case, the refund claim is made by a buyer and not by the manufacturer. The buyer says that he has not passed on the burden to its dealers. The buyer has bought the goods from the manufacturer paying the purchase price which included cost of purchase plus taxes and duties on the date of purchase. In such cases, cost of purchase to the buyer is a relevant factor. None of the authorities below have looked into this aspect Even the appellate Tribunal has not gone into this relevant factor. It has merely quoted the passages from the order of the lower authority, whose order was impugned before it. Costing of the goods in the hands of the distributor, the cost element and the treatment given to purchases by the buyer in his own account were relevant circumstances which the Authorities below failed to examine. It was submitted that cost of purchase was not a relevant factor. It was submitted on behalf of the respondent that the resale price charged by the buyer was not a relevant factor. It was submitted that since the sale price of the goods before and after the assessment remained the same the burden of excess duty was absorbed by the respondent. It was submitted that in any event the sale price of the goods increased much less than the amount of duty (differential) involved in this case and, therefore, incidence of duty was not passed on to the consumers. In this connection, reliance was placed on several judgments of the Tribunal. We have gone through these judgments. They are not applicable to the facts of this case. In the present case, we are concerned with the distributor buying the products from the manufacturer and reselling them to its dealers. Hence, the cost of purchase is a relevant factor. The facts of the cases before the Tribunal deal with sale by manufacturer to the consumer. They deal with assessees' invoice bearing a composite price. They are the cases which dealt with the claim of refund by the manufacturer. They did not deal with claim of refund by the buyer. Hence, they have no bearing on the facts of the present case.

Before concluding, we may state that uniformity in price before and after the assessment does not lead to the inevitable conclusion that incidence of duty has not been passed on to the buyer as such uniformity may be due to various factors. Hence, even on merits, the respondent has failed to make out a case for refund. Since relevant factors stated above have not been examined by the authorities below, we do not find merit in the contention of the respondent that this Court should not interfere under Article 136 of the Constitution in view of the concurrent finding of fact.

Accordingly, this civil Appeal stands allowed. The judgment and order No. C-II/1748-50/WZB/2000 dated 13.6.2000 in Appeal No. E/3318/99-Mum passed by the Customs, Excise and Gold (Control) Appellate Tribunal, West Regional Bench at Mumbai-II is hereby set aside. There shall be no order as to costs.