Commissioner Of Customs vs Vedanta Ltd

P. Dinesha, Member (J)

This appeal is filed by the Revenue against Order in Appeal No. 01/2020-TTN dated 18.2.2020 passed by the Commissioner of GST & Central Excise, Coimbatore @ Trichy..

Brief facts which are relevant for our consideration are that the assessee-respondent filed three refund claims dated 25.8.2016, 27.7.2016 and 1.12.2017 for the refund of excess customs duty paid. The respondent is engaged in the manufacture of copper anode, copper cathode, continuous copper rods etc. for the manufacture of which the primary raw material namely copper concentrate was being imported. The price of the said raw material and also the finished products namely copper cathode, copper anode, copper rods etc. was determined based on the prevailing price for copper in the London Metal Exchange (LME for short). At the end of the period specified in the contract, a provisional invoice was raised based on which copper anodes were provisionally assessed and cleared for home consumption and thereafter, when the final price was ascertained, the provisional assessments came to be finalized.

2.1 There is also no dispute that along with these refund claims, the assessee also filed copies of final Orders in Original and other documents based on which the Deputy Director (Cost) of the Department gave his report dated 12.6.2017 concluding that as the price of the final products manufactured by the respondent was based on the price prevailing in LME, which is not within the respondent’s reach, the question of passing on the incidence of duty did not arise at all.

2.2 Show Cause Notice dated 28.11.2017 came to be issued proposing, inter alia, to reject the assessee’s refund claims including the cash refund of DEPB/FPS scrips on the ground that the refund claims were hit by the principles of unjust enrichment. Insofar as other two refund claims are concerned, two separate Show Cause Notices dated 25.7.2016 and 22.8.2016 came to be issued on more or less identical grounds. It appears that the respondent tried to defend its refund claims in response to the above three Show Cause Notices by also relying on the Final Order Nos. 40781 to 40784/2018 dated 13.3.2018 of the CESTAT, Chennai in the assessee’s own case for earlier periods wherein an identical issue was decided and the Bench had categorically held that there was no question of passing on the incidence of duty. The adjudicating authority having considered the reply of the assessee in common adjudication, however, proceeded to sanction the refund but credited the same to the Consumer Welfare Fund on the alleged ground of unjust enrichment. Aggrieved by the above order, it appears that the respondent appealed against the same before the First Appellate Authority. The First Appellate Authority vide the impugned Order in Appeal No. 01/2020-TTN (CUS) dated 18.2.2020 having considered the claim of the respondent, allowed the appeal filed by it and it is against this order that the present appeal is being filed by the Revenue.

Smt. Anandalakshmi Ganeshram, learned Assistant Commissioner (AR) appeared for the appellant-department and Shri Akshit Malhotra, learned Advocate appeared for the respondent.

Having heard both sides, we find that the only issue to be decided by us is, “whether the First Appellate Authority is justified in ordering refund thereby holding that the claim of the respondent was not hit by unjust enrichment?”

We have carefully perused the documents placed on record and we have also perused the final order of this Bench in the respondent’s own case. In Final Order Nos. 40781 to 40784/2018 dated 13.3.2018, relied upon by the First Appellate Authority as well as the respondent, we find that there is no change in the facts; admittedly, the price prevailing in LME was in no way under the control of the respondent and further, this Bench in the respondent’s own case has categorically held that the final product price is based on the price prevailing in LME which has no relation to the cost of raw material including customs duty, for which reliance has been placed on the decision of the Hon'ble Supreme Court in the case of State of Rajasthan & Ors. Vs. Hindustan Copper Ltd. – (1998) 9 SCC 708.

This Bench has thus concluded that the stand of the Revenue insofar as unjust enrichment was concerned, had no merit, which reads as under:-

“8. The only dispute relates to as to whether grant of such refund would result in unjust enrichment to the assessee or not.

The appellants have taken a categorical stand that their final product price is also LME based and has no relation to the cost of the raw materials including the customs duty paid by them. The said issue stands considered by the Hon'ble Supreme Court in the case of State of Rajasthan & Others Vs. Hindustan Copper Ltd., 1998 (9) SCC 708, laying down that where the price of the copper is fixed by MMTC on the basis of the prevailing price fixed by the LME, the unjust enrichment angle will not be involved. For better appreciation we reproduce para-2 of the said decision as under:

"2. On the question of refund, an affidavit of Shri Prashant Swarup, authorized representative of the respondent, has been filed wherein it has been stated that there is no question of any unjust enrichment of the respondent as a result of the refund of the excise duty paid on rectified spirit because the respondent has not passed on the duty to any consumer of the final product, viz., copper, manufactured by the respondent. It has been fixed by the Mineral & Metal Trading Corporation (MMTC) on the basis of the prevailing price fixed by the London Metal Exchange (LME) and this was done not only for the period in question but also for prior and subsequent period and that only such price could be charged and that no part of the duty in respect of rectified spirit captively consumed in the manufacture of copper could be added to the price of copper which was fixed on the basis of the LME prices. We have no reason to doubt the correctness of the aforesaid statement contained in the said affidavit. In the circumstances, no case is made out for interference with the direction contained in the impugned judgment of the High Court regarding refund of excise duty paid by the respondent on import of rectified spirit used in the manufacture of copper. The appeals are, therefore, dismissed."

Further, the Tribunal in the case of Hindustan Copper Ltd., Vs. Commissioner of CE, Jaipur 2010 (261) ELT 943 (Tri. Del) has dealt with an identical question and also examined the effect of the Hon'ble Supreme Court decision in the case of UOI Vs. Solar Pesticides Ltd.- 2000 (116) ELT 401 (S.C.), which lays down that unjust enrichment angle is applicable in case of captive consumption. However, the Tribunal observed that inasmuch as the final product price is being determined on LME prices, the unjust enrichment angle is not required to be examined. For better appreciation, we reproduce para-6 of the said order as under:-

"6. I have carefully considered the submissions from both sides. The decision of the Hon'ble Apex Court in the case of UOI Vs Solar Pesticides Ltd. - 2000 (116) ELT 401 (S.C.) and the decision of the Tribunal in the case of CC (Imports) Vs. Godrej & Boyce Mig. Co. - 2001 (135) BLT 878, no doubt holds that unjust enrichment applies to the dases of captive consumption and cases of capital, goods. However, in the present case, undisputedly, the prices of the final products are being determined on the basis of ruling UME prices. In my considered view, the question of passing on the duty burden in such a situation, to the buyers cannot be arise. The ratio of the decision of the Tribunal in the case of Mahaveer Polypacks clearly applies to the facts of the present case. The Commissioner (Appeals) have also noted the submissions of the party regarding determination of prices of final products, based on LME prices, but he has not discussed the same: As it is evident from the records that the prices of the final products were being determined based on the LME prices, the decision of the original authority in sanctioning the refund by way of credit into CENVAT account cannot be faulted. Therefore, the order of the Commissioner (Appeals) cannot be allowed to survive.”

We find that the Revenue has not been able to distinguish the above case nor is there any evidence placed on record to aver that there was any change in either facts or law, nor has the Revenue placed anything on record to state that the above final orders have been appealed to higher judicial forum and, if so, the status of the same. Hence the ratio of the above order squarely applies to the case on hand as well.

In view of the above discussions, we find that the Revenue has not made out a case to disturb the finding of the First Appellate Authority in the impugned order.

Consequently, Revenue’s appeal lacks merit. The appeal filed by the Revenue is dismissed.