Commr. of C. Ex., Bangalore-II vs Techno Rubber Industries Pvt. Ltd.

N. Kumar, J.—This appeal is filed by the Revenue against the order passed by the Appellate Tribunal [2007 (2011) E.L.T. 130 (Tribunal)] granting relief to the assessee by upholding the claim of the assessee for refund of a sum of Rs. 2,46,240/- being the excess duty paid.

The facts leading to the filing of the appeal are that the assessee, during the month of March, 2003 had cleared Tyre Flaps to different divisions of M/s. CEAT Ltd. situated at Ahmedabad, Nasik, Delhi and Varanasi by paying duty at the rate of 16% BED and 176% SED. In the budget of the year 2003-2004, vide notification No. 11/2003-C.E., dated 1-3-2003 the rate of excise duty in the second schedule was reduced to 8% in respect of the goods falling under Chapter 4012.19. However, assessee continued to pay SED at the rate of 16% during the month of March, 2003. Therefore, assessee filed refund claim of Rs. 2,46,240/-being the excess amount of Special Excise Duty paid by them during the month of March 2003. The adjudicating authority rejected the said claim on the ground that the duty incidence has been passed on by the assessee to his customer during the clearance of goods. Aggrieved by the, same, the assessee filed an appeal before the first appellate authority who confirmed the order of the adjudicating authority. Feeling aggrieved, the assessee filed an appeal before the Tribunal. The Tribunal, as a matter of fact, held that the consumer has not paid the amount at all which is an admitted fact from the records produced by them. It also held that, customer refused to pay the higher duty paid by mistake by the assessee; that when the assessee has proved that he has borne the higher duty which was paid by mistake and is not passed on to the customer, assessee is entitled to refund of the excess duty paid and therefore, it set aside the orders passed by the adjudicating authority as well as the first appellate authority and upheld the claim and granted relief sought for with consequential relief. Aggrieved by the same, revenue is before this Court.

The appeal was admitted to consider the following substantial question of law :

Whether the finding of the Tribunal in setting aside the order of the Deputy Commissioner in rejecting their claim on the basis that, the duty goods were removed from the factory during the month of March, 2003 on payment of duty and the customer has raised the debit note only in the month of June, 2003 which amounts to instance of the duty has been passed by him to the customer?

Learned counsel for the revenue submitted that the assessee claimed refund of duty which was on the basis of debit note raised by the customer in the name of the assessee in the month of June, 2003. The assessee has not furnished any evidence to show that burden of duty is not passed on to the customer. Therefore, adjudicating authority and first appellate authority were justified in rejecting this claim and Tribunal was in total error in interfering with the aforesaid orders which was based on legal evidence. Therefore, he submits that a case for interference is made out.

Per contra, learned counsel for the assessee submitted that mere raising of a debit or credit note is not proof of payment of duty. It is only an adjustment of accounts in records and it is not a proof of payment of excess duty. The evidence produced before the authorities by way of accounts books discloses that the customer has not paid this excess duty to the assessee. When once that is established, assessee is entitled to refund of the excess duty paid which the Tribunal has rightly allowed and therefore, he submits that no case for interference is made out.

From the material on record, it is clear that assessee paid the duty at the rate of 16% as against 8% during the month of March, 2003. A sum of Rs. 2,46,240/- is the excess duty. In order to demonstrate that his customer has not paid his excess duty to the assessee, he relied on a debit note raised by the customer in his name in the month of June, 2003. ''The adjudicating authority rejected the said piece of evidence holding that debit note if it had been raised in the month of March, 2003, it could have been looked into, but when a debit note is raised for a different month, it cannot be the basis for such refund. But the documents produced in the case such as, accounts books, as pointed out by the Tribunal, clearly discloses that customer has not paid this excess duty. When once it is admitted that the department has received excess duty, they are bound to refund it to the person who has paid the excess duty. If the customer of the assessee has paid that excess duty, customer would have been entitled to the said refund. When the customer is not claiming refund, when he has raised a debit note, when he refuses to pay excess duty claimed, the only inference to be drawn is that the assessee has not received that excess duty which he has paid to the department, in which event, the department is bound to refund to the assessee the excess duty calculated which is not in dispute. This is precisely what the Tribunal has held. We are satisfied from the legal evidence on record, that the said finding of the Tribunal is sound and just and does not call for interference.

Hence, the substantial question of law raised is answered in favour of the assessee and against the revenue. Accordingly, we dismiss the appeal.