M/S.Sakthi Industrials vs Commissioner Of Customs

Sulekha Beevi C.S., Member (J)

Brief facts are that the appellant is engaged in manufacture of water filters and filed declaration under erstwhile Rule 173B of Central Excise Rules, 1944 classifying their product under sub heading 8421.10 of First Schedule to CETA 1985. Later, they filed a revised declaration on 02.05.2007 seeking classification of the said goods under sub heading 7323.10 of CETA. It appeared to the department that the water filters are rightly classifiable under sub heading 8421.10. Show cause notice was issued proposing to determine the classification and for demanding the differential duty of Rs.87,677/-. After due process of law, the original authority vide OIO No.41/2001 dt. 31.08.2001 confirmed the demand and imposed penalty. The appellant filed an appeal before the Commissioner (Appeals) and vide OIA No.4/2002 dt. 04.02.2002 it was held that water filters are classifiable under sub heading 7323.10 and that the appellants are eligible for the benefit of Notification No.4/97-CE dt. 01.03.1997. Based on such OIA, the appellant filed claim for refund of Rs.28,63,257/- being the duty paid by them on water filters between 09/97 and 03/2000. The duty was paid by them under protest.

After due process of law, the refund sanctioning authority sanctioned refund of Rs.1,380/- and rejected Rs.83,200/-. The balance amount of Rs.27,77,948/- was sanctioned but ordered to be credited to the Consumer Welfare Fund on the ground that the said claim is hit by the principle of unjust enrichment.

Aggrieved by such order directing the amount to be credited to the Consumer Welfare Fund, the appellant filed an appeal before the Commissioner (Appeals) who vide order impugned herein upheld the same. Hence this appeal.

Ld. Consultant Sri P.C Anand appeared and argued for the appellant. It is submitted that the appellant though collected excise duty from their dealers while selling the water filters, the element of excise duty was returned to the dealers by way of issuing credit notes. The incidence of duty has not been passed on to the dealers and therefore the authorities below ought not to have held that the claim of refund is hit by unjust enrichment. It is prayed that the appeal may be allowed.

Ld. A.R Sri M. Ambe appeared for the Department. It is submitted that though the appellant claims that the excise duty has neither been realized nor passed on to the customers, the same has not been established by the appellant. By issuing credit notes to the dealers, the requirement of establishing that the incidence of duty element has not been passed on to the ultimate consumer is not satisfied. Ld. A.R relied upon the decision of the Hon’ble Supreme Court in the case of Addison and Co. Ltd. Vs Commissioner – 2017 (353) ELT A64 (SC) to argue that it was categorically held in the said decision that even if the duty is paid back to the dealer by issuing post-clearance credit notes, the assessee cannot be said to have passed the test of unjust enrichment as the refund of duty has to be made to the ultimate consumer. Ld. A.R prayed that the appeal may be dismissed.

Heard both sides.

The short issue to be decided in this appeal is whether the refund is hit by the bar of unjust enrichment. The appellant has collected excise duty by issuing invoice to their dealers and thereafter has issued credit notes as mark of returning the excise duty. However, it has to be borne in mind that the dealers have already passed on the said duty element to the consumers while selling the water filters to the consumers. There is no evidence that the appellant has returned the excise duty to the ultimate consumers. The Hon’ble Supreme Court in the case of M/s.Addison and Co. Ltd. (supra) had occasion to consider the very same point and held that by merely issuing credit notes subsequent to the clearance of goods, the assessee cannot be said to have passed the bar of unjust enrichment envisaged under Section 12B of the Central Excise Act, 1944. Following the same, we are of the view that the order passed by the authorities below is legal and proper and does not require any interference. The impugned order is sustained. The appeal is dismissed.