# • .> COMMISSIONER OF CENTRAL EXCISE, MUMBAI-II v. MIS ALLIED PHOTOGRAHICS INDIA LTD

- **Citation:** [2004] 3 S.C.R. 261
- **Court:** Supreme Court of India
- **Decided:** 2004-03-18
- **Case number:** Civil Appeal No. 2687 of2001
- **Bench:** V.N. Khare, S.B. Sinha, 3.h KAPADIA
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-central-excise-mumbai-ii-v-mis-allied-photograhics-india-ltd-19847
- **Pages:** 25

## Headnote

B
Central Excise Act, 1944-Section 11 B-Unjust enrichmentApplicability of-Making of refimd and claiming of refund-Difference
between-Payment of duty under protest-Nature of-Held, is different than C
duty paid under provisional assessment-Duty paid by the manufacturer under
protest-Burden of duty passed on to buyer/distributor-Subsequently, duty
revised by Department-Distributor claiming refund-Held, Section 11 B would
be applicable-Central Excise Rules, 1944-Rule 9 B.
Constitution of India-Article 136-Concurrent findings of fact- D
lnte(ference with-lower authorities not examining relevant facts while arriving
at findings of fact-Held. can be interfered with-Central Excise Act. 1944Section 11 B.
Respondent was the sole distributor of NHL. The Excise Department
sought to recover excise duty from NHL on the basis of the price charged E
by the respondent to its dealers and not the price declared by NHL as
wholesale cash price. NHL paid the amount demanded by the Department
under protest and appealed against the said demand. The appeal filed by
NHL was dismissed.
In view"of subsequent judgment in Union of India and Ors. v. Bombay F
Tyre International, AIR (1984) SC 420, which held that distributor c·ould
not be treated as "related person" under Section 4 (1) (a) of the Central
Excise Act, 1944 the Department, on 31.10.1984, approved ex-factory price
of NHL as value under Section 4 of the Central Excise Act. NllL filed claim
for refund. The Assistant Commissioner granted only two months' refund. G
NHL filed writ petition where it concede that it had passed on the
burden of the duty to the respondent. The High Court however granted
refund to the respondent holding that the appellant had failed to prove
that the respondent had passed on the burden of the duty to its consumers.
261
H
262
SUPREME COURT REPORTS
[2004] 3 S.CR.
A The matter ultimately came in appeal to the Court. The Court held that
..I.. ..
as NllL had passed on the burden of duty to the respondent, its refund
-
claims were liable to be rejected. However, the Court observed that the
order would not prevent the respondent from adopting appropriate
remedies open to it in law.
B
After the judgment of the Court in Mafat/a/ Industries Ltd. v. Union
of India, [1997J 5 SCC 536, on ll.2.1997, the respondent filed refund claim
before the Department. The claim of the respondent was allowed by the
Assistant Commissioner. The Department filed an appeal to the
(.
Commissioner (Appeals) but the appeal was dismissed. The Tribunal, on
c appeal, also affirmed the order passed by the Commissioner.
The appellant filed appeal before the Court. The respondent,
defending the impugned judgment contended that deposit of duty under
protest stood on the same footing as a provisional assessment under Rule
98 of the Central Excise Rules, 1944 both being in the nature of "on
D account" payment and therefore, in view of observations of the Court in
para 104 of Mafalfa/ Industries ltd. v. Union of India, [19971 5 SCC 536,
resort to Section 11 B of the Central Excise Act was not necessary. The
'r •
respondent further contended that it had stopped into the shoes of the NHL
and therefore, the amount payable to NHL should be paid to it. It was
E
also contended that the concurrent finding of facts should not be interfered
with.
Allowing the appeal, the Court
· HELD: l. l. There is a basic difference between duty paid under
F
protest and duty paid under Rule 9 B of the Central Excise Rules, 1944.
The duty paid under protest falls under Section 11 B of the Central Excise
.4
Act, 1944 whereas duty paid under provisional assessment falls under 9
B of the Central Excise Rules. Section 11 B of the Central Excise Act deals
with claim for refund whereas Rules 9 B of the Central Excise Rules deals
with making of refund, in which case the assesssee has not to comply with
G Section 11 B of the Central Excise Act. Therefore, Section 11 B of the
Central Excise Act and Rule 9 B of the Central Excise Rules operate in
di

## Text

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• .>
COMMISSIONER OF CENTRAL EXCISE, MUMBAI-II
A
v
MIS ALLIED PHOTOGRAHICS INDIA LTD.
MARCH 18, 2004
[V.N. KHARE, CJ., S.B. SINHA AND 3.h KAPADIA, JJ.]
B
Central Excise Act, 1944-Section 11 B-Unjust enrichmentApplicability of-Making of refimd and claiming of refund-Difference
between-Payment of duty under protest-Nature of-Held, is different than C
duty paid under provisional assessment-Duty paid by the manufacturer under
protest-Burden of duty passed on to buyer/distributor-Subsequently, duty
revised by Department-Distributor claiming refund-Held, Section 11 B would
be applicable-Central Excise Rules, 1944-Rule 9 B.
Constitution of India-Article 136-Concurrent findings of fact- D
lnte(ference with-lower authorities not examining relevant facts while arriving
at findings of fact-Held. can be interfered with-Central Excise Act. 1944Section 11 B.
Respondent was the sole distributor of NHL. The Excise Department
sought to recover excise duty from NHL on the basis of the price charged E
by the respondent to its dealers and not the price declared by NHL as
wholesale cash price. NHL paid the amount demanded by the Department
under protest and appealed against the said demand. The appeal filed by
NHL was dismissed.
In view"of subsequent judgment in Union of India and Ors. v. Bombay F
Tyre International, AIR (1984) SC 420, which held that distributor c·ould
not be treated as "related person" under Section 4 (1) (a) of the Central
Excise Act, 1944 the Department, on 31.10.1984, approved ex-factory price
of NHL as value under Section 4 of the Central Excise Act. NllL filed claim
for refund. The Assistant Commissioner granted only two months' refund. G
NHL filed writ petition where it concede that it had passed on the
burden of the duty to the respondent. The High Court however granted
refund to the respondent holding that the appellant had failed to prove
that the respondent had passed on the burden of the duty to its consumers.
261
H
262
SUPREME COURT REPORTS
[2004] 3 S.CR.
A The matter ultimately came in appeal to the Court. The Court held that
..I.. ..
as NllL had passed on the burden of duty to the respondent, its refund
-
claims were liable to be rejected. However, the Court observed that the
order would not prevent the respondent from adopting appropriate
remedies open to it in law.
B
After the judgment of the Court in Mafat/a/ Industries Ltd. v. Union
of India, [1997J 5 SCC 536, on ll.2.1997, the respondent filed refund claim
before the Department. The claim of the respondent was allowed by the
Assistant Commissioner. The Department filed an appeal to the
(.
Commissioner (Appeals) but the appeal was dismissed. The Tribunal, on
c appeal, also affirmed the order passed by the Commissioner.
The appellant filed appeal before the Court. The respondent,
defending the impugned judgment contended that deposit of duty under
protest stood on the same footing as a provisional assessment under Rule
98 of the Central Excise Rules, 1944 both being in the nature of "on
D account" payment and therefore, in view of observations of the Court in
para 104 of Mafalfa/ Industries ltd. v. Union of India, [19971 5 SCC 536,
resort to Section 11 B of the Central Excise Act was not necessary. The
'r •
respondent further contended that it had stopped into the shoes of the NHL
and therefore, the amount payable to NHL should be paid to it. It was
E
also contended that the concurrent finding of facts should not be interfered
with.
Allowing the appeal, the Court
· HELD: l. l. There is a basic difference between duty paid under
F
protest and duty paid under Rule 9 B of the Central Excise Rules, 1944.
The duty paid under protest falls under Section 11 B of the Central Excise
.4
Act, 1944 whereas duty paid under provisional assessment falls under 9
B of the Central Excise Rules. Section 11 B of the Central Excise Act deals
with claim for refund whereas Rules 9 B of the Central Excise Rules deals
with making of refund, in which case the assesssee has not to comply with
G Section 11 B of the Central Excise Act. Therefore, Section 11 B of the
Central Excise Act and Rule 9 B of the Central Excise Rules operate in
different spheres. 1279-G-H; 280-AI
r:
1.2. Rule 9 B of the Central Excise Rules is a complete code by itself.
On Compliance with the conditions therein, the proper officer is duty
H bound to refund the duty without requiring the assessee to make a separate
C.C.E. v. ALLIED PHOTOGRAHICS INDIA LTD.
263
refund application. Rule 9 B, therefore, provides for making of refund. A
On the other hand, Section I I B (1) of the Central Excise Act deals with
claiming of refund by the person who has paid duty on. his own accord.
Hence, under Section ll B (1 ), such a person had to claim refund by
making an application. A bare reading of Section 11 B (1) of the Central·
Excise Act, therefore, shows that it refers to claim for refund as against B
making of refund by the proper officer under Ruie 9 B of the Central
Excise Rules. There is a difference between making of refund and claiming
of refund.
1.3. In cases where duty is paid under Rule 9 B of the Central Excise
Rules and refund arises on adjustment under Rule 9 B (5) thereof, then C
such refund will not be governed by Section I I B of the Central Excise
Act. If an independent refund claim is made after adjustment on final
assessment under Rule 9 B (5) of the Central Excise Rules, then such claim
would attract Section I I B of the Central Excise Act. This is because when
the assessee makes an independent refund claim after final orders under
Rules 9 B (5) of the Central Excise Rules, such application represents a D
claim for refund and, it would not come in the category of making of
refund and therefore, the bar of unjust enrichment would apply. The
respondent was bound to comply with Section I I B of the Central Excise
Act. (280-A-B; DJ
1.4. Para 104 of the judgement in Mafatld's case dealt with refund E
consequent upon finalisation of provisional assessment under Rule 9 B of
the Central Excise Rules. Paragraph l 04 does not deal with refund of duty
paid under protest. In para 104 there is nothing to suggest that payment
of duty under protest does not attract bar of unjust enrichment.
(282-A-B; 279-E-FI F
Mafatlal Industries Ltd v. Union of India, (I 997( 5 SCC 536, explained.
Sinkhai Synthetics and Chemicals Pvt. Ltd. v. Collector of Central
Excise,Chennai, (2002), 143 ELT 17 and National Winder v. Commissioner
of Central Excise, Allahabad, (2003), I 54 ELT 350, held per incuriam.
G
Collector of Central Excise, Chennai v. TVS. Suzuki Ltd., (2003) 156,
EL T 161; Union of India and Ors. v. Bombay Tyre International, AIR (1984)
>.:
SC 420 and New India Industries Ltd. v. Union olfndia, (1990) 46 ELT 23,
referred to.
H
264
SUPREME COURT REPORTS
12004 I 3 S. C.R.
A
CCE v. National Tobacco Co. of India ltd, AIR (1972) SC 2563, cited.
1.5. In any event, the application filed by the respondent for refund
fell in the category of refund claim being made after finalisation of
assessment of NHL and, therefore, Section 11 B of the Central Excise Act
had to be complied with in terms of para 104 of the judgment in Mafatla/'s
B case. 1280-D-EI
2.1. There is no merit in the argument advanced on behalf of the
respondent that the distributor was entitled to claim refund of "on
account" payment made under protest by the ~anufacturer without
C complying with Section 11 B of the Central Excise Act. The basis on which
a manufacturer claims refund is different from the basis on which a buyer
claims refund. The cost of purchase to the buyer consists of purchase price
including taxes and duties payable on the date of purchase (other than
the refund which is subsequently recoverable by the buyer from the
Department). Consequently, it is not open to the buyer to include the
D refund amount in the cost of purchase on the date when he buys the goods
as the right to refund accrues to him at a date after completion of purchase
depending upon his success in the assessment. j281-E-F; B-DJ
E
Atic Industries Ltd v. H.H. Dave, Asstt. Collector of Central Excise, AIR
(1975) SC 960, referred to.
2.2. Rule 9 B of the Central Excise Rules refer to the payment of
duty on provisional basis by the assessee on his own account and, therefore,
in cases where the manufacturer has been allowed to invoke this Ruic.:
and the refund accrues on adjustment under Rule 9 B (5) of the Central
Excise Rule, that refund is on the account of the manufacturer and not
F on the account of the buyer. Section 11 B of the Central Excise Act on
one hand and Rule 9 B of the Central Excise Rules on the other hand,
both indicate payment by the assessee on his own account and refund
becomes due on that account alone. [278-F-Gj
G
2.3. The scheme of Section 11 B of the Central Excise Act shows the
difference between the rights of a manufacturer to claim refund and the
right of the buyer to claim refund as separate and distinct. The accounts
of the manufacturer are different from the accounts of a buyer
(distributor). [281-E-FJ
H
3. Since relevant factors have not been examined by the authorities
)
. >
C.C.E. v. ALLIED PHOTOGRAHICS INDIA LTD. fKAPADIA . .I.] 265
below, there is no merit in the contentions of the respondent that the Court A
should not interfere under Article 136 of the Constitution of India in view
of the concurrent finding of fact. The refund claim is made by the buyer
and not by the manufacturer. The respondent has admitted that it 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 B
cases, cost of purchase to the buyer is the relevant factor. None of the
authorities below have looked into this aspect. [285-E-F; 284-G-H[
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2687 of2001 .
From the Judgment and Order dated 13.6.2000 of the Central Excise,
Customs and Gold (Control) Appellate Tribunal, West Regional Bench, C
Mumbai in F.O. No. CJ 1/1748-50/WZ.B/2000 in A.No. E/3318 of 1999Mum.
A.K. Ganguli. S. Ganesh, Dushyant A. Dave, Dileep Tandon, G.
Venkatesh Rao, B. Krishna Prasad, Sandeep Narain, Shri Narain, Ms. Anjali, D
Ms. Rohina Nath, Umesh Kumar Khaitan and Ms. Kumkum Sen for the
appearing parties.
The Judgment of the Court was delivered by
KAPADIA, J. Finding inconsistencies between two decisions of threeE
Judge Benches of this Court in the case of Sinkhai Synthetics and Chemicals
Pvl. ltd. v. Collector of Central Excise, (2002) I43 EL T 17 and Collector of
Central Excise. Chennai v. T V.S. Surnki ltd., (2003) (156) EL T 161 on one
hand and the decision of nine-Judge Constitution Bench in Mafatlal Industries
ltd. V. Union of India, [ 1997) 5 sec 536 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 11 B of the Central Excise Act 1944?
FACTS:
New India Industries Ltd. (NIIL) is incorporated under the Companies
F
G
Act 1956 and carries on business of manufacturing photographic printing
paper which became chargeable to excise duty vide tariff item No. 37-C(2) H
266
SUPREME COURT REPORTS
[2004] 3 S.C.R.
A of"the Central Excise Act 1944 (hereinafter referred to as "the Act") with
effect from March I, 1974. NllL 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
B 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
C 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 ofNIIL to pay excess duty should be ascertained by the price charged
by M/s AG IL to its dealers. The petition was subsequently withdrawn. On
D 15.9.1975, NIIL addressed a latter to the Department submitting a declaration
stating that Mis AGIL is not related to NllL in terms of section 4(a) of the
said Act. On I. I 0.1975, the said section 4 of the Act was amended and the
y ·
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 AG IL to
E its dealers. NIIL went in appeal which was dismissed on 21.9.1979. On
31. I 0.1984 the Department approved the ex-factory price of NllL instead of
the price list of Mis AGIL to its dealers. Therefore, from l .11.1984, NllL
started paying excise duty on the ex-factory price charged by NIIL to Mis
AGIL and not on price charged by Mis AGIL to its dealers. On 11.8.1986,
NIIL filed refund claims for Rs. 60.19,238.65 for recovery of excise duty
F 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. l 978 to 3 I. I 0.1981. Similarly on 7.4.1987 another refund claim
was lodged for excise duty paid in excess during the period 1.3.1974 to
31. I 0.1978 by NllL amounting to Rs.22,38,391.72. These refund claims were
G made in view of judgment of this Court in the case of Union of India and
Ors. v. Bombay Tyre International ltd., repo1ted in AIR (1984) SC 420. 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 the lodgment
H of the claim. On 13.4.1987, NIIL filed Writ Petition No. 1336of1987 in the
-~
-/
-
C.C.E. r. ALLIED PHOTOGRAlllCS INDIA LTD. JKAPADIA . .I.] 267
High Cou11 challenging the· order of Assistant Collector denying refund except A
for two months. That writ petition came for hearing before learned Single
Judge on 29.8.1988. The learned Judge held that the action of the Department
in collecting duty not on the sale price ofNIIL to Mis AGIL was illegal and,
therefore, NIIL was entitled to refund. However, since the question of unjust
enrichment was debatable, the learned Judge referred the question to the Full B
Bench. After the decision of the Full Bench in the case of New India Industries
. Ltd v. Union of India, reported in (1990) 46 EL T 23, the said Writ Petition
No. I 336/87 was reposted before the learned Judge on I 7. l.1990 when he
directed Union of India to prove that the tax burden has in fact been shifted
to consumers. Pending further examination, the Department was directed to
deposit Rs. I ,25,34,988.97 in Court. When the Writ Peiition came for hearing C
on 22.3.1990, NIIL conceded that it had passed on the burden to Mis AGIL,
the sole-selling distributors of NIIL. The learned Judge, however, directed
Mis AGIL to file affidavit stating whether it had passed on the burden to its
dealers or not.
Therefore on 22.3.1990 the refund claims of NIIL were
rejected but the learned Judge went into further enquiry as to whether the
burden had been passed on by Mis AGIL to its dealers and by judgment D
dated 14.6.1990 held that Union of India had failed to prove that Mis AGIL
had passed on the burden to its dealers and accordingly granted refund of
Rs. l ,25,34,988.97 to Mis AG!L. Being aggrieved, the Department carried
the matter in appeal to the Division Bench which took the view that since
NIIL had conceded of having passed on the tax burden to Mis AGIL there E
was no question of the trial court further examining the question as to whether
Mis AGIL had passed _on the burden to its dealers. Accordingly, the Division
Bench allowed the appeal filed by the Department vide judgment dated
2.3.1993. Being aggrieved, NIIL came to this Court vide SLP No. 7484 of
1993. By order dated 30.1.1997, this Court disposed of the SLP observing
that since NIIL had passed on the burden of excise duty to Mis AGIL the F
refund claims filed by NIIL are liable to be rejected. Accordingly, the said
SLP was dismissed. However it was clarified that the said Order will not
prevent Mis AGIL from adopting appropriate remedy as open to it in law. In
view of the order dated 30.1.1997 passed by this Court, Mis AGIL filed Writ
Petition No. 1776 of 1993 in the High Court contending that the petitioners G
(AG IL) were entitled to refund of Rs.1,25,34,988.97 as sole selling distributors
of NIIL. That as distributors they (AGIL) were not related to NIIL. That
their transaction was at arms length and therefore, the Department had erred
in collecting excess excise duty from NII L on the basis of the prices charged
by Mis AGIL to its dealers. In the Writ Petition, Mis AGIL relied on the
judgment of this Court in the case of Bombay Tyre (supra). By order dated H
268
SUPREME COURT REPORTS
[2004] 3 S. C.R.
A 28.9.1993 passed by the High Coun, the Depa11ment was allowed to withdraw
Rs.1,25,34,988.97 with undenaking to bring back the amount with interest as
and when the Court so directs. In the meantime on 19 .12.1996 this Court
delivered its judgment in Mafatlal's case (supra) inter. alia giving 60 days'
time to those claimants, who had earlier adopted legal proceedings claiming
B refund to move under section I 18 as amended w.e.f. 20.9.1991. Consequently,
Mis AGIL mov(:d their refund claim before the Depanment on 11.2.1997 for
Rs. 1,25,34,988.97. On 9.5.I997, a show cause notice was issued by the
Department to Mis Allied Photographies India Ltd. (formerly known as
Mis AGIL) calling upon them to show cause why Rs.1,25,34,988.97 should
not be transferred to Consumer Welfare Fund. By judgment and order dated
C 31.10.1997 passed by the Assistant Commissioner refund was granted to
Mis Allied Photographies India (P) Ltd. (Mis APIL). This order of Assistant
Commissioner was confirmed in appeal by the Commissioner (Appeals) and
the Tribunal vide impugned order dated 13.6.2000 and the Department was
directed to refund Rs.1,25,34,988.97 with interest.
Being aggrieved, the
Depal'tm€!lt has come to this Court by way of present civil appeal under
D section 35L\b) ohlle Act.
ARGUMENTS:
Mr. A.K. Ganguli, learned senior counsel for the Department submitted
E that there was a difference between provisional assessment under rule 9B and
payment of duty under protest in tern1s of rule 233B. In this connection
reliance was placed on the judgment of this Cou11 in Mafat!al 's case (supra).
He submitted that under the second proviso to section 11 B if duty is paid by
the manufacturer under protest the limitation of six months was not applicable,
however, the purchaser of duty paid goods, after finalization of assessment
F of excise duty payable by the manufacturer. was not entitled to rely upon the
said proviso. That in any event in the present case, M/s APIL (the respondentherein) had claimed refund by filing an independent application on 11.2.1997
and therefore it was governed by section 11 B(3). In suppol1 reliance was
placed on para 104 of the Ma/at/al 's case. It was submitted that the above
mentioned two decisions of this Court in the cases of Sinkhal Synthetics and
G Chemicals Pvt. ltd. v. Collector of Central Excise, reported in (200~) 143
EL T 17 and Collector of CC'n!ral Excise v. T. VS. S1cuki ltd. reported in
(2003) 156 ELT 161 run counter to the law laid down by this Court in
Mafatlal's case and a clarification to that effect was required in the interest
of justice. Learned counsel next contended that M/s APIL as the sole distributor
H of NllL had bought the products in the course of trading between 1974 and
I
)--
.( '
)' .
C.C.E. v. ALLIED PHOTOGRAHICS INDIA LTD. fKAPADIA . .I.] 269
1984 and.had sold them to its dealers earning profits between 12.6535% io A
21.1333%. That during the said period, the purchaser had no right to claim
refund and that Mis APIL became entitled to claim refund only after 20.9.1991
when section 11 B was amended by the Central Excise and Customs
Amendment Act of 1991· when such right was recognized for the first time
and, therefore, there was no reason for Mis APIL not to pass on the burden
to its dealers. That Mis APIL not only passed on the burden to its dealers B
but even admittedly made profits on its sales. That the consideration paid by
Mis APIL to NllL included excise duty and the very fact that Mis APIL
, >
recovered all its expenses and made profits in all its sales to its dealers itself
establishes that incidence of duty was passed on to the dealers by Mis APIL
in the course of its trading business. It was further urged that Mis APIL had C
never moved any refund claim prior to 8.6.1990 and that it filed its affidavit
on that day in response to suo-moto notice issued by the High Court in the
Writ Petition filed by NIIL inter alia for refund whereby for the first time Mi
s APIL contended that it had not passed on the burden tG its dealers. In this
connection, Mis APIL asserted that the excess duty component was negligible
amount of 1.62% of its sale price; that it had earned profits varying from D
12.6535% to 21.1333% and therefore it absorbed the burden of excess duty
within its profit and that it gave a trade discount varying from 2% to 4% to
its customers which itself was more than the burden. of additional duty.
However, on behalf of the Department it was contended that excess duty
component was a part of cost incurred by Mis API L during the above period E
1974/1984 and there is no reason why Mis APIL did not recover it from its
dealers particularly when Mis APIL had no right as a purchaser to claim
refund which was recognized only on 20.9.1991 when section 118 was
amended and therefore, Mis APIL was seeking to unjustly enrich itself by
seeking such refund. Lastly, it was urged that Mis APIL had worked out its
sale prices before the Department in such a way that it has not passed the F
burden to its dealers and yet it has earned profits varying from 12.6535% to
21.1333% which was contrary to normal conduct of a trader. In this connection
it was further submitted that Mis APIL did not produce any material before
the Department disclosing how its sale price were arrived at.
Per contra, Shri S. Ganesh, learned senior counsel for the respondent
-
Mis APIL submitted that Mis APIL as the purchaser was entitled to claim
refund of the excess duty as that amount had been passed on by NllL to Ml
.I(
s APIL. In this connection reliance was placed on judgments of this Cou1t
in the case of Mqfatlal (supra) and in the case of National Winders v. Collector
G
of Central Excise, reported in (2003) 154 EL T 350. Learned counsel for the H
270
SUPREME COURT REPORTS
[2004] 3 S.C.R.
A respondent contended that in the present case section 118 was not at all
attracted. In support he pointed out that during the period 1974 to 1984, the
Department insisted on NIIL paying excise duty on the footing that M/s
APIL was related to NIIL. That the Department insisted on NIIL paying the
additional excise duty of 1.62% on the footing that Mis APIL was related
B person to NIIL. However in 1984 assessments of NIIL were finalized in
tenns of judgment of this Court in the case of Bombay Tyre (supra) wherein
it was held that the distributor could not be treated as a "related person" and
accordingly the amounts paid by NllL towards excise duty during 1974-84
were adjusted and appropriated against the amounts found payable on the
-l .
said assessments and consequently the disputed amount of excess duty of
C 1.62% paid by NllL under protest during the above period became refundable
on the finalization of NII L's assessments in 1984. That neither NIIL nor M/
D
s APIL ever disputed the said assessments made in 1984 and M/s APIL had
based their refund claim on the said assessment. It was submitted that when
a provisional assessment is made under the Act or when excise duty is paid
Under Protest by the appellant, all payments of excise duty are On Account
payments which are to be adjusted and appropriated only on vacating of the
protest or finalization of assessment. In this connection, reliance was placed
on rule 98 (5) as it stood prior to its amendment in 1989 and rule 2338 (v)
r •
and (vi). In either situations, when the assessment is finalized or the protest
is vacated and the account is settled between the appellant and the Department
E and the said On Account payments made by the appellant are adjusted and
appropriated against the assessed amount and if it is found that any amount
is payable by the appellant then it can be recovered by the Department
without issuance of show cause-cum-demand notice under section 11 A.
Correspondingly, if any amount is found to be repayable by the Department
to the appellant on such taking of accounts, then that amount has to be
F refunded without going through section 118. In this connection reliance was
placed on the judgment of this Court in the case ofCCE v. National Tobacco
Co. of India Ltd., reported in AIR (1972) SC 2563. According to the learned
counsel the same principle was applicable in cases where the Department has
to refund moneys to the appellant on finalization of the assessment; which
G principle has been reiterated vide para 104 of the Mafatlal judgment.
Accordingly it was submitted that the doctrine of unjust enrichment in section
118 would not apply to the present case. Lastly it was urged that the argument
of the Department was based entirely on section 118 (3) which had no
bearing on the basic issue as to whether section 118(2) was at all applicable
particularly when the appellant was seeking refund of an "On account"
H payment made Under Protest or under the Provisional assessment". Therefore,
' ..
C.C.E. v. ALLIED PHOTOGRAHICS INDIA LTD. [KAPADIA. J.] 271
the reliance on section 118(3) was misplaced. That in the circumstances, A
neither Sinkhal Synthetics nor T.V.S. Suzuki can be said to be in any way
incorrect, much less per incuriam. On merits, learned counsel for the
respondent submitted that the question as to whether the burden of duty has
been passed on to the consumer is to be answered by relying on one singular
test viz. whether the manufacturer has increased his sale price in order to pass B
on the disputed amount and not whether the manufacturer has made profits
or losses. In this connection, reliance was placed on judgments of the Appellate
Tribunal having been accepted by the Department that composition of costs
incurred by Mis APIL was not relevant and the only relevant factor was
whether M/s APlL had increased its sale price to its dealers after it was
required to pay the differential amount of excise duty in the form of the C
increased price charged to it by NIIL. In this connection it was submitted
that M/s APIL did not increase its sale price after it was required to bear the
differential amount of excise duty of 1.62% in the form of the enhanced
purchase price paid by it to NIIL and on the contrary, far from enhancing its
sale prices, Mis APIL granted discounts between 2% to 4% on the sale price D
charged by it to its dealers and this discount was more than the disputed
differential amount of excise duty which came to l .62% of the price. It was
submitted that the case of Mis APIL has been accepted by all the authorities
below and that this Court should not interfere with the concurrent findings
of fact recorded by the· authorities below. In this connection it was submitted E
that the said findings were based on the audited accounts of APIL; certificate
of Chartered Accountant, Sale Invoices of APIL and two affidavits filed on
behalf of APIL. It was further urged that in the case of Maji11/al (supra) it
has been held that where the claim for refund relates to the period from .... to
20.9.1991, any evidence which reasonably shows that the disputed duty has
not been passed on to the dealers/customers in the form of increased price F
would suffice and the claimant is not required to produce documents specified
in section 12A which has prospective operation.
Hence, Mis APlL
(respondents herein) had not increased the sale price for rec"vering the
additional disputed duty burden of l .62% which was passed on to it (M/s
APIL} by NllL.
Learned counsel for the respondent next contended that G
profits made by it during the period 1974 to 1984 does not indicate passing
on of the duty burden to its dealers. It was contended that profit or loss is
not the determinative factor in order to ascertain whether the disputed
additional duty is passed on by the respondent to its dealers. In the
circumstances, it was submitted that on the said material and evidence and
having regard to the specific findings the only possible conclusion was that H
the respondent, Mis APIL had not passed on the disputed duty burden ·to its
272
SUPREME COURT REPORTS
[2004) 3 S.C.R.
A dealers/customers.
POINT FOR DETERMINATION:
Whether the doctrine of unjust enrichment in section l IB of the Act
is applicable to the facts of this case, having regard to the fact that NIIL
B (manufacturer) had paid the differential disputed excise duty Under Protest
from 1.3.1974 to 31.10.1984 when the assessment was finalized in favour of
NllL in view of the judgment of this Court in the case of Union of India and
Ors. v. Bombay Tyre International Ltd., reported in AIR (1984) SC 420?
C FINDINGS.·
The points at issue in this civil appeal are - whether refund of duty paid
under provisional assessment is similar to duty paid under protest as both are
"On Account" payments adjustable on finalization of assessment or vacating
of protest? Secondly, in the course of such adjustment or vacation of protest,
D if any amount is found payable by the Department to the manufacturer, is it
open to the purchaser to contend that he (the purchaser) has stepped into the
shoes of the manufacturer seeking refund of "on account payment" and,
therefore, he was not bound to comply with section 11 B of the said Act. In
"I ·
this civil appeal, we have to deal with the law governing refund during the
E disputed period from 1974 to 1984. To resolve the dispute herein, we quote
herein below section 11 B of the said Act as also rule 9B of the Centrnl Excise
Rules, 1944 as it stood prior to Central Excise & Customs (Amendment) Act,
40 of 1991: -
F
"Section 11 B: Claim for refund of duty.
(I) Any person claiming refund of any duty of excise may make an
application for refund of such duty to the Assistant Collector of Centi ul
Excise before the expiry of six months from the relevant date:
Provided that the limitation of six months shall not apply where
G
any duty has been paid under protest.
H
Explanation. - For the purposes of this section, -
(A)"refund" includes rebate of duty of excise on excisable goods
expoi1ed out of India or on excisable materials used in the manufacture
of goods which are expo11ed out of India;
(B) "relevant date" means, -
)I
' \
·,}
-j
C.C.E. v. ALLIED PHOTOGRAHICS INDIA LTD. !KAPADIA, .I.] 273
(a) in the case of goods exported out of India where a refund of A
excise duty paid is available in respect of the goods themselves or,
as the case may be, the excisable materials used in the manufacture
of such goods, -
(i) if the goods are exported by sea or air, the date on which the
ship or the aircraft in which such goods are loaded, leaves B
India, or
(ii) if the goods are exported by land, the date on which such
goods pass the frontier, or
(iii) if the goods are exported by post, the date of despatch of C
goods by the Post Office concerned to a place outside India;
(b) in the case of goods returned for being remade, refined,
reconditioned, or subjected to any other similar process, in any factory,
the date of entry into the factory for the purposes aforesaid;
( c) in the case of goods to which banderols are required to be affixed D
if removed for home consumption but not so required which expo1ted
outside India, if returned to a factory after having been removed from
such factory for export out of India, the date of entry into the factory;
(d) in a case where a manufacturer is required to pay a sum for a E
ce1tain period, on the basis of the rate fixed by the Central Government
by notification in the Official Gazette in full discharge of his liability
for the duty leviable on his production of certain goods, if after the
manufacturer has made the payment on the basis of such rate for any
period but before the expiry of that period such rate is reduced, the
date of such reduction;
F
(e) in a case where duty of excise is paid provisionally under this Act
or the ru Jes made thereunder, the date of adjustment of duty after the
final assessment thereof;
(f) in any other case, the date of payment of duty.
(2) If on receipt of any such application, the Assistant Collector
of Central Excise is satisfied that the whole or any part of the duty
of excise paid by the applicant should be refunded to him, he may
make an order accordingly.
G
H
274
SUPREME COURT REPORTS
[1004] 3 S.C.R.
A
(3) Where as a result of any order passed in appe;il or revision
under this Act refund of any duty of excise becomes due to any
person, the Assistant Collector of Central Excise may refund the
amount to such person without his having to make any claim in that
behalf.
B
(4) Save as otherwise provided by or under this Act, no claim for
c
D
refund of any duty of excise shall be entertained.
(5) Notwithstanding anything contained in any other law, the
provision of this section shall also apply to a claim for refund of any
amount collected as duty of excise made on the ground that the goods
in respect of which such amount was collected were not excisable or
were entitled to exemption from duty and no court shall have any
jurisdiction in respect of such claim.
Ruic 98: Provisional assessment of duty.-{ I) Notwithstanding
anything contained in these rules: -
(a) where the proper officer is satisfied that an assessee is unable to
produce any document or furnish any information necessary for
the assessment of duty on any excisable goods; or
l'! I
(b) where the proper officer deems it necessary to subject the
E
excisable goods to any chemical or any other test for the purpose
of assessment of duty thereon: or
F
G
H
( c) where an assessee has produced all the necessary documents and
furnished full information for the assessment of duty, but the
proper officer deems it necessary to make further enquiry
(including the inquiry to satisfy himself about the due observance·
of the conditions imposed in respect of the goods after their
removal) for assessing the duty,
the proper officer may, either on a written request made by the
assessee or on his own accord, direct that the duty leviable on
such goods shall, pending the production of such documents or
furnishing of such information or completion of such test or
enquiry. be assessed provisionally at such rate or such value
(which may not necessarily be the rate or price declared by the
assessee) as may be indicated by him, if such assessee executes
a bond in the proper form with such surety or sufficient security
in such amount, or under such conditions as the proper officer
!
~
.J.
c.c.E. V. ALLIED PHOTOGRAHICS INDIA LTD. [KAPADIA, J.] 275
deems fit, binding himself for payment of the difference between A
the amount of duty as provisionally assessed and as finally
assessed.
(2) ..........
(3) The Collector may permit the assessee to enter into a general B
bond in the proper Form with such surety or sufficient security in
such amount or under such conditions as the Collector approves for
assessment of any goods provisionally from time to time:
Provided that, in the event of death, insolvency or insufficiency
of the surety or where the amount of the bond is inadequate, the C
Collector may, in his discretion, demand a fresh bond and may, ifthe
security furnished for a bond is not adequate, demand additional
security.
( 4) The goods provision ally assessed under sub-rule (I) may be cleared
for home consumption or export in the same manner as the goods D
which are not so assessed.
(5) When the duty leviable on the goods is assessed finally in
accordance with the provisions of these rules, the duty provisionally
assessed shall be adjusted against the duty finally assessed, and if the
duty provisionally assessed falls short of, or is in excess of the duty E
finally assessed, the assessee shall pay the deficiency or be entitled
to a refund, as the case may be."
Before analysing section 11 B, it is important to note that there is a
difference between making of refund and claiming of refund. Section 118
was inserted in the said Act w.e.f. 17.11.1980. Under sub-clause (e) to F
...
explanation B to section 11 B( I), where assessment was made provisionally
the relevant date for commencement of limitation of six months was the date
of adjustment of duty as final assessment. Entitlement to refund would thus
be known only when duty was finally adjusted. Sub-clause (e) referred to
limitation in cases covered by rule 98 which dealt with duty paid under G
provisional assessment. The said rule started with a 11011-obstante clause.
Rule 98(1 )(a) to (c) indicated the circumstances in which the proper officer
would allow provisional assessment.
Rule 98(4) dealt with clearance of
goods provisionally assessed whereas rule 98(5) dealt with adjustment of
provisionally assessed duty against finally assessed duty. The said rule 98
H
276
SUPREME COURT REPORTS
[2004] 3 S.C.R.
A was a complete code by itself. On compliance with the conditions therein.
J..
the proper officer was duty bound to refund the dut~ without requiring the
assessee to make a separate refund application. The said rule, therefore,
provided for making of refund. On the other hand. section ~l B( I) dealt with
claiming of refund by the person who has paid duty on his own accord. In
this connection, section 4 of the said Act is relevant. In the case of Bombay
B Tyre (supra) it has been held that section 3 of the Act refers to levy of duty
whereas section 4 dealt with assessment. Assessment means determination of
the tax liability. Under the Act, duty was payable by the manufacturer on his
own account.
Hence, under section I I B( I), such a person had to claim
refund by making an application within six months from the relevant date
C except in cases where duty was paid under protest in terms of the proviso.
However, even in such cases, the person claiming refund had to pay the duty
under protest in terms of prescribed rules. A bare reading of section 11 B(l ),
therefore, shows that it refers to claim for refund as against making of refund
by the proper officer under rule 9B.
D
On 20.9.1991, the above section I IB underwent a drastic change vide
Central Excises and Customs Laws (Amendment) Act. 40of1991 (hereinafter
referred to as "the Amendment Act"). By the Amendment Act, the concept
of unjust enrichment as undeserved profit was introduced.