M/S Banmore Foam Pvt vs The Commissioner Central Excise
2024 Latest Caselaw 16361 MP

Madhya Pradesh High Court

M/S Banmore Foam Pvt vs The Commissioner Central Excise on 31 May, 2024

Author: Vivek Rusia

Bench: Vivek Rusia

                              (1)             M.A. No.836/2005

IN THE HIGH COURT OF MADHYA PRADESH
             AT GWALIOR
                             BEFORE
          HON'BLE SHRI JUSTICE VIVEK RUSIA
                                &
     HON'BLE SHRI JUSTICE RAJENDRA KUMAR VANI


                     M.A. NO.836 OF 2005

BETWEEN:-

       M/S BANMORE FOAM PVT. LTD.
       105-106 INDL. AREA BANMORE,
       DISTRICT MORENA



                                               .....APPELLANT

(BY SHRI YOGESH SINGHAL - ADVOCATE)

AND

       THE COMMISSIONER             CENTRAL
       EXCISE, INDORE


                                              .....RESPONDENTS

(BY SHRI PRAVEEN SURANGE - ADVOCATE)
             Reserved on:       29/05/2024
             Delivered on:      31/05/2024

       This appeal coming on for hearing this day, Hon'ble Shri
Justice Vivek Rusia passed the following:
                       JUDGMENT

1. Appellant has filed this appeal under section 35(G) of the (2) M.A. No.836/2005

Central Excise Act, 1944 challenging the order dated 8/2/2005

passed by the Customs, Excise And Service Tax Appellate

Tribunal, New Delhi in Appeal No. E/2947/04- NB(C),

whereby the appeal was dismissed and the order dated

15/3/2004 passed by the Commissioner (Appeals), Customs &

Central Excise, Gwalior has been affirmed.

2. The facts of the case, in short, are as under:-

(i) The appellant having Central Excise Registration No.

4/CH/39-94/BAR/92 has been engaged in the manufacturing of

PU Foam block, PU Foam Seats and other articles falling under

Chapter 39, Ist Schedule of Central Excise Tariff Act, 1985.

According to the appellant, there is no requirement to pay

excise duty on the sale of packing material i.e. M.S. Drums as

the excise duty is not applicable since the drums were not

purchased as input. Several show-cause notices were issued by

the Central Excise Department demanding the excise duty. The

appellant started depositing the excise duty from 20/5/2000 to

the department to avoid any consequential action under protest

and also challenged the show-cause notices which are

subjudice. From 23/3/2002, the appellant stopped paying the

excise duty but paid Rs.75331/- from 23/3/2002 to 13/9/2002

under protest.

(ii) According to the appellant, a similar issue came up for

consideration before the Apex Court in the case of West Coast

Industrial Gasses Ltd. v. CCE - 2003 (155) ELT 11 (SC), in

which the department appeal was dismissed on the issue of duty

payable on containers/waste packages. The CBEC also clarified

this issue vide circular dated 6/6/2003.

(iii) On 3/4/2002 the appellant submitted an application

seeking a refund of the excise duty with support of the account

statements of all the concerned parties and the certificate issued

by a buyer viz M/s Archana Industries, to the effect that they

never paid excise duty to the appellant.The appellant submitted

a claim of Rs.4,45,825/- on 21/7/2003 about the years 2000-

2001 (Rs.1,16,533/-), 2001-2002 (Rs.87,131/-), 2002-2003

(Rs.2,02,861/-) and 2003-2004 (Rs.39,300/-) in respect of the

duty paid on such containers/ drums at the time of removal

from the factory gate under protest. The learned Dy. The

Commissioner issued a show-cause notice dated 18/9/2003

which was duly replied to by the appellant and thereafter

personal hearing was also provided on 16/10/2003.

(iv) Vide order dated 22/10/2003 the learned Dy. Commissioner

adjudicated the claim for refund in favour of the appellant but

instead of transferring the amount of excise duty to the account

of the appellant directed it credited to the account of the

Consumer Welfare Fund.

(v) The appellant preferred an appeal before the Commissioner

(Appeals), Customs & Central Excise, Gwalior. Vide order

dated 15/3/2004, the learned appellate Authority dismissed the

appeal and maintained the order of the adjudicating Authority.

(vi) Thereafter the appellant approached the Customs Excise

and Service Tax Appellate Tribunal, New Delhi by way of

Second Appeal. Vide Final Order NO.175/05-C dated 8/2/2005,

the learned Tribunal has dismissed the appeal. Hence, the

present appeal before this Court.

3. The appeal came up for hearing on 16/2/2009 and after

hearing learned counsel for the appellant, this Court observed

that the appellant collected the amount of excise duty from

buyer M/s Archana Industries and the adjudicating Authority

has taken a view that since initially the appellant has collected

the full amount including excise duty it leads to a belief that

later on also the appellant has received the amount of duty from

the customers. Learned counsel relied on the certificates given

by M/s Archana Industries and the appellant's Chartered

Accountant to show that the appellant had not recovered some

amounts on account of excise duty on the sale of empty drums

to M/s Archana Industries. The appellant was called upon to

produce all those documents. The appellant filed the documents

along with the list of documents.

4. On 12/5/2009, the appeal was admitted on the following

sole substantial question of law:

Whether the impugned order passed by the CEGAT is vitiated on account of the fact that M/s Archana Industries has issued a certificate in favour of the present appellant to the effect that it has returned the excise duty recovered from M/s Archana Industries to it and thus has not recovered the excise duty from the said firm?

5. Learned counsel appearing for the appellant submits that

the certificate issued by M/s Archana Industries and the

certificate issued by the Chartered Accountant produced before

the Learned Tribunal, establishes that no excise duty was paid

to the appellant. The Chartered Accountant has also certified

that the appellant has not recovered Rs.4,45.825/- on account of

excise duty on the sale of empty drums. The aforesaid

certificate was issued based on the books of accounts of the

Company. All Books and Accounts were produced before the

Tribunal also but the learned Tribunal ignored and wrongly

affirmed the order of the Adjudicating Authority and

Commissioner of Appeal for transferring the amount of excise

duty in the Consumer Welfare Fund. It is further submitted that

even the amount shown in the invoices under the head of on

account of excise duty on sale of empty drums were adjusted

later on in the sale price. M/s Archana Industries did not pass

on the aforesaid amount of excise duty to any other further

customer or dealer. Therefore, the claim of refund is

maintainable by the present appellant which has rightly been

ordered but instead of refunding it to the appellant, the same

has been directed to be credited to the consumer welfare fund.

Learned counsel has placed reliance on the judgment passed by

the Apex Court in the case of Commissioner of Central

Excise, Madras Vs. Addison and Company Ltd. ((2016)10

SCC 56) in which the Apex Court has held that the certificate

issued by the Chartered Accountant is liable to be believed.

6. Per contrs learned counsel appearing for the respondents

urges that the findings based on the facts of the case recorded

by the Adjudicating Authority, Commissioner (Appeals) and

CEGATE, are not liable to be interfered in this appeal. The

question of law framed by this Court is a question of fact and

not a question of law. The appellant has utterly failed to prove

from the document, as well as, the evidence that no excise duty

was collected from M/s Archana Industries along with the sale

price of the drum. Therefore, the Authorities have rightly

applied the presumption under section 12B of the Central

Excise Act, 1944 which says that every buyer who has paid the

duty of excise on any goods under this Act shall, unless the

contrary is proved by him, be deemed to have passed on the full

incidence of such duty to the buyer of such goods. The

appellant has produced various invoices issued to M/s Archana

Industries in which the excise duty charged by the petitioner is

clearly written. Therefore, the adjudicating Authority has

rightly formed an opinion that the initial the appellant was

receiving the payment through cheque entire amount of

invoices including excise duty. However, subsequently, the

appellant changed the practice and started receiving the

payment in cash, which led to the belief that later on also

received the amount of duty from the customers. In this case, at

the most M/s Archana Industries could have claimed a refund

from the department if able to prove the same. Learned counsel

has also placed reliance on the judgment of the Apex Court in

the case of Commissioner of Central Excise Vs. M/s Allied

Photographics India Ltd. ((2004)4 SCC 34) and upon the

judgment in the case of Gail (India) Ltd. Vs. Commissioner

Central Excise and Customs passed by a co-ordinate Bench of

this Court in Central Excise Appeal No. 1 of 2011 and prayed

for dismissal of the appeal.

Appreciation and conclusion

7. As per the finding given by the Dy. Commissioner i.e.

Assessing Authority in its order dated 22/10/2003, no excise

duty is chargeable on the packing material of input as per

CEBC Circular No. 470/36/99-CX dated 19/7/1999 and the

judgment passed by the Apex Court in West Coast Industrial

Gases Ltd. v. CCE (Supra). The only issue for consideration

before the Adjudicating Authority was whether the appellant

had successfully rebutted the presumption that the incidence of

duty was not passed on to the buyer under section 12B of the

Central Excise Act. The adjudicating Authority examined

various invoices which are also filed in this memo of appeal,

reflecting that the appellant charged excise duty from M/s

Archana Industries. The appellant is not denying this fact but

submitted that those amounts paid as duty had been adjusted

later on in sale consideration but in the considered opinion of

all the authorities and learned tribunal burden has not bee duly

discharged by the appellant. Initially, the sale price and excise

duty were paid by way of cheques, thereafter the appellant

started receiving by way of cash. Learned Dy. The

commissioner held that the duty of Rs.4,45,825/- was debited

by the party under protest as the same was not payable and the

reversal of credit is also not warranted on waste package and

containers used for packing inputs and allowed the refund claim

of Rs.4,45,825/-. Since the appellant passed on the incidence of

duty to the buyers, therefore, the amount is not liable to be

refunded to the appellant but liable to be credited to the

consumer welfare fund under the principal of " Unjust

enrichment". All three Authorities concurrently held that the

invoices which are on the record duly cite the element of excise

duty, which was recovered by the appellant from the customers.

The Adjudicating Authority, while adjudicating the case of

refund examined the accounts of the appellant and gave a

finding of fact that the duty had been recovered from the

customer by the appellant. Therefore, the appellant has not

come out from the rigour of S.12B of the Act.

8. The appellant has only placed reliance on the certificate

issued by the CA which is contrary to the invoices, hence the

same is not liable to be relied on. Before the Tribunal also, the

appellant has only filed the ledger account in which the excise

duty amount is mentioned in the second last column recovered

from various buyers. Thereafter, the ledger accounts of relevant

periods were filed, which also nowhere established that this

excise duty was charged but later on adjusted. Hence

concurrent finding of facts cannot be interfered in this appeal.

The question of law which is framed is also a question of fact,

not a pure question of law on which the findings can be

reversed.

9. In the case of Allied Photographics (Supra), the refund

claim by the buyer was not held tenable because the excise

duty was charged as reflected in the invoices. Even the

contention of the buyer has been disbelieved that he has not

passed on the burden to its dealer. The buyer buys the goods

from the manufacturer by paying the purchase price which

includes the cost of the purchase. The assessee's invoice

bearing a composite price and declined to interfere with the

finding of fact under Article 136 of the Constitution of India. In

the case of M/s Adison & Co. Ltd. (Supra), the Apex Court

has held that there is a proviso to S.11B(2) which postulate that

the amount of excise duty which is refundable may be paid to

the applicant instead of being credited to the consumer welfare

fund if such amount is relatable to the duty excise paid by the

manufacturer and he has not passed on the incidence of such

duty to any other person. Even the buyer can apply for a refund.

The sine qua non for the claim of refund, as contemplated

under section 11B of the Act, is that the claimant has to

establish that the amount of excise in relation to which such

refund is claimed was paid by him and that incidence of such

duty has not been passed on by him to any other person.

S.11B(2) provides that in case it is found that the part of the

duty of excise paid is refundable, the amount shall be credited

to the consumer welfare fund. Para 21 to 24 are reproduced

below:

21. The sine qua non for a claim for refund as contemplated in Section 11- B of the Act is that the claimant has to establish that the amount of duty of excise in relation to which such refund is claimed was paid by him and that the incidence of such duty has not been passed on by him to any other person.

Section 11-B (2) provides that, in case it is found that a part of the duty of excise paid is refundable, the amount shall be credited to the fund. Section 2 (ee) defines "fund" to mean the Consumer Welfare Fund established under Section 12-C. There is a proviso to Section 11-B (2) which postulates that the amount of excise duty which is refundable may be paid to the applicant instead of being credited to the fund, if such amount is relatable to the duty of excise paid by the manufacturer and he had not passed on the incidence of such duty to any other person. Clause (e) to proviso of Section 11-B (2) also enables the buyer to receive the refund if he had borne the duty of excise, provided he did not pass on the incidence of such duty to any other person. There is a third category of a class of applicants who may be specified by the Central Government by a notification in the official gazette who are also entitled for refund of the duty of excise. A plain reading of Clauses (d), (e) and (f) of the proviso to Section 11-B (2) shows that refund to be made to an applicant should be relatable only to the duty of

excise paid by the three categories of persons mentioned therein i.e. the manufacturer, the buyer and a class of applicants notified by the Central Government. Clause (e) refers to the buyer which is not restricted to the first buyer from the manufacturer. The buyer mentioned in the above Clause can be a buyer downstream as well.

22. While dealing with the absence of a provision for refund to the consumer in the rules this Court in Mafatlal Industries Vs. Union of India ((1997)5 SCC 536) held as follows (SCC pp. 625-26, para

98):-

"98. A major attack is mounted by the learned counsel for petitioners- appellants on Section 11-B and its allied provisions on the ground that real purpose behind them was not to benefit the consumers by refusing refund to manufacturers (on the ground of passing on the burden) but only to enable the Government to retain the illegally collected taxes. It is suggested that the creation of the Consumer Welfare Fund is a mere pretence and not an honest exercise. By reading the Rules framed under Section 12-D, it is pointed out, even a consumer, who has really borne the burden of tax and is in a position to establish that fact, is yet not entitled to apply for refund of the duty since the Rules do not provide for such a situation. The Rules contemplate only grants being made to Consumer Welfare Societies. Even in the matter of making grants, it is submitted, the Rules are so framed as to make it highly difficult for any consumer organisation to get the grant. There is no provision in the Act, Shri Nariman submitted, to locate the person really entitled to refund and to make over the money to him. "We expect a sensitive Government not to bluff but to hand back the amounts to those entitled thereto", intoned Shri Nariman. It is a colourable device -- declaimed Shri Sorabjee -- "a dirty trick" and "a shabby thing". The reply of Shri Parasaran to this criticism runs thus: It ill- becomes the

manufacturers/Assessees to espouse the cause of consumers, when all the while they had been making a killing at their expense. No consumers' organisation had come forward to voice any grievance against the said provisions. Clause (e) of the proviso to sub-section (2) of Section 11- B does provide for the buyer of the goods, to whom the burden of duty has been passed on, to apply for refund of duty to him, provided that he has not in his turn passed on the duty to others. It is, therefore, not correct to suggest that the Act does not provide for refund of duty to the person who has actually borne the burden. There is no vice in the relevant provisions of the Act. Rules cannot be relied upon to impugn the validity of an enactment, which must stand or fall on its own strength. The defect in the Rules, assuming that there is any, can always be corrected if the experience warrants it. The Court too may indicate the modifications needed in the Rules. The Government is always prepared to make the appropriate changes in the Rules since it views the process as a "trial and error" method -- says Shri Parasaran".

23. There was a further submission which was considered in the said judgment about the convenience/difficulty for the ultimate consumer to make applications for refund. In that connection it was held as follows: (Mafatlal Industries case ((1997)5 SCC 536), SCC pp. 626-27, para 99) "99. We agree with Shri Parasaran that so far as the provisions of the Act go, they are unexceptionable. Section 12-C which creates the Consumer Welfare Fund and Section 12-D which provides for making the Rules specifying the manner in which the money credited to the Fund shall be utilised cannot be faulted on any ground. Now, coming to the Rules, it is true that these Rules by themselves do not contemplate refund of any amount credited to the Fund to the consumers who may have borne the burden; the Rules only

provide for "grants" being made in favour of consumer organisations for being spent on welfare of consumers. But, this is perhaps for the reason that clause (e) of the proviso to sub-section (2) of Section 11-B does provide for the purchaser of goods applying for and obtaining the refund where he can satisfy that the burden of the duty has been borne by him alone. Such a person can apply within six months of his purchase as provided in clause (e) of Explanation B appended to Section 11-B. It is, therefore, not correct to contend that the impugned provisions do not provide for refunding the tax collected contrary to law to the person really entitled thereto. A practical difficulty is pointed out in this behalf by the learned counsel for appellants-petitioners: It is pointed out that the manufacturer would have paid the duty at the place of "removal" or "clearance" of the said goods but the sale may have taken place elsewhere; if the purchaser wants to apply for refund -- it is submitted -- he has to go to the place where the duty has been paid by the manufacturer and apply there. It is also pointed out that purchasers may be spread all over India and it is not convenient or practicable for all of them to go to the place of "removal" of goods and apply for refund. True it is that there is this practical inconvenience but it must also be remembered that such claims will be filed only by purchasers of high-priced goods where the duty component is large and not by all and sundry/small purchasers. This practical inconvenience or hardship, as it is called, cannot be a ground for holding that the provisions introduced by the 1991 (Amendment) Act are a "device" or a "ruse" to retain the taxes collected illegally and to invalidate them on that ground -- assuming that such an argument is permissible in the case of a taxing enactment made by Parliament. (See R.K. Garg [(1981) 4 SCC 675 :

1982 SCC (Tax) 30 : AIR 1981 SC 2138] and

other decisions cited in paras 87 and 88.)"

(emphasis supplied)

24. That a consumer can make an application for refund is clear from paras 98 and 99 of the judgment of this Court in Mafatlal Industries (supra). We are bound by the said findings of a Larger Bench of this Court. The word 'buyer' in Clause (e) to proviso to Section 11-B (2) of the Act cannot be restricted to the first buyer from the manufacturer. Another submission which remains to be considered is the requirement of verification to be done for the purpose of finding out who ultimately bore the burden of excise duty. It might be difficult to identify who had actually borne the burden but such verification would definitely assist the Revenue in finding out whether the manufacturer or buyer who makes an application for refund are being unjustly enriched. If it is not possible to identify the person/persons who have borne the duty, the amount of excise duty collected in excess will remain in the fund which will be utilized for the benefit of the consumers as provided in Section 12-D."

10. In view of the above, the invoices that came on the record

clearly indicate that the appellant collected the excise duty from

the buyer and paid it to the excise department and if it is

refunded to the appellant, that would be an unjust enrichment to

him. Hence, the same has rightly been directed to be credited to

the consumer welfare fund as contemplated under section 11B.

In the case of Gail India (Supra) also, this Court has

disbelieved the certificate issued by the Chartered Accountant

and maintained the order of the Adjudicating Authority,

Appellate Authority and CEGATE rejecting the claim of refund

of the amount. However, in the present case, the refund has

been allowed but instead of giving it to the appellant, the

Authority has directed to credit the said amount to the

consumer welfare fund. Therefore, the appeal hereby fails and

is dismissed. The question of law is answered against the

appellant.

                      (VIVEK RUSIA)                (RAJENDRA KUMAR VANI)
                         JUDGE                            JUDGE
(and)