Order Directing to credit Excise Refund to Consumer Welfare Fund is not just as Incidence of Duty was Borne by Assessee: CESTAT [Read Order]

The Chennai bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the order directing to credit the Excise refund to the consumer welfare fund is not just an incidence of duty borne by the assessee.

M/s. Axon Drugs (P) Ltd, the appellant is engaged in the manufacture of P and P medicines falling under chapter 30 of the schedule to the Central Excise Tariff Act, 1985.  They filed a rebate claim for an amount of Rs.5,55,950/- about the export of medicaments on payment of duty through the CENVAT account. 

On scrutiny of the claim, it was found that Rs.3,01,002/- pertains to duty paid on exported goods that were manufactured using the inputs procured without payment of duty in terms of notification no.43/2001 dated 26/6/2001. Show Cause Notice was issued proposing to reject the claim to the extent of Rs.3,01,002/-.

After due process of law, the original authority sanctioned a rebate of Rs,2,54,948/- and allowed a re-credit of Rs.45/- in their CENVAT account.  The amount of Rs.3,01,002/- though sanctioned as a refund under Section 11 B of Central Excise Act, 1944 was ordered to be credited to the Consumer Welfare fund as under sub Section (2) of Section 11 B of the Central Excise Act, 1944. 

Counsel  Shri M. Karthikeyan appeared and argued for the appellant.  It was submitted that during the period from July 2009 to October 2009, the appellant made exports on payment of duty under a claim of rebate and preferred a rebate claim for Rs.5,55,950/- in respect of export made vide 5 file nos. ARE-1’s. The appellant had also mentioned that some of the export goods had been manufactured using inputs procured duty-free in terms of notification no.43/2001/CE (NT) and accordingly requested to reduce the cash rebate claim to Rs.2,54,948/- and allow the balance amount of Rs.3,01,002/- as recredit to their CENVAT account. 

The Show Cause Notice was issued proposing to restrict the rebate claim to the extent of duty payable on the FOB value and reject the rebate claim of Rs.3,01,002/- on the ground that the export goods were manufactured using imported duty-free inputs. 

It was argued that there was no whisper of the allegation of unjust enrichment in the Show Cause Notice and had submitted copies of the excise invoice, export invoice, shipping bill etc. before the adjudicating authority along with the rebate claim and also before the first appellant authority.  The bank realization certificate was also produced as proof of the realization of the export proceeds.

From the documents furnished by the appellant, it was evident that the export invoice was raised on the foreign buyer in foreign exchange on the CIF value.  The excise duty is paid by the appellant only on the FOB value in INR after excluding the freight and insurance.  In the shipping bill, the export invoice in foreign currency has been mentioned and it also shows the invoice value both in INR as well as foreign exchange.  The CIF value billed to the foreign buyer vide their export invoice does not include the excise duty paid for such exports. 

The adjudicating authority though sanctioned the refund claim has ordered to credit the amount to the Consumer Welfare Fund observing that the amount is hit by the principle of unjust enrichment.  It was thus, held by the authorities below that the incidence of duty has been passed on to the foreign buyer. 

A two-member bench comprising Ms Sulekha Beevi C S, Member (Judicial) and Mr Vasa Seshagiri Rao, Member (Technical)  observed that the incidence of duty has been borne by the appellant, thereby the order passed by the authorities below directing to credit the sanctioned refund to Consumer Welfare Fund is not just and proper.

The Tribunal modified the impugned order to the extent of sanctioning the refund of Rs.3,01,002/- and held that the appellant is eligible to receive a refund of this amount. The appeal was allowed.

To Read the full text of the Order CLICK HERE

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