Person bearing Excise Duty, not leviable in law is entitled to claim refund subject to limitation prescribed in Section 11B: Madras HC [Read Judgment]

The Madras High court while dismissing the appeal held that the person who has borne the incidence of Excise Duty, which was not leviable in law is entitled to claim refund of the same, subject to his locus standi and the limitation prescribed in Section 11B of the Income Tax Act.

The Appellant Company, M/s.Chennai Petroleum Corporation Ltd. is an oil refinery and is manufacturer of petroleum products which are sold at the instance of or on the purchase orders placed by their marketing company M/s.Indian Oil Corporation Ltd., to yet another Government Company, M/s.PPN Power Generating Company Ltd., (M/s.PPN, for short) which manufactures power, out of the Raw Naptha, which is manufactured by the Appellant M/s.CPCL and sold to M/s.PPN on the basis of purchase orders placed by their marketing company M/s.Indian Oil Corporation Ltd.

The Appellant company raises invoice including Excise Duty component on its marketing company M/s.IOCL, which in turn raises its own invoice on the purchasing company M/s.PPN.

The Appellant company has a Running Account with the Marketing Company M/s.IOCL. Some reduction in price happened, when M/s.IOCL informed the Appellant Corporation that excess price has been charged by the Appellant Corporation from M/s.PPN and accordingly it has issued Credit Notes to M/s.PPN.

Accordingly, refund claims were made by the manufacturer M/s.CPCL with the Respondent Excise Department which has been rejected by the Excise Department on the basis of the impugned show cause notice issued to the Appellant Corporation, which further resulted in adverse orders against the Appellant Corporation.

The Assessee urged that since the incidence of Excise Duty has not been passed on by the consumer of raw naptha in question for the electricity or power manufactured out of use of such raw naptha.

The Appellant company is entitled to a refund and the only reason given in the impugned show cause notice for refusing the said refund to the Appellant was that on the basis of the Credit Notes issued by M/s.IOCL to M/s.PPN, refund could not be claimed by the Appellant M/s.CPCL.

The division judge bench of Justice Vineet Kothari and Justice M.S. Ramesh opined that there is no merit in the present appeals filed by the Assessee M/s.CPCL and they deserve to be dismissed on various grounds.

Firstly, the appellant Assessee, cannot be said to have borne any incidence of Excise Duty illegally levied and therefore, the right of the appellant Assessee to claim any refund cannot arise.

Secondly, locus standi of the person who is claiming the refund and not on what basis it is claimed. Whether on the basis of Credit Note issued by M/s.IOCL, a refund of Excise Duty could be made or not is not the question, and the claim of the Assessee is not fortified merely because the show cause notice refuted the claim of the Assessee on the basis of credit note alone.