TIOL-DDT 2577
15 04 2015
Wednesday

THE doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched - The Supreme Court in Mafatlal Industries Ltd and Others vs. Union of India and Others - 2002-TIOL-54-SC-CX-CB

This, in essence, is the concept of unjust enrichment which has been implemented through Court orders earlier and by Law since 1991. Section 11B of the Central Excise Act stipulates that refund can be granted only if the incidence of duty is not passed on to any other person.

A Nine Member Constitution Bench of the Supreme Court upheld this law in the celebrated and much misunderstood Mafatlal case. The Mafatlal judgement consisted of 305 paras and adjudicating authorities have been quoting out of context extracts from the huge judgement. This judgement is a must read classic for any student of tax laws.

Is the Concept of unjust enrichment applicable to captive consumption? When you sell your goods, you can pass on the incidence of duty, but if you don't sell your goods and captively consume them, how do you prove that you have not passed on the incidence of duty? In Mafatlal in para 98, it was specifically mentioned, "The situation in the case of captive consumption has not been dealt with by us in this opinion. We leave that question open." Further in para 148, it was mentioned, "It is made clear that whatever is stated in this judgment will not apply in the cases of goods which are captively consumed."

The Mafatlal judgement was delivered on 19.12.1996. Though it almost brought an end to the refund regime in Indirect Taxes, the question of captive consumption remained unanswered for quite some time - until it reached the Supreme Court.

In Union of India vs. Solar Pesticides Pvt. Ltd. reported in 2002-TIOL-57-SC-CX- LB, the issue before the Supreme Court was whether the doctrine of unjust enrichment is applicable in respect of raw material imported and consumed in the manufacture of a final product. The Supreme Court remembered the observation in Mafatlal that this issue was left open and proceeded to decide the issue. The Court allowed the Revenue Appeal and held, the principle of unjust enrichment incorporated in Section 27 of the (Customs) Act would be applicable in respect of imported raw material and captively consumed in the manufacture of a final product.

Now basically the Solar pesticides as well as Mafatlal dealt with raw materials and finished goods; what about capital goods used in manufacture of excisable goods. If I have paid excess duty on capital goods bought by me for which I have paid excess duty.

Is the concept of unjust enrichment applicable in the case of refund of duty paid on 'capital goods' used captively?. This question was obviously not answered either in Mafatlal or Solar Pesticides . An appeal filed by the Revenue in 2003 was decided by the Supreme Court recently.

In this case, at the Tribunal stage, the revenue relied on the Solar Pesticides case, but Tribunal distinguished Solar Pesticides on the ground that the Supreme Court in the said case was not concerned with the issue of unjust enrichment in connection with capital goods used captively. Remember in Solar Pesticides the issue was whether the doctrine of unjust enrichment is applicable in respect of raw material imported and consumed in the manufacture of a final product.

In the present case the Supreme Court observed, "This case (Solar Pesticides), therefore, makes it clear that the principle of unjust enrichment is applicable even when the goods are used for captive consumption. No doubt, in the said case the goods with which the Court was concerned was raw material, imported and consumed in the manufacture of the final product. The question is as to whether this principle would be extended to capital goods also, as it was in respect of raw material. This was left open in Mafatlal Industries case. As it falls for determination in the present case, we are addressing this issue".

The Supreme Court allowed the Revenue appeal holding that the doctrine of unjust enrichment is applicable in the case of refund of duty paid on 'capital goods' used captively.

We bring you this judgement today. Please see Breaking News

IT PAN - Aadhar card added for proof of Date of birth

THE CBDT has amended the Income Tax Rules making several changes. One important change:

The Following are the proof of Date of Birth for applying for a PAN card.

(a) birth certificate; or

(b) pension payment order; or

(c) marriage certificate issued by the Registrar of Marriages; or

(d) matriculation certificate or mark sheet of recognised board; or

(e) passport; or

(f) driving licence; or

(g) domicile certificate issued by the Government; or

(h) aadhar card issued by the Unique Identification Authority of India; or

(i) elector's photo identity card; or

(j) photo identity card issued by the Central Government or State Government or Central Public Sector Undertaking or State Public Sector Undertaking; or

(k) Central Government Health Service Scheme photo card or Ex-servicemen Contributory Health Scheme photo card ; or

(l) affidavit sworn before a magistrate stating the date of birth.

The items marked in red are the new documents prescribed.

CBDT Notification No. 38/2015, Dated: April 10, 2015

NACEN Hindupur Bhoomi Puja

The CM Smiles :

DG, NACEN, Dr. Sreekumar Menon with the FM. AP CM Chandrababu Naidu seen with one of his rare smiles, though other dignitaries don't seem to be amused.

We bring you more pictures of the function. Please click here.

Jurisprudentiol- More Recent SC Judgements

Customs - Valuation - Customs Valuation (Determination of Price of Imported Goods) Rules of 1988 - consideration for the technical services cannot be added to the value of the equipment imported to set up the plant in India. The Show Cause Notice in this case was issued in 1993; the issue was the addition in the value for assessment to Customs Duty charges paid by Essar Steel Ltd for supply of technical services required for setting up and commissioning a plant for the manufacture of Hot Rolled Steel Coils in India. Customs duty is chargeable on goods by reference to their value at a price at which such goods or like goods are ordinarily sold or offered for sale at the time and place of importation in the course of international trade. This would mean that any amount that is referable to the imported goods post-importation has necessarily to be excluded. It is with this basic principle in mind that the rules were interpreted by the Supreme Court. The Apex Court held that only those costs and services that are actually paid or payable for imported goods pre-import are to be added for the purpose of determining the value of the imported goods.

Please see Commissioner of Customs vs ESSAR Steels Ltd - 2015-TIOL-63-SC-CUS

Central Excise - Refund - Buyer can claim refund - Section 11-B does provide for the purchaser making the claim for refund provided he is able to establish that he has not passed on the burden to another person. It, therefore, cannot be said that Section 11-B is a device to retain the illegally collected taxes by the State. This is equally true of Section 27 of the Customs Act, 1962

The assessee is claiming refund for the period from 25.09.1996 to 16.10.1996. In terms of Section 11B, the application for refund was to be made within six months. Limitation of six months would not apply where any duty has been paid under protest. Even filing of the appeal should be treated as protest. In this case even if appeal is treated as a form of protest that was much beyond six months period from the date of purchase. Supreme Court held that the application for refund was time barred.

Please see Oswal Chemicals & Fertilizers Ltd Vs Commissioner of Central Excise, Bolpur - 2015-TIOL-65-SC-CX

Central Excise - manufacture - classification - assessee is engaged in the packing combination of mixture of raw rice, dehydrated vegetables and spices in the name of 'Rice and Spice'. Rice Spice is a combination of Raw Rice, Dehydrated vegetables and certain spices and condiments mixed in a pre-determined proportion and that blended together in a mixer for uniformity and the blended mixer is heated, if required, to sterilize the product. The mixed product is then packed in pouches with Nitrogen flushing for a longer shelf life.

The Supreme Court held that mere addition in the value, after the original product has undergone certain process, would not bring it within the definition of 'manufacture' unless its original identity also under goes transformation and it becomes a distinctive and new product.

Please see Satnam Overseas Ltd Vs Commissioner of Central Excise, New Delhi- 2015-TIOL-66-SC-CX

Central Excise - manufacture - intermediary product - Tribunal remanded the matter on certain aspects - all issues remanded: -In this case, the first Show Cause Notice was issued in the year 1992 - 17 SCNs followed. The tribunal remanded the case to the Commissioner on certain issues. Even this remand is under challenge in the Supreme Court. Now, after 12 years, the Supreme Court has remanded all the issues raised to the Commissioner.

Please see Shalimar Wire Industries Ltd Vs Commissioner of Central Excise, Kolkata - 2015-TIOL-67-SC-CX

Central Excise - SSI Exemption - computation of Previous year's clearance - value of clearances of others' brands not eligible for SSI exemption, not to be included: - The appellant was engaged in the manufacture of certain articles from vulcanized rubber as bushes for use in the motor vehicles. The appellant is a Small Scale Industrial unit. The appellant has its own brand name "VIR" and has been manufacturing these products under the said brand name and supplying the same to various customers. In addition, the appellant was also having job orders from some automobile companies like Hindustan Motors, Kinetic Honda, etc. The goods which were supplied to these automobile companies used to be cleared by the appellant on payment of excise duty. However, in respect of manufacture of its own goods under the brand name "VIR", the appellant claimed SSI benefit in terms of Notification No. 1/93 which provided for exemption from payment of excise duty on fulfillment of certain conditions. While interpreting this notification, the Department included the value of goods supplied to the automobile companies under the brand name 'HM" "PAL", "KH", etc. and on that basis, came to the conclusion that the total value of goods cleared by the assessee in the previous financial year was much more than Rs.3 crores and so denied the exemption. The Supreme Court held, "Once we come to the conclusion that in respect of those goods where brand name of other party is used on manufactured goods and that other party is not a SSI unit, exemption is not available, it would lead to inevitable result that the value of such goods cannot be added as well, while considering the value of the goods cleared by the assessee in the previous year."

Please see Vir Rubber Products P Ltd Vs Commissioner of Central Excise, Mumbai-III- 2015-TIOL-68-SC-CX

Until Tomorrow with more DDT

Have a nice day.

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