Legal principle

Refund of duty can be allowed only where the incidence of duty has not been passed on to any other person, including the ultimate consumer — the claimant must show it actually bore the burden of the duty.

Court decision

The Supreme Court allowed the Revenue's lead appeal (Civil Appeal No. 7906 of 2002), setting aside the Madras High Court, holding that a claim for refund of excess duty can be allowed only where the burden of duty has not been passed on to any other person, which includes the ultimate consumer. The appeal in Civil Appeal No. 14689 of 2015 and the appeals/SLPs arising from the Andhra Pradesh High Court, and SLP (C) No. 25055 of 2009 (Rajasthan job-worker matter), were allowed in the same terms. However, Civil Appeal No. 8488 of 2009 was dismissed: the 100% EOU assessee had returned the excess duty to its buyers (evidenced by credit notes and a Chartered Accountant's certificate) and had itself borne the burden, so it was entitled to the refund.

Facts

Addison & Co. Ltd., a manufacturer of cutting tools, filed a refund claim (later revised to Rs. 40,37,938) of excise duty relating to deductions such as turnover discount and additional discount. The Assistant Collector rejected refund of Rs. 26,37,462 (turnover discount) and Rs. 17,17,808 (additional discount); the Collector (Appeals) allowed it, and after a show-cause notice under the amended Section 11-B, the Assistant Collector's Order-in-Original dated 27.10.1992 granting refund was upheld in appeal. CEGAT reversed, holding refund was available only if the duty burden had not been passed on, and that credit notes issued later could not ground a claim. On reference, the Madras High Court held Section 11-B does not require inquiry up to the ultimate consumer and answered for the assessee. Connected appeals from the Andhra Pradesh, Bombay and Rajasthan High Courts raised the same refund/unjust-enrichment question.

Key provisions

• Section 28A(2), Customs Act, 1962 —  Power not to recover duties not levied or short-levied as a result of general practice
• Section 27(2), Customs Act, 1962 — Claim of refund duty
• Section 28B(2), Customs Act, 1962 — Duties collected from the buyer to be deposited with the Central Government