MUHAMMAD FAHEEM WALI, J.-Collector Custom, Model Customs Collectorate, Customs House, Peshawar (hereinafter referred to as petitioner) has filed instant Tax Reference against the judgment and order dated 20.09.2016, passed by Customs Appellate Tribunal, Islamabad, whereby their appeal had been dismissed.
2. Precise facts of the case leading to filing of instant Tax Reference are that M/s ChiniotEnterprises (hereinafter referred to as respondents) are manufacturers of vegetable oil/ ghee and for said purpose, they import raw material i.e. 17% Federal Excise Duty (FED) during clearance of their consignment between 13.06.2013 to 19.07.2019 during which period, the prevailing rate of FED was 16%, thus they approached the petitioners for refund of 1% excess paid FED, however, their request was declined by the Collector Customs vide order dated 17.12.2014.The appeal filed by the respondents before the Collectorate of Customs (Appeals), Islamabad was allowed vide order dated 21.08.2015. The judgment and order of Collectorate of Customs (Appeals), Islamabad was assailed by the petitioners through appeal before Customs Appellate Tribunal, Islamabad. The Customs Appellate Tribunal, Islamabad dismissed the appeal of the petitioners vide judgment and order dated 20.09.2016, which has now been impugned by the petitioners before this Court through instant Tax Reference.
3. Arguments heard and record perused.
In essence, the petitioners claim that when the excess duty has been collected and its incidental burden is not borne by the manufacturer, rather the same got shifted to intermediary or end consumer, then the refund claim of the manufacturer would not be maintainable under Section 11 of the Federal Excise Act, 2005. The factual position that the rate prevailing during period of collection of FED was 16% whereas the same was charged at the rate of 17% from the respondents, stands admitted and the only controversy between the parties is as to whether the excess recovered FED would be refundable to respondent or not? The main contention of learned counsel for the petitioners before this Court was that since the duty charged was assessed on the basis of retail price of the vegetable oil/ghee under Section 12 (4) of the Federal Excise Act, 2005, therefore, the incidence of excess recovered FED has been passed on to the intermediary or end consumer and under Section 11 of the Federal Excise Act, 2005, the claim of respondents for the refund of excess recovered FED, was barred. It was further contended that respondents have failed to bring on record any proof that the incidence of excess recovered FED has not been passed on to the intermediary or end consumer, therefore, under proviso to Section 33 of the Customs Act, 1969, when the sanctioning authority was satisfied that incidence of excess recovered customs duty and other levies has not been passed on to the buyer or consumer, no refund could be made to respondents. Said arguments of learned counsel were rebutted by learned counsel representing respondents mainly on the ground that the FED was recovered at the stage of its import and respondents have sufficiently proved that the rates of product were not enhanced, therefore, the incidence of excess duty was not passed on to intermediary or end consumer and their claim for refund was rightly acceded to by the Custom Appellate fora.
5. Section 11 of the Federal Excise Act, 2007 deals with collection of excess duty, which being relevant in the instant case, is reproduced below for ready reference; "11.Collection of excess duty etc.- Every person who for any reason whatever has collected or collects any duty, which is not payable as duty or which is in excess of the duty actually payable and the incidence of which has been passed on to the consumer, shall pay the amount so collected to the Federal Government and all the provisions of this Act or rules made there under shall apply for the recovery of such amount and claim for refund of any such amount paid or recovered shall not be admissible on any ground whatever."
6. Careful perusal of Section 11 ibid reveals that the refund claim for excess payable/paid duty would not be admissible if the incidence of such excess paid duty has passed on to the consumer.
The petitioners herein have taken the stance that under Section 19A of the Customs Act, 1969, it would be presumed that the incidence has been shifted to consumer. Section 19A of the Customs Act, 1969 provides; "19A Presumption that incidence of duty has been passed on to the buyer.--Every person who has paid the customs duty and other levies 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 customs duty and other levies to the buyer as a part of the price of such goods."
Presumption under Section 19A ibid would only prevail, when the person paying duty, has failed to prove that the incidence of excess paid duty was not passed on to buyer. In the instant case, the situation is, however, different. The Collectorate of Customs (Appeals), Islamabad, during hearing of appeal, required the respondents to produce their Sales Tax Register for the month of June and July, 2013 wherein it was found that the sale price of the final product was not enhanced by them.
Accordingly, it was rightly held by the Collectorate of Customs (Appeals) that the respondents had not passed on the excess paid duty to consumer.
7. Petitioners also seek benefit under proviso to sub-section 1 of Section 33 of the Customs Act, 1969 on the ground that the sanctioning authority was satisfied in the instant case that the excess paid duty was passed on to the buyer or consumer, therefore, their claim for refund was not allowed. In order to meet such contention of petitioner, it would be beneficial to reproduce Section 33 of the Customs Act, 1969 as under: "33. Refund to be claimed within one year.---(1) No refund of any customs-duties or charges claimed to have been paid or over-paid through inadvertence, error or misconstruction shall be allowed, unless such claim is made within one year of the date of payment: Provided that no refund shall be allowed under this section if the sanctioning authority is satisfied that incidence of customs duty and other levies has been passed on to the buyer or consumer.
(2) In the case of provisional payments made under section 81, the said period of one year shall be reckoned from the date of the adjustment of duty after its final assessment.
(3) In the case where the refund has become due in consequence of any decision or judgment by any appropriate officer of Customs of the Board or the Appellate Tribunal or the Court, the said period of one year shall be reckoned from the date of such decision or judgment, as the case may be."
In the instant case, there is no proof that the excess paid duty was passed on to the buyer, rather it was proved that the duty was recovered at raw material before manufacturing of final product and it was paid by the manufacturer himself and the rates were not enhanced as a consequence of payment of such excess duty and secondly the proviso to Section 33 of the Customs Act, 1969 would become redundant when the refunds becomes due in consequence of any decision by the appropriate officer of Customs or Board, or the Appellate Tribunal or the Court. Reliance in this respect may be made to the judgment of honourable Supreme Court of Pakistan in the case of "Collector of Customs Appraisement, Collectorate, Customs House Karachi Vs. Messrs, Gul Rehman, Proprietor Messrs G.Kin Enterprises, Ghazali Street, Nasir Road, Sialkot"(2017 SCMR 339) wherein it was held that; "Therefore the proviso to section 33 has to be confined to the particular sub-section to which it is attached, i.e. subsection (1), and if the case does not fall within the purview of such subsection in that the customs duty was not paid as a result of inadvertence, error or misconstruction then obviously the proviso would not be relevant. Before a proviso can have any application, the section itself must apply. A holistic reading of section 33 of the Act, particularly the provisions of subsection (3), clarifies that where a refund becomes due as a result of any decision or judgment passed by a customs officer, Appellate Tribunal etc., the proviso to subsection (1) would not be applicable because no such proviso is attached to subsection (3), meaning thereby that the refund has to be made notwithstanding the fact that the incidence of customs duty had been passed onto the customer and therefore section 19A of the Act would not be attracted. Resultantly we do not find any merit in this appeal which is accordingly dismissed."
8. The refunds in the instant case became due upon order passed by the Collectorate of Customs (Appeals), Islamabad, as such benefit could not be claimed by the petitioners under Proviso to Section 33 of the Customs Act, 1969.
9. Nutshell of the above discussion is that the excess duty recovered by the petitioners from respondents was refundable because its burden was not passed on to intermediary or end consumer, therefore, order passed by Collectorate of Customs (Appeals), Islamabad as well as Customs Appellate Tribunal, Islamabad are within the four corners of law, warranting no interference by this Court.
10. Accordingly, this reference fails which is hereby dismissed.