2001 (8) TMI 672 - AT - Central Excise

Summary

Issues Involved:
1. Applicability of the doctrine of unjust enrichment.
2. Entitlement to refund of excise duty paid on captively consumed goods.
3. Interpretation of relevant case laws and judgments.

Detailed Analysis:

1. Applicability of the Doctrine of Unjust Enrichment:
The primary issue in this case is whether the doctrine of unjust enrichment applies to the appellant's claim for a refund of excise duty. The lower authority credited the refund amount to the Consumer Welfare Fund based on the doctrine of unjust enrichment, as per Section 11B(2) and Section 12C of the Central Excise Act, 1944. The appellant contended that the duty paid on Aluminium Oxide and Oxygen gas, used captively in the manufacture of rough synthetic gem stones, was not collected from buyers but borne by them. The Commissioner (Appeals) upheld the lower authority's decision, stating that the appellants failed to produce evidence that they had not passed on the incidence of excise duty to another person. The Commissioner relied on the judgment of the Madras High Court in the case of M/s. Indo-Swiss Synthetic Gem Manufacturing Co. Ltd., which held that the duty paid becomes part of the cost of the final product and is indirectly passed on to the customer.

2. Entitlement to Refund of Excise Duty Paid on Captively Consumed Goods:
The appellant argued that since the goods (Aluminium Oxide and Oxygen gas) were not sold but used captively, the doctrine of unjust enrichment should not apply. They relied on the Supreme Court judgment in HMM Ltd. v. Administrator, Bangalore City Corporation, which emphasized that the doctrine of unjust enrichment does not apply when raw materials on which duty is paid are captively consumed. However, the Commissioner (Appeals) and the Tribunal noted that the Madras High Court's judgment in the Indo-Swiss case and the Supreme Court's judgment in UOI v. Solar Pesticides Pvt. Ltd. clarified that the doctrine of unjust enrichment applies even in cases of captive consumption. The Supreme Court in the Solar Pesticides case held that unjust enrichment includes passing on the duty indirectly through the cost of the final product.

3. Interpretation of Relevant Case Laws and Judgments:
The appellant cited several judgments, including those of the Bombay High Court and the Supreme Court, to support their claim. However, the Tribunal noted that the Madras High Court had not agreed with the Bombay High Court's view in Solar Pesticides Pvt. Ltd. The Supreme Court's judgment in UOI v. Solar Pesticides Pvt. Ltd. further clarified that the doctrine of unjust enrichment applies to cases of captive consumption. The Tribunal observed that the appellants had failed to prove that they had not passed on the incidence of excise duty to their customers, directly or indirectly. The Tribunal also referred to the Mafatlal case, which emphasized that the principle of unjust enrichment applies regardless of whether the goods are used by the importer or sold as such.

Conclusion:
The Tribunal confirmed the order of the Commissioner (Appeals), upholding the decision of the lower authority to credit the refund amount to the Consumer Welfare Fund. The Tribunal rejected the appeal, finding no merit in the appellant's arguments. The decision was based on the interpretation of the doctrine of unjust enrichment and relevant case laws, which established that the duty paid on captively consumed goods becomes part of the cost of the final product and is indirectly passed on to the customer.