2005 (5) TMI 541 - AT - Central Excise

Summary

Issues Involved:
1. Applicability of the doctrine of unjust enrichment.
2. Retrospective application of the amendment to Section 11B of the Central Excise Act.
3. Requirement of issuing a notice under Section 11A before reviewing an order under Section 35E.
4. Opportunity to prove non-application of unjust enrichment.

Detailed Analysis:

1. Applicability of the Doctrine of Unjust Enrichment:
The primary issue revolves around whether the principle of unjust enrichment applies to the appellants' refund claim. The Commissioner (Appeals) disallowed the refund on the grounds that the appellants had passed on the incidence of duty to the ultimate buyers, invoking the principle of unjust enrichment. The Tribunal upheld this application, referencing the Supreme Court's judgment in Mafatlal Industries v. UOI, which clarified that the principle of unjust enrichment applies to all refund claims unless the claimant proves that the burden of duty was not passed on to others.

2. Retrospective Application of the Amendment to Section 11B:
The appellants argued that the doctrine of unjust enrichment, incorporated into Section 11B by an amendment effective from 20-9-1991, should not apply retrospectively to their case since the refund was allowed and paid before this date. However, the Tribunal noted that the refund order by the Assistant Commissioner did not attain finality as it was appealed within the limitation period. Thus, the amended Section 11B was applicable. The Tribunal referenced the Supreme Court's observation that amended provisions apply to all pending proceedings where the refund has not been made finally and unconditionally.

3. Requirement of Issuing a Notice under Section 11A:
The appellants contended that before reviewing the Assistant Commissioner's order under Section 35E, a notice under Section 11A for recovery of the refund amount should have been issued. The Tribunal dismissed this argument, stating that Sections 35E and 11A operate in different fields and serve different purposes. The Supreme Court's judgments in Asian Paints (India) Ltd. v. CCE and CCE v. Woodcraft Product Ltd. supported this view, emphasizing that no show cause notice under Section 11A was required before filing an appeal under Section 35E.

4. Opportunity to Prove Non-Application of Unjust Enrichment:
The appellants requested an opportunity to prove that they had not passed on the duty incidence to the buyers or that their case was covered by the proviso (c) to Section 11B(2), which excludes the bar of unjust enrichment for duty paid on inputs. The Tribunal agreed, noting that the appellants were not given an effective opportunity to present this evidence before the Commissioner (Appeals). Consequently, the Tribunal remanded the case back to the adjudicating authority to allow the appellants to substantiate their claim.

Conclusion:
The Tribunal upheld the application of the principle of unjust enrichment but remanded the case to the adjudicating authority to provide the appellants an opportunity to prove that their refund claim was either not covered by this principle or was saved by the proviso to Section 11B(2). The appeal was disposed of accordingly.