2006 (7) TMI 453 - AT - Central Excise

Summary

Issues: Refund claims for Polyester yarns, Nylon chips, and Polyester chips denied based on unjust enrichment; Interpretation of the principle of unjust enrichment in case of captive consumption.

Analysis:
1. Refund Claims Denial: The appellants, manufacturers of Polyester yarns, Nylon chips, and Polyester chips, filed refund claims amounting to Rs. 10,10,527/-, 1,06,403/-, and 25,635/-. The Commissioner (Appeals) set aside these refunds on the grounds that the appellants failed to demonstrate non-passing of duty incidence for the larger refund amounts and that the smaller refund amount was liable to be adjusted against interest. The appellants contended that the lower authorities had already examined the aspect of unjust enrichment and found no passing on of duty incidence. However, the Commissioner (Appeals) overturned the Assistant Commissioner's decision. The dispute centered on whether the duty incidence had been passed on by the appellants.

2. Principle of Unjust Enrichment: The Advocate for the appellants argued that the Assistant Commissioner had correctly determined that the duty incidence had not been passed on, but the Commissioner (Appeals) erred in setting aside the refund claims. On the other hand, the Departmental Representative contended that the Supreme Court's decision in the Solar Pesticides case established that the doctrine of unjust enrichment applied even in cases of captive consumption. The Department argued that since the cost of the chips included excise duty and the sister concern did not claim Cenvat credit, it indicated passing on of the duty incidence.

3. Judgment and Remand: The Tribunal, after considering the arguments, held that the mere non-claiming of Cenvat credit by the sister unit did not conclusively prove that the duty incidence had not been passed on. The Tribunal emphasized the need to examine the product's cost and costing details provided by the department to determine whether the duty incidence had been transferred. Consequently, the matter was remanded to the original authority for a thorough examination of the product's costing to ascertain definitively whether the duty incidence had been passed on, and to decide the refund claims accordingly. The appeal was allowed for remand to the original adjudicating authority.