2006 (10) TMI 366 - AT - Central Excise

Refund - Unjust enrichment - incurred a loss - certificate from the Chartered Accountant - HELD THAT - That the manufactured goods were sold at a loss is not conclusive on the question of passing on of excise duty. Loss making sales can take place in respect of non-excisable goods also. For refund purposes, the only relevant fact is whether the tax paid was being collected from the buyers. Whether a sale price is a profitable price or a loss making price is altogether irrelevant for the purpose of refund. Viewed from this perspective, it is clear that the certificate of the Chartered Accountant does not satisfy the requirement. It is to be noted that Section 11B of the Central Excise Act makes no distinction in relation to refund, between a private enterprise and a Govt enterprise. Central Excise Act makes no distinction based on the ownership of an enterprise. The judgment of the Hon ble Karnataka High Court in the case of CCE, Bangalore v. Karnataka State Agro Corn Products Ltd. 2006 (7) TMI 11 - HIGH COURT OF KARNATAKA (BANGALORE) was in the context of the State Govt. unit producing items and supplying them to State Govt. authorities for free distribution. In the present case, situation is different. The appellant is a commercial enterprise selling its produce to buyers for money. In the result, the appeal fails and is rejected.

Summary

Issues:
Appeal against denial of refund on grounds of unjust enrichment.

Analysis:
1. The appellant, a unit of a government undertaking, appealed against the denial of a refund of over Rs. 23 lakhs due to unjust enrichment. The appellant argued that they sold their produce below the cost of production, thus not passing on the Central Excise Duty. They provided certificates from a Chartered Accountant confirming the sale below cost price and absorbing the excise duty themselves.

2. The appellant referred to a High Court judgment and a Tribunal decision to support their contention that unjust enrichment does not apply to State undertakings and disputed amounts on balance sheets do not attract unjust enrichment. The Departmental Representative argued that if the tax was passed on to the buyer, unjust enrichment applies, citing a Supreme Court judgment emphasizing the equitable basis of unjust enrichment.

3. The Commissioner (Appeals) noted that the appellant's price included excise duty as evidenced by invoices and gate passes. The absence of evidence to the contrary led to the conclusion that excise duty was indeed passed on to the buyer, as reflected in the sale price. The fact that the goods were sold at a loss does not negate the passing on of excise duty, as loss-making sales can occur irrespective of excisability.

4. The Tribunal emphasized that for refund purposes, the critical factor is whether the tax paid was collected from the buyers, not the profitability of the sale. The argument that a State undertaking is exempt from unjust enrichment was dismissed, as the Central Excise Act does not differentiate based on enterprise ownership. The distinction made in a Karnataka High Court judgment involving free distribution by a State Govt. unit was deemed inapplicable to the commercial enterprise selling goods for money in this case.

5. Ultimately, the appeal was rejected, affirming the lower authorities' findings that excise duty was indeed passed on to the buyers, leading to the denial of the refund on grounds of unjust enrichment.