2005 (9) TMI 585 - Commissioner - Central Excise

Issues Involved:
1. Applicability of the principle of unjust enrichment.
2. Relevance of the Supreme Court judgment in Oswal Agro Mills v. CCE.
3. Applicability of the judgment in U.O.I. v. Jain Spinners.
4. Whether the duty was secured by a bank guarantee or paid.
5. Application of Section 11B of the Central Excise Act.
6. Relevance of various Tribunal judgments cited by the appellants.
7. The burden of proof regarding passing on the duty to consumers.
8. Doctrine of unjust enrichment and its applicability.

Detailed Analysis:

1. Applicability of the Principle of Unjust Enrichment:
The appellants argued that the principle of unjust enrichment is not applicable when the duty was only secured by a bank guarantee and not paid. The court, however, upheld the view that the principle of unjust enrichment is applicable irrespective of whether the duty was paid or secured by a bank guarantee. The Supreme Court in Mafatlal Industries v. U.O.I. emphasized that a refund claim can succeed only if the petitioner establishes that they have not passed on the burden of duty to another person.

2. Relevance of the Supreme Court Judgment in Oswal Agro Mills v. CCE:
The appellants relied on the judgment in Oswal Agro Mills Ltd., which stated that furnishing a bank guarantee is not equivalent to payment of excise duty and thus Section 11B is not attracted. The court noted that this judgment is applicable only when the Revenue fails and no amount is payable. Since the Revenue succeeded in the present case, the ratio of Oswal Agro Mills Ltd. is not applicable.

3. Applicability of the Judgment in U.O.I. v. Jain Spinners:
The appellants contended that the lower authority wrongly relied on the judgment in U.O.I. v. Jain Spinners, which involved withdrawal of money deposited with the court, not the encashment of a bank guarantee. The court found that the reliance on Jain Spinners was misplaced and that the present issue is covered by the Supreme Court judgment in Oswal Agro Mills.

4. Whether the Duty was Secured by a Bank Guarantee or Paid:
The court observed that the appellants had furnished bank guarantees for fifty percent of the disputed amount. Although the case was decided in favor of the appellants, the bank guarantees had already been encashed by the Revenue. The court noted that the behavior of the Excise Department was improper, but upheld the encashment as per the High Court's order.

5. Application of Section 11B of the Central Excise Act:
The court reiterated that Section 11B applies to all refund claims, including those arising from appellate or court orders. It emphasized that the burden of proving that the duty has not been passed on to another person lies with the claimant.

6. Relevance of Various Tribunal Judgments Cited by the Appellants:
The appellants cited several Tribunal judgments to argue that the principle of unjust enrichment was not applicable when the duty was paid subsequently. The court found these judgments inapplicable to the present case, as the appellants were aware of the duty incidence and likelihood of the levy when they furnished the bank guarantees.

7. The Burden of Proof Regarding Passing on the Duty to Consumers:
The court emphasized that the burden of proving that the duty was not passed on to consumers lies with the manufacturer. The appellants did not claim at any stage that they had not passed on the burden of duty. The court cited the Supreme Court's observation in Mafatlal Industries that the presumption is that the duty has been passed on unless proven otherwise.

8. Doctrine of Unjust Enrichment and Its Applicability:
The court referred to the Supreme Court's ruling in Sahakari Kit and Udyog Mandal Ltd. v. CCE, which stated that the doctrine of unjust enrichment can be invoked to deny a refund if the claimant has passed on the burden of duty to consumers. The court upheld the rejection of the refund by the Adjudicating Authority, as the appellants did not establish that they had not passed on the duty burden.

Conclusion:
The court upheld the impugned order and rejected the appeal, affirming that the principle of unjust enrichment applies, and the burden of proving that the duty was not passed on lies with the appellant. The court found that the Revenue was entitled to enforce the bank guarantees and that the appellants failed to establish that they had not passed on the duty burden to consumers.

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