2011 (3) TMI 1500 - HC - Central Excise

Whether the Tribunal is right in allowing the refund to the party when the party had already passed on the incidence of such duty amount (refund amount) and when there is a proviso in sub-section (2)(e) of Section 11B of Central Excise Act, 1944 that the refund shall be credited to the Consumer Welfare Fund if the duty of excise paid by the manufacturer had passed on the incidence of such duty to any other person? Whether the Tribunal is correct in connecting the sundry receivables (losses) shown in the balance sheet to the passing of duty element? Held that - No justification in the contention of the appellant herein that on account of unjust enrichment at the hands of the State, refund could not be granted. Thus following the decision of the Apex Court reported in Mafatlal Industries Ltd. v. Union of India 1996 (12) TMI 50 - SUPREME COURT OF INDIA that the concept of unjust enrichment is not applicable as far as State Undertakings are concerned and to the State, apart from the finding of the Tribunal that the assessee had not passed on the liability to its consumers, we reject the prayer of the appellant herein and confirm the order of the Tribunal. Appeal dismissed.

Summary

Issues:
1. Whether the Tribunal correctly allowed the refund when the duty incidence had been passed on to consumers?
2. Whether the Tribunal was right in connecting sundry receivables to the passing of duty element?

Issue 1:
The assessee, a power station, filed refund claims for duty on Naphtha used in electricity production. The claim was rejected due to alleged passing of duty liability to consumers. The Commissioner and CEGAT upheld this finding. However, the Tribunal accepted the claim, noting tariff rates were fixed before duty exemption. The High Court analyzed the proviso in Section 11B(2)(e) of the Central Excise Act, stating the refund should be credited to the Consumer Welfare Fund if duty incidence was passed on. The Court upheld the Tribunal's decision, as the duty had not been passed on to consumers, dismissing the Revenue's appeal.

Issue 2:
The Revenue argued that since tariff rates remained constant post-exemption, duty was included in the tariff, and the refund should be rejected. The Court considered Section 11A and the doctrine of unjust enrichment. The assessee contended that as per Supreme Court precedent, unjust enrichment does not apply to the State. Citing a Karnataka High Court decision, it was held that unjust enrichment is not applicable to State undertakings. The Court rejected the Revenue's argument, confirming the Tribunal's decision based on factual findings and legal principles. The Court dismissed the appeal, affirming the Tribunal's order for the refund claim.