2013 (11) TMI 1534 - AT - Central Excise

Denial of refund claim - Unjust enrichment - Held that - Refund of duty has arisen when the payment was made the second time when the goods were cleared from the depot. The liability to pay excise duty arises when the goods are cleared from the factory. The appellant discharged duty liability during June to August, 2011 when the goods were cleared from the factory and that is the legal discharge of duty. The subsequent payment, made erroneously, is not a payment of duty and the obligation to pay duty has already been fulfilled. Therefore, it is the second payment which needs to be considered for refund which the appellate authority has rightly considered. - No customer will pay duty twice for the same set of goods. Therefore, the question of unjust enrichment would not arise at all. - Decided against Revenue.

Summary

Issues involved:
- Refund of excess duty paid by the respondent
- Interpretation of duty liability on clearances of goods
- Justification for refund based on erroneous payment
- Consideration of unjust enrichment in duty refund cases

Analysis:
1. Refund of excess duty paid by the respondent:
The appellate authority allowed the refund of excess duty paid by the respondent, M/s. Volkswagen India Pvt. Ltd., Pune, for the second time by mistake. The duty liability was considered to be recoverable only once on clearances of goods, leading to the conclusion that the refund should be based on the payment made wrongly the second time. It was emphasized that the appellant had not recovered duty from the customers, thus eliminating the issue of unjust enrichment.

2. Interpretation of duty liability on clearances of goods:
The Revenue contended that the initial duty payment was associated with the clearance of goods where the duty burden was on the respondent. However, the second payment, made in error, was passed on to the buyers of the goods through excise invoices. The respondent argued that the first duty payment was a legal discharge of duty related to the clearance of excisable goods, while the second payment was an erroneous one. Therefore, the refund claim was based on the second payment, as no payment was made the second time, no refund could be claimed.

3. Justification for refund based on erroneous payment:
The Tribunal considered the submissions from both sides and clarified that the claim for refund arises only when an excess payment of duty is made. In this case, the refund was deemed eligible when the payment was mistakenly made the second time during the clearance of goods from the depot. It was highlighted that the legal discharge of duty occurred during the initial clearance of goods from the factory, and the subsequent erroneous payment did not fulfill the obligation to pay duty. Therefore, the second payment was the focus for the refund, as rightly considered by the appellate authority.

4. Consideration of unjust enrichment in duty refund cases:
The argument raised by the Revenue regarding passing on the duty incidence to customers through excise invoices for the second payment was not accepted. The Tribunal emphasized that the duty incidence could not have been passed on twice to customers, ruling out the possibility of unjust enrichment. Citing a similar case precedent, the Tribunal clarified that the question of unjust enrichment does not apply when duty is paid twice but recovered only once from the customer. Consequently, the appeal filed by the Revenue was dismissed for lacking merit.

In conclusion, the judgment upheld the appellate authority's decision to allow the refund based on the erroneous second payment of duty, emphasizing the legal discharge of duty during the initial clearance and rejecting the Revenue's argument regarding unjust enrichment.