2010 (8) TMI 226 - AT - Central Excise

Refund unjust enrichment excess payment of cess - quantum of BS&W was less than what was indicated at the time of removal and quantity increased the respondent liable to pay cess with interest - as per the MOU, cess is not supposed to be passed on and, the quantity received was to be finalized by mutual understanding between the two parties - no unjust enrichment in the transaction - appeal filed by the Revenue and reject

Summary

Issues:
Dispute over the quantity of crude oil received in the refinery leading to a refund claim for excess OID cess payment. Applicability of the doctrine of unjust enrichment in the context of passing on the burden of OID cess to the consumer.

Analysis:
The case involved M/s. Oil & Natural Gas Corporation Ltd. engaged in crude oil exploration and payment of OID cess. The dispute arose with IOCL regarding the quantity of crude oil received in the refinery, resulting in a refund claim for excess OID cess payment. The Commissioner (Appeals) allowed the refund, but Revenue contended the application of unjust enrichment, alleging the burden was passed on to the consumer. The Revenue argued that once duty was collected from IOCL, issuing a credit note did not negate passing on the burden. The advocate for the respondent cited a Larger Bench decision, emphasizing that the assessment was provisional until both parties agreed on the exact quantity. The MOU between the parties specified the liability for taxes and discounts based on sediment and water content in crude oil, indicating that the burden was not passed on to the consumer.

The Tribunal considered the Revenue's arguments on passing the burden of duty and cited previous decisions on excise duty disputes. However, the OID cess was to be paid based on the quantity received in the refinery, not at the time of removal. The MOU clarified the liability for OID cess and discounts based on sediment and water content, indicating that the burden was on the supplier, not the receiver. The finalized quantity of crude oil after dispute resolution led to excess OID cess payment, affecting the price received by the respondent due to discounts based on sediment and water levels.

The Tribunal concluded that the amount payable was determined only after finalizing the quantity received in the refinery, making prior payments provisional. The taxable event was the receipt in the refinery, and the due date for payment commenced upon finalizing the quantity. The doctrine of unjust enrichment did not apply as per the MOU terms, where the burden was not passed on, and the quantity was to be mutually agreed upon, absolving both parties from unjust enrichment allegations. The appeal by the Revenue was rejected, as the department had already accepted the eligibility for the refund on merit, and no evidence supported unjust enrichment claims against the respondent.