2011 (3) TMI 428 - HC - Central Excise

Refund claimed - Unjust enrichment - There is no question of applying the principles of unjust enrichment because, the company has not imported the goods under the advance licences - Goods were imported duty free by the persons to whom the advance licences were sold - Since the predecessor company had not imported the goods duty free, the question of passing on the duty element to the customers did not arise at all - It is not in dispute that the amount was deposited for and on behalf of the petitioners, it is not in dispute that the said amount is refundable and it is also not in dispute that the said deposit amount could not be passed on to the customer. Since the amount in question did not belong to the consumer the said amount could not be directed to be credited to the Consumer Welfare Fund - The impugned order quashed and set aside to the extent it holds that the refund amount of Rs. 1,10,55,000/- be credited to the Consumer Welfare Fund - The respondents are directed to refund the entire amount of Rs. 1,30,55,000/- to the petitioner No. 1 with interest @ 6% p.a. from the date of deposit till payment.

Summary

Issues:
Challenge to show cause notice for refund rejection on unjust enrichment principles, challenge to order sanctioning refund with partial payment to petitioner and crediting balance to Consumer Welfare Fund.

Analysis:
The writ petition was filed to challenge a show cause notice dated August 18, 2010, calling upon the petitioners to justify why their refund claim should not be rejected on unjust enrichment principles. During the pendency of the petition, the Assistant Commissioner of Customs sanctioned a refund of Rs. 1,30,55,000 but directed only Rs. 20,00,000 to be paid to the petitioners and the remaining Rs. 1,10,55,000 to be credited to the Consumer Welfare Fund. The petitioners challenged this order dated January 24, 2011, amending their petition accordingly.

The petitioners had obtained advance licenses in 1994, which were sold to third parties who imported goods duty-free under these licenses. Subsequently, a show cause notice was issued in 1997 alleging fraudulent acquisition of licenses. The Managing Director of the petitioner company paid Rs. 1,30,55,000 to secure the duty demand during the investigation. The petitioners applied under the Kar Vivad Samadhan Scheme, which was initially rejected but later allowed, settling the duty demand under the show cause notice.

The petitioners sought a refund of the amount paid during the investigation, contending that the entire sum was refundable as held in a previous writ petition. The respondents argued that only Rs. 20,00,000 was recoverable based on the petitioners' account books. The doctrine of unjust enrichment was invoked by the respondents, citing a Supreme Court decision. However, the court found that the entire amount was refundable as it was paid for and on behalf of the company.

The court held that unjust enrichment principles did not apply as the company did not import goods under the licenses. The amount deposited was refundable, and directing a portion to the Consumer Welfare Fund was unwarranted. The court allowed the petition, quashing the order directing crediting to the Fund and directing the respondents to refund the entire amount with interest.

In conclusion, the court allowed the petition, setting aside the order directing crediting to the Consumer Welfare Fund and directing the refund of the entire deposited amount with interest to the petitioner company within three weeks.