2011 (3) TMI 735 - HC - Central Excise

Refund - The doctrine of unjust enrichment applies when duty is recovered from a customer and later if it is found that such a duty was not leviable the assessee who has recovered it from the customer is not entitled to refund of the same - The customer refused to pay the excess duty claimed pointing out that it is a clerical mistake - In the instant case factually it is demonstrated that by an arithmetical mistake the excess duty was paid and a credit note was raised - held that the burden of excess duty has not been passed on to the customer and it is paid from the pocket of the assessee and hence the assessee is entitled to refund of the same - Appeal is rejected

Summary

Issues:
1. Entitlement to refund of excess duty paid due to arithmetical mistake.
2. Application of the doctrine of unjust enrichment.
3. Interpretation of passing on the burden of duty to the customer.

Analysis:

Issue 1: Entitlement to refund of excess duty paid due to arithmetical mistake
The Tribunal held that the excess duty paid by the assessee due to an arithmetical error is not considered as duty and is not subject to the provisions of unjust enrichment. The Tribunal referred to a previous judgment in CC, Cochin v. Rajesh Chemicals and another judgment in CCE, Bhopal v. Tesla Transformers to support its decision. The Tribunal set aside the order of the authority and directed the refund of the excess duty paid. The Revenue challenged this decision in the present appeal.

Issue 2: Application of the doctrine of unjust enrichment
The doctrine of unjust enrichment applies when duty is collected from a customer and later found to be not leviable. In such cases, if the burden has already been passed on to the customer, the assessee is not entitled to a refund. The Tribunal found that in this case, the excess duty was paid due to an arithmetical mistake, and a credit note was raised. The customer refused to pay the excess duty, claiming it was a clerical error. As the burden of the excess duty was not passed on to the customer, the Tribunal held that the assessee was entitled to a refund. This decision was in accordance with the law, and the High Court upheld the Tribunal's judgment, rejecting the Revenue's appeal.

Issue 3: Interpretation of passing on the burden of duty to the customer
The High Court emphasized that in situations where the burden of duty has been passed on to the customer, the assessee is not entitled to a refund. However, in this case, it was established that the excess duty was paid due to an arithmetical mistake, and the burden was not transferred to the customer. The High Court agreed with the Tribunal's view that the excess duty was borne by the assessee and not passed on to the customer. Therefore, the High Court found no error in the Tribunal's decision and dismissed the Revenue's appeal.

In conclusion, the High Court upheld the Tribunal's decision, ruling that the assessee was entitled to a refund of the excess duty paid due to an arithmetical mistake, as the burden was not passed on to the customer. The application of the doctrine of unjust enrichment was considered in light of these circumstances, leading to the rejection of the Revenue's appeal.