2011 (1) TMI 1155 - AT - Customs

Refund claim claim rejected on the ground that the appellant had not established that the excess customs duty paid on import of crude petroleum by MRPL had not been passed on to its customers - appellant followed provisional assessment - it was found that the appellant had paid excess duty than due. It claimed refund which was allowed. In respect of certain consignments, the appellant was not able to establish that the excess duty paid had not been fully or partly passed on to its buyers - authority sanctioned refund to the tune of Rs. 25,42,726/- and credited to the Consumer Welfare Fund Held that - under Section 27(3), no refund of duty and interest can be made without satisfying the requirements of sub-section (2). Therefore, even though under Section 18, sub-section (5) has been introduced w.e.f. 13-7-2006, the issue of refund was always subject to the provisions of Section 28(3), considering that Sections 18(2) (a) applies to final assessment, order of this Court dated 30-10-1991 in the matter of restitution would be subject to the provisions of Section 27(3) of the Customs Act, 1962, refund claim rejected

Summary

Issues Involved:
1. Applicability of the principle of unjust enrichment to refunds arising from the finalization of provisional assessments.
2. Applicability of the principle of unjust enrichment to units suffering losses.

Issue-wise Detailed Analysis:

1. Applicability of the principle of unjust enrichment to refunds arising from the finalization of provisional assessments:

The core issue revolves around whether the principle of unjust enrichment applies to refunds resulting from the finalization of provisional assessments. The appellant, M/s. Mangalore Refineries & Petrochemicals Ltd. (MRPL), contested the Commissioner (Appeals) order, which upheld the denial of their refund claim amounting to Rs. 25,42,726/-. The denial was based on the ground that MRPL had not sufficiently demonstrated that the excess customs duty paid on imported crude petroleum had not been passed on to its customers.

The appellant cited several judicial precedents to support their claim that the principle of unjust enrichment should not apply to refunds from provisional assessments finalized before the amendment of Section 18 of the Customs Act, 1962, on 13-7-2006. They referenced cases such as CC v. Hindalco Industries Ltd., CC v. Hindustan Zinc Ltd., and A.P. Gas Power Corporation Ltd. Additionally, they relied on the judgment in CCE v. TVS Suzuki Ltd., where it was held that the bar of unjust enrichment did not apply to refunds arising from the finalization of provisional assessments.

The Tribunal examined these precedents and noted that a larger bench of the Apex Court in Allied Photographics India Ltd. had affirmed that the principles of unjust enrichment did not apply to consequential refunds from the finalization of provisional assessments. However, the Tribunal also considered the judgment of the Hon'ble High Court of Bombay in United Spirits Ltd. v. CC (Import), Mumbai, which held that all claims of refund under the Customs Act must pass the test of unjust enrichment.

The Tribunal concluded that the principle of unjust enrichment applies to refunds arising from the finalization of provisional assessments, as established by the Hon'ble High Court of Bombay in United Spirits Ltd. and Bussa Overseas and Properties Pvt. Ltd. v. UOI. The Tribunal upheld the impugned order, stating that the appellant failed to establish that the excess duty paid had not been passed on to its customers.

2. Applicability of the principle of unjust enrichment to units suffering losses:

The appellant argued that the principle of unjust enrichment should not apply to units suffering losses, citing cases such as Superintending Engineers, TNEB v. CCE and Shakun Overseas Ltd. & Another v. CCE. In these cases, it was established that the duty paid had not been factored into the tariff or passed on to customers.

The Tribunal distinguished these cases from the present one, noting that in Superintending Engineer, TNEB, the duty paid on raw naphtha was not included in the tariff for electricity, and the tariff remained constant. In Shakun Overseas Ltd., the appellants provided financial records certified by a Chartered Accountant to prove that the duty had not been passed on.

In contrast, MRPL did not provide sufficient evidence to demonstrate that the excess duty paid had not been passed on to its customers. Therefore, the Tribunal rejected the argument that the principle of unjust enrichment did not apply to units suffering losses in this case.

Conclusion:

The Tribunal sustained the impugned order and rejected the appeals, concluding that the principle of unjust enrichment applies to refunds arising from the finalization of provisional assessments and that MRPL failed to prove that the excess duty paid had not been passed on to its customers. Additionally, the Tribunal found that the argument regarding units suffering losses was not applicable in this case due to the lack of sufficient evidence.