2011 (9) TMI 782 - AT - Customs

Refund - Unjust enrichment - it was contended that the penalty and redemption fine was paid at the time of releasing the goods to avoid demurrages and challenge the Order-in-Original imposing fine and penalty which was reduced by the Commissioner (Appeals) in his order - Revenue today cannot argue against their own circular though the point put forth is that the CBEC s Circular dated 2-1-2002 will be only applicable in the case of pre-deposit as ordered by the High Court - Held that as per the procedure of accounting the amount to be received as refund can be shown as receivables. In any case this point may not be of much relevance so long as the doctrine of unjust enrichment does not apply here - Appeal is allowed

Summary

Issues:
Refund claim rejection based on unjust enrichment - Applicability of Section 27 of the Customs Act, 1962 - Accounting treatment of penalty and redemption fine - Pre-deposit under protest - Applicability of CBEC Circular - Doctrine of unjust enrichment - Judicial precedents on refund claims - Transfer of duty incidence to buyer - Accounting treatment of refund amount.

Analysis:
The appeal involved a dispute regarding a refund claim filed by M/s. Asian Granito (I) Ltd. against the Order-in-Appeal passed by the Commissioner of Customs (Appeals). The main issue was the rejection of the refund claim by the lower adjudicating authority on the grounds of unjust enrichment, crediting the amount to the consumer welfare fund. The appellant contended that the penalty and redemption fine were paid to release goods and sought a refund of the differential amount after a reduction by the Commissioner (Appeals). They argued that Section 27 of the Customs Act, 1962 only covers duty, not penalty and redemption fine, making unjust enrichment inapplicable. They provided evidence, including a Chartered Accountant's certificate, ledger account, and voucher, to support their claim that the amount was not passed on to buyers.

The Commissioner (Appeals) rejected the claim, stating that the amount had been accounted for as an expense in the financial year 2008-09 and passed on to buyers. However, the Commissioner agreed that Section 27 does not cover penalty and redemption fine. The key question was whether the refund claim was barred by unjust enrichment. The judgment cited the case of Sambhav Enterprises v. Commissioner of Customs, Cochin, emphasizing that the deposit made under protest for appeal does not signify acceptance of the order. The judgment also referenced a CBEC Circular and various judicial precedents supporting the appellant's right to appeal and refund.

The judgment highlighted that the doctrine of unjust enrichment does not apply in cases where the appellant has the right to appeal against an order they disagree with. It referenced several judgments supporting this view, emphasizing the right of the appellant to seek a refund without being subject to unjust enrichment. Additionally, the judgment disagreed with the Commissioner (Appeals) regarding the accounting treatment of the penalty and redemption fine, stating that the refund amount could be shown as receivables. Ultimately, the appeal was allowed, granting relief to the appellants based on the arguments presented and the legal principles discussed during the proceedings.