2011 (6) TMI 513 - AT - Central Excise

Unjust enrichment refund duty paid under protest - the appellant paid an amount of Rs. 1,75,000/- during the investigation and after the clearance and before issuance of show-cause notice. - Held that - The Tribunal in the case of Silwester Textiles P. Ltd. v. Commissioner of Central Excise, Mumbai (2003 -TMI - 107556 - CESTAT, MUMBAI) held that the extra duty with interest paid later on at the instance of the department it is clear that the appellants could not have passed on the duty benefit to their customers at the time of the clearance of the goods and allowed the assessee s appeal. - refund allowed.

Summary

Issues:
1. Rejection of refund claim amounting to Rs. 1,75,000.
2. Application of the doctrine of unjust enrichment in the case of deposit.
3. Interpretation of legal precedents regarding refund claims and unjust enrichment.

Analysis:
1. The appellant filed an appeal against the rejection of a refund claim amounting to Rs. 1,75,000. The appellant, an independent textile processor, processed excisable goods for various customers. A case of undervaluation was made against the appellant, leading to the payment of Rs. 1,75,000 'under protest' before the issuance of a show-cause notice. The lower adjudicating authority dropped the demand, and the appellant sought a refund, which was rejected on the grounds of unjust enrichment. The Commissioner (Appeals) upheld this decision, prompting the present appeal (para 2-3).

2. The appellant argued that the amount paid was a deposit and not duty, as it was made before any appropriation by the department. Citing legal precedents and a circular, the appellant contended that the doctrine of unjust enrichment should not apply to deposits. The department, however, relied on Supreme Court decisions emphasizing equity and the doctrine of unjust enrichment, irrespective of statutory provisions. The department argued that the burden is on the petitioner to show payment, non-passing of burden, and potential loss without relief (para 4-5).

3. The Tribunal examined the records and found that the amount paid was indeed a deposit, as it was made before any appropriation by the department. Legal precedents were cited to support the view that deposits made during investigations can be considered as such, exempting them from the doctrine of unjust enrichment. The Tribunal also referred to a case where extra duty paid later was deemed non-passed to customers, leading to a favorable decision for the appellant. The Tribunal distinguished a Supreme Court case cited by the department, as it involved recovery from customers, unlike the present case. Consequently, the order-in-appeal was set aside, and the appeal was allowed with any consequential relief (para 6-8).