2012 (11) TMI 487 - AT - Customs

Claim for refund on excess duty paid rejected - unjust enrichment - ordered for credit the amount of refund to the consumer welfare fund on presumption of unjust enrichment - Held that - As from the Cost Accountant s Certificate reproduced by assessee it can be seen that net realisation was Rs. 1.87 Crores approximately and appellants had suffered a loss of Rs. 4.44 Crores approximately. The Commissioner has rejected this claim on the ground that raw material cost was about 1.13 Crores whereas, the net realisation was Rs. 1.87 Crores and therefore, the realisation of finished goods is higher than the cost of finished goods. However, the cost itself shows that the value of materials consumed was Rs. 4.10 Crores and other costs have to be added. Only when the material imported is sold as such, the method adopted by the Commissioner can be acceptable. In a case like this, where raw material have been used for manufacture, what is required to be seen is the total cost incurred for the finished goods and not the difference between the cost of raw material and the price of finished goods without taking other expenses/raw materials/ inputs into account. Therefore, the method adopted by the learned Commissioner to reject the cost certificate cannot be sustained. The cost certificate clearly shows that the appellant s realisation from POY was less than the cost incurred by them for manufacture and therefore, it cannot be said that they have passed on the duty liability to the customers. As appellants have been able to show that they have not passed on the customs duty liability to the customers and therefore, are eligible for refund appellants have been able to show that they have not passed on the customs duty liability to the customers and therefore, are eligible for refund - in favour of assessee by way of remand.

Summary

Issues:
Refund claim based on unjust enrichment principle.

Analysis:
The case involved a refund claim of excess duty paid on Mono Ethylene Glycol (MEG) used in the production of Partially Oriented Yarn (POY). The appellant's claim for refund was initially rejected as they failed to rebut the presumption of unjust enrichment. However, the Tribunal ruled in favor of the appellant based on the principle that unjust enrichment does not apply when goods are used for captive consumption, citing a previous High Court judgment. The matter was escalated to the Supreme Court, which reversed the High Court's decision, emphasizing that the doctrine of unjust enrichment applies even in cases of goods used for captive consumption. Consequently, the Tribunal remanded the case for further examination by the Assistant Commissioner to determine if the duty burden was passed on to consumers.

The adjudicating authority issued a show cause notice for processing the refund claim, requesting invoices to prove that duty incidence was not transferred to others. Despite the appellant's submission of documents, the authority concluded that the duty burden had been passed on and ordered the refund amount to be credited to the consumer welfare fund. The appellant's subsequent appeal was rejected, leading to the current appeal.

During the proceedings, the appellant demonstrated that the duty liability was not transferred to customers. They provided evidence, including a Cost Accountant's Certificate, showing a significant loss incurred in the production of POY, indicating that the duty burden was not recovered through sales. The Commissioner rejected this evidence, arguing that the loss had been capitalized, but the Tribunal disagreed, emphasizing that the focus should be on whether the duty was passed on, not future events. Another Cost Accountant's Certificate further supported the appellant's claim of incurring a loss without passing on the duty liability.

After thorough analysis and considering all submissions, the Tribunal concluded that the appellant had successfully shown that the duty liability was not transferred to customers, making them eligible for a refund. The case was remanded to the original adjudicating authority to reevaluate the refund claim and process the eligible amount without invoking the unjust enrichment principle.

This detailed analysis highlights the complex legal journey of the case, focusing on the application of the unjust enrichment principle, the burden of proof regarding duty incidence, and the relevance of evidence in demonstrating non-transfer of duty liability to consumers.