2013 (10) TMI 845 - AT - Central Excise

Refund - Unjust Enrichment - Entry by debit note / credit note Nil rate of duty in terms of Notification No. 3/2005 - Held that - Following COMMR. OF C. EX. LUDHIANA Versus ORIENTAL TEXTILE PROCESSING CO. (P) LTD. 2012 (5) TMI 247 - CESTAT NEW DELHI - Merely because the buyers of the respondent had issued the debit notes and had made reference to debit notes in their ledger books that itself cannot be sufficient to say that the respondent had discharged their burden in that regard - there is no dispute that the duty was initially collected by the appellant from their customers who had also availed cenvat credit and it was only subsequently that debit note were issued the lower authorities have rightly held the refund claim to be hit by the bar of unjust enrichment. - decided against the assessee.

Summary

Issues:
Refund of duty related to the payment of Rs. 43,577; Unjust enrichment in refund claim.

Analysis:
The judgment revolves around a dispute concerning the refund of duty amounting to Rs. 43,577. The appellant, engaged in the manufacture of SS cold rolling pattas, cleared the product to M/s. Virat Alloys Pvt. Ltd. on payment of duty. However, it was later revealed that the product attracted nil rate of duty, and M/s. Virat Alloys Pvt. Ltd. should not have claimed credit for the duty paid. Consequently, M/s. Virat Alloys Pvt. Ltd. reversed the credit entry and issued a debit note to the appellant. The appellant's refund claim was rejected by the lower authorities citing unjust enrichment, as the duty amount was collected from the buyers. The Commissioner (Appeals) upheld this decision, leading to the present appeal.

The presiding judge referred to a previous decision by the Tribunal in the case of Commissioner of Central Excise Vs. Oriental Textile Processing Co. (P) Ltd. The Tribunal emphasized that the issuance of credit notes after duty collection does not absolve the burden of unjust enrichment. Merely issuing debit notes and referencing them in ledger books does not prove that the duty incident was not passed on to the customers. As a result, the Tribunal deemed the lower authorities' decision unsustainable and set it aside, granting consequential relief to the appellant.

In the current scenario, it was undisputed that the duty was initially collected from the customers, who also availed Cenvat credit. Subsequently issuing debit notes led the lower authorities to rightly conclude that the refund claim fell under the unjust enrichment principle. Following the precedent set by the Tribunal, the judge rejected the appellant's appeal, thereby affirming the decision of the lower authorities. The appeal was dismissed based on the established legal principles and the specific circumstances of the case.

In conclusion, the judgment clarifies the application of the unjust enrichment principle in refund claims related to duty payments. The decision underscores the importance of establishing that the duty incident was not passed on to the customers, even if debit notes were subsequently issued. The judgment provides a detailed analysis of relevant legal precedents and upholds the lower authorities' decision based on the principles of unjust enrichment.