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2013 (11) TMI 1217 - AT - Central ExciseUnjust enrichment - Whether the amount whose refund granted by the adjudicatory authority can be hit by unjust enrichment or not during investigation appellant deposited an amount of ₹ 18,75,000/- under protest by debit entries in the cenvat credit account - Held that - The provisions of Section 11B would be applicable to a refund claim only if the claim is for refund of excess Central Excise duty paid - The bar of unjust enrichment is prescribed in 1st proviso to Section 11B (2) - The provisions of Section 11B and hence the principle of unjust enrichment would not be applicable to the refund claims of amounts which are not duty -like refund of excess fine or penalty or refund of pre-deposit paid under section 35 F on the direction of the Appellate authority where subsequently the assessee s appeal is allowed - The refund is sought of the unappropriated amount left after adjusting the duty and penalty from the provisional deposit - The amount is not even duty and hence there is no question of applying the provisions of Section 11B and the principle of unjust enrichment for its refund - This amount should have been refunded without even refund application. Revenue s contention is that the amount of excise duty is included is cost of goods in the year 2001-2002. But I find that out of the ₹ 18,75,000/-, ₹ 8,40,120/- has already been paid and adjusted by the Department without considering the cost structure of goods. Therefore is my view that bar of unjust enrichment cannot be now applied to rest of ₹ 10,34,880/- in this case. - Decided in favor of assessee.
Issues Involved:
1. Unjust Enrichment 2. Applicability of Section 11B of the Central Excise Act 3. Treatment of Refund Claim Detailed Analysis: 1. Unjust Enrichment: - Appellant's Argument: The appellant argued that the amount of Rs. 18,75,000/- paid during the investigation was not recovered from customers. They contended that showing this amount as a revenue expense in the profit and loss account does not imply passing on the cost to the customers. The refund claim should not be denied on the grounds of unjust enrichment as per Section 11B, which applies only if the duty incidence has been passed to the buyers. - Respondent's Argument: The respondent defended the rejection of the refund claim, asserting that once the amount is shown in the profit and loss account as a revenue expenditure, it gets included in the product's cost. Thus, the duty incidence is passed on to customers, leading to unjust enrichment if refunded. - Judgment Analysis: The judgment analyzed that the provisions of Section 11B and the principle of unjust enrichment are not applicable to amounts that are not duty, such as pre-deposits paid under Section 35F. The amount of Rs. 18,75,000/- paid during the investigation was not excise duty paid on goods cleared under an invoice. Therefore, the presumption under Section 12B does not apply. The burden of proof lies on the Department to show that the amount was recovered from the buyers, which was not demonstrated. 2. Applicability of Section 11B of the Central Excise Act: - Appellant's Argument: The appellant contended that Section 11B's bar on unjust enrichment does not apply to their refund claim as the amount was not passed on to the buyers. The refund should be granted as the amount was paid during the investigation and not as part of the excise duty on goods cleared. - Respondent's Argument: The respondent argued that the amount shown as revenue expenditure in the profit and loss account was included in the product's cost, thus passing the duty incidence to the buyers. Hence, the refund claim is hit by unjust enrichment under Section 11B. - Judgment Analysis: The judgment highlighted that Section 11B applies to refunds of excess Central Excise duty paid, and the principle of unjust enrichment is prescribed in the first proviso to Section 11B(2). Since the amount in question was not excise duty paid on goods cleared under an invoice, Sections 12A and 12B do not apply. Therefore, the principle of unjust enrichment is not applicable, and the amount should have been refunded without even a refund application. 3. Treatment of Refund Claim: - Appellant's Argument: The appellant argued that the refund claim should be granted as the amount was paid during the investigation and not recovered from customers. The amount shown as revenue expenditure does not imply passing on the cost to customers. - Respondent's Argument: The respondent maintained that the amount shown as revenue expenditure was included in the product's cost, thus passing the duty incidence to customers. Therefore, the refund claim is hit by unjust enrichment. - Judgment Analysis: The judgment concluded that the amount of Rs. 10,34,880/- paid during the investigation is not excise duty paid on goods cleared under an invoice. The Department failed to prove that the amount was recovered from buyers. The principle of unjust enrichment does not apply, and the refund claim should be allowed. Separate Judgments: - Majority Decision: The majority concluded that the refund claim is not hit by unjust enrichment. The amount in question was not excise duty paid on goods cleared under an invoice, and the Department did not prove that the amount was recovered from buyers. Therefore, the refund claim should be allowed. - Dissenting Opinion: The dissenting opinion argued that the amount shown as revenue expenditure in the profit and loss account was included in the product's cost, thus passing the duty incidence to customers. Therefore, the refund claim is hit by unjust enrichment and should be denied. Final Order: In view of the majority decision, the appeal was allowed, and the refund claim was granted. The Revenue's stand that the refund claim is hit by unjust enrichment was not tenable.
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