2014 (1) TMI 167 - AT - Customs

Rejection of refund claim - Import of crude petroleum oil - Amount shown as receivable but have adjusted the same with the amount payable by them to the government - Held that - Unjust enrichment - Held that - ledger which shows the amount receivable and payable to the department and the certificate issued by the Chartered Accountant which explains the whole process in detail and therefore certified that there is no enrichment. ledger in respect of government dues and receivables only netting has been done and this is in accordance with accounting practice. Appellants are using crude petroleum oil and once the amount is shown as receivable in accordance with the cost accounting principles, such amount cannot be added to the cost of production - Following decision of Solar Pesticides Ltd. 2000 (2) TMI 237 - SUPREME COURT OF INDIA - Decided in favour of assessee.

Summary

Issues:
Refund claims rejection based on netting impact on reserves and unjust enrichment applicability.

Analysis:
The appellants imported crude petroleum oil, and the quantity transferred to their refineries exceeded the imported quantity, resulting in higher duty payment during assessment. Subsequently, refund claims were filed, rejected on the ground of netting impact on reserves and unjust enrichment applicability. The rejection was due to the appellants adjusting the receivable amount with the payable amount to the government, leading to a netting situation affecting reserves creation. The Commissioner (Appeals) held that the burden had been passed on, and unjust enrichment was not disproved by the appellants.

The advocate, also a Chartered Accountant, contended that netting out was in line with accounting principles, contrary to the Commissioner's view. He argued that even without netting, the balance sheet would reflect the same increase in assets and liabilities, highlighting that netting was standard accounting practice. Referring to the ledger and a Chartered Accountant's certificate, it was asserted that no unjust enrichment occurred. The advocate emphasized that showing the amount as receivable, as per cost accounting principles, should not impact production costs. Additionally, the decision in Solar Pesticides Ltd. case cited by the original adjudicating authority was deemed inapplicable to the present case.

The Member (T) agreed with the advocate's submissions, noting the lower authorities' failure to grasp accounting methods and implications. Consequently, the appeals were allowed, granting consequential relief to the appellants. The judgment emphasized the importance of understanding accounting practices and unjust enrichment principles in such cases.