2014 (2) TMI 68 - AT - Customs

Benefit of exemption under Customs Notification No.29/97-Cus against EPCG scheme - Assessee deposited duty during pending adjudication - Tribunal granted benefit of notification - Department rejected refund claim - Unjust enrichment - Held that - in an internationally competitive situation, the respondent could not have passed on the incidence of duty to the foreign buyer - case of capital goods captively consumed is on a different footing as compared to raw material. I also take note of the principle that exporters are to be given relief of local incidence of duties - The fact that he has accounted the depreciation of duty paid (though it was not payable) can only reflect on his profitability and it cannot be taken as a proof that he has passed on the incidence to the foreign buyer - Following decision of Design Classics Exports (P) Ltd. Vs CC Chennai 2004 (7) TMI 140 - CESTAT, CHENNAI , Golden Iron & Steel Forgings Vs CC Mumbai 2003 (2) TMI 119 - CEGAT, NEW DELHI and Bharti Sons Vs CC Amritsar 2009 (7) TMI 1040 - CESTAT NEW DELHI - Decided against Revenue.

Summary

Issues:
Excess duty paid on imports, exemption under Customs Notification No.29/97-Cus, unjust enrichment, refund application, passing on of duty incidence, appeal by Revenue against Commissioner (Appeals) order.

Analysis:
1. The case involved a dispute over excess duty paid on imports by the respondent under Customs Notification No.29/97-Cus against the EPCG scheme. The matter had gone through multiple rounds of litigation, with the Tribunal initially setting aside the Commissioner (Appeal) order and allowing the respondent's appeal with consequential relief.

2. Subsequently, the respondent filed a refund application for the excess duty paid. The Assistant Commissioner acknowledged the excess payment but held that the respondent failed to prove that no unjust enrichment had occurred, thereby crediting the amount to the Consumer Welfare Fund. The Commissioner (Appeals) overturned this decision, ruling in favor of the respondent and ordering the refund.

3. The crux of the issue was whether the duty incidence had been passed on to others, invoking the doctrine of unjust enrichment. The adjudicating authority contended that since the duty paid was included in the respondent's balance sheet, capitalized, and depreciation claimed, it was deemed passed on. This argument was supported by a reference to a Supreme Court decision in Bussa Overseas and Properties Pvt. Ltd Vs UOI.

4. The respondent argued against unjust enrichment, citing that the duty was borne by them under a zero-duty EPCG License for capital goods used in manufacturing for export. They contended that as all sales were exports, there was no passing on of duty incidence to any party, and the duty inclusion in the cost of goods produced did not equate to passing on without corroborative evidence.

5. The Revenue appealed the Commissioner (Appeals) decision, asserting that every refund claim must pass the test of unjust enrichment as per Section 27(2) of the Customs Act, 1962. They argued that since the duty amount was not shown as receivables and was accounted for in the capital account, it was evident that the duty incidence had been passed on, necessitating the restoration of the adjudication order.

6. In the final judgment, the Tribunal considered the arguments from both sides and upheld the decision of the Commissioner (Appeals). They emphasized that in the context of capital goods used for export manufacturing, the duty incidence could not be passed on to foreign buyers due to pre-decided contract prices. Relying on precedents, the Tribunal rejected the Revenue's appeal, highlighting the unique circumstances of the case and the absence of unjust enrichment.

This detailed analysis provides a comprehensive overview of the legal judgment, covering all the issues involved and the arguments presented by both parties.