2014 (2) TMI 700 - HC - Customs

Denial of refund claim - Unjust enrichment - Whether CESTAT was correct in holding that the doctrine of unjust enrichment under Section 21 of the Customs Act is not applicable to the claim of refund of customs duty paid on the capital goods - Held that - Though the original authority and the appellate authority have clearly observed that no documents were produced before them to prove that there was no case of unjust enrichment, the fact remains that the CESTAT has not considered the said aspect and proceeded to hold that there was no necessity to prove that there was no unjust enrichment in case a claim is made under Section 27 of the Customs Act - in respect of any claim for refund, the party should prove that there was no case of unjust enrichment by producing acceptable materials, the matter requires consideration by the authorities after giving opportunity to the assessee to produce materials. Since the order passed by the CESTAT does not contain any averment with respect to the materials produced by the assessee to prove that there was no case of unjust enrichment and the duty burden has not been passed on, we are of the view that opportunity should be given to the assessee to produce materials - Matter remitted back - Decided in favour of Revenue.

Summary

Issues:
Challenge to the order of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) regarding the doctrine of unjust enrichment under Section 21 of the Customs Act not being applicable to the claim of refund of customs duty paid on capital goods.

Analysis:
The civil miscellaneous appeal challenges the CESTAT's order on the claim of refund of customs duty paid on capital goods, specifically addressing the doctrine of unjust enrichment under Section 21 of the Customs Act. The main substantial question of law considered is whether the Tribunal was correct in holding that the doctrine of unjust enrichment is not applicable to the refund claim. The appellant, the Commissioner of Customs, contests the decision based on the lack of verification of documents proving non-passing of duty burden to the purchaser of finished goods.

The original authority and the appellate authority noted the absence of documents demonstrating the absence of unjust enrichment. However, the CESTAT did not address this crucial aspect and instead concluded that the doctrine of unjust enrichment does not apply to the claim of refund of customs duty on capital goods. This discrepancy led to the current appeal before the High Court.

Referring to the Supreme Court's ruling in Sahakari Khand Udyog Mandal Ltd. v. Commissioner of Central Excise and Customs, the High Court emphasized the necessity for the party claiming a refund to prove that the duty burden was not transferred to consumers. The court highlighted the importance of demonstrating the absence of unjust enrichment before seeking a refund, regardless of statutory provisions. Therefore, the burden lies on the party claiming the refund to establish the non-passing of duty burden to consumers.

Given the lack of clarity regarding the production of materials by the assessee to prove the absence of unjust enrichment, the High Court set aside the CESTAT's order and remitted the matter to the original authority for fresh consideration. The court directed the assessee to provide materials supporting their claim of non-passing of duty burden for a fair assessment. The assessing authority was instructed to review the records promptly and decide on the refund issue within two months from the date of the court's order.

In conclusion, the civil miscellaneous appeal was allowed, and the matter was remanded for further examination to ensure proper verification of the absence of unjust enrichment before granting the refund of customs duty on capital goods.