2012 (9) TMI 887 - AT - Central Excise

Refund of excess interest paid by the appellant - Mis calculation of interest - Unjust enrichment - Held that - Revenue has failed to produce any evidence that the appellant has recovered the amount of interest paid by them on supplementary invoices from their customers. While raising the supplementary invoices, the appellant only recovered duty from their customers and no interest has been recovered from the customers. Section 12(b) (sic) of the Central Excise Act, 1944 provides that every person, who has paid the duty of excise on the goods under this Act, shall unless the contrary is proved by him be deemed to have passed full incidence of such duty to the buyers of such goods. From the said provision, it is very much clear that the bar of unjust enrichment is applicable to the duty only and not for the interest. As in this case, both the lower authorities have held that bar of unjust enrichment has not been proved by the appellant, the same is not sustainable as Central Excise Act, 1944, does not provide any presumption of passing the incidence of interest on the buyers - Decided in favour of assessee.

Summary

Issues:
Refund claim denial based on unjust enrichment.

Analysis:
The appellant filed an appeal against the denial of a refund claim for excess interest paid due to mis-calculation, which was rejected on the grounds of unjust enrichment. The appellant cleared motor parts in 2007 and later received a price revision in 2008, adjusting the duty accordingly. The appellant paid interest on the differential duty in 2011, realizing the error in calculation. The appellant contended that the excess interest amount was shown as receivable in the balance sheet and income tax was paid on it, shifting the burden of proof to the department. The appellant cited relevant case laws to support their argument.

The appellant argued that the doctrine of unjust enrichment does not apply to amounts paid post-clearance. Citing various judgments, the appellant emphasized that the amount paid after goods clearance is not subject to unjust enrichment. The appellant highlighted that no interest was passed on to customers, only duty was recovered. The appellant's position was supported by legal precedents and interpretations.

The learned AR reiterated the lower authorities' findings, upholding the denial of the refund claim based on unjust enrichment. After hearing both sides, the Tribunal analyzed the case. The Tribunal found that the Revenue failed to provide evidence that the appellant had passed on the interest amount to customers. The Tribunal noted that the Central Excise Act applies the bar of unjust enrichment to duty, not interest. As the appellant had not recovered interest from customers and had proven the burden of unjust enrichment was not met, the Tribunal ruled in favor of the appellant. The impugned order was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal's judgment clarified the application of unjust enrichment in cases of interest payment, distinguishing it from duty. The appellant successfully demonstrated that the burden of unjust enrichment was not met, leading to the allowance of the appeal and the setting aside of the denial of the refund claim.