2014 (8) TMI 535 - AT - Central Excise

Denial of refund claim - Unjust enrichment - discount given to their customers on the sale of vehicles on account of clearance of old stocks/prompt payment - appellant issued invoices of the gross amount and thereafter issued credit note on the discount applicable against each clearance - discount amount was having the components of duty paid by the appellant - refund claims were allowed but transferred to the Consumer Welfare Fund holding that the appellant has failed to pass the bar of unjust enrichment - Held that - discount given by the appellant to their dealers regarding clearance of old stocks/prompt payment were in the knowledge of the dealers before the clearance of the vehicle, is not in dispute. The appellant was having a system that he invoices are to be raised on the pre-discounted assessable value of the vehicle and if any discount is entitled to the dealer that will be passed on to the dealers by way of credit notes. In that situation, the claim of the appellant is that duty component in the discount has not been passed on the dealers as the amount of discount has been credited in the account of dealers. where the entitlement discount has already known to the buyers, in that case, if discount is given by way of credit note, the bar of unjust enrichment is not applicable - Following decision of ADDISON & CO. Versus COMMISSIONER OF C. EX., MADRAS 2000 (11) TMI 146 - HIGH COURT OF JUDICATURE AT MADRAS - Decided in favour of assessee.

Summary

Issues:
Refund claims rejected on grounds of unjust enrichment.

Analysis:
The appellant filed refund claims due to discounts given to customers on vehicle sales. The discounts were known to customers before clearance. Invoices were issued for the gross value, followed by credit notes for discounts. The duty component in discounts led to the refund claims. Authorities transferred the claims to the Consumer Welfare Fund citing unjust enrichment. The appellant argued that customers knew about discounts in advance, credit notes proved passing of unjust enrichment, and buyers confirmed receiving discounts. They cited relevant case laws to support their claim.

The opposing view highlighted duty payment at vehicle clearance, invoking unjust enrichment. Precedents like Sangam Processors (Bhilwara) Ltd. and Grasim Industries Ltd. set the principle. Mere issuance of credit notes post-duty collection does not discharge unjust enrichment burden. Dealers selling vehicles to end-users raised doubts on duty pass-on. The appellant's entitlement to refund claims was questioned based on these grounds.

The judgment acknowledged that customers were aware of discounts pre-clearance. Invoicing on pre-discounted value with subsequent credit notes was the practice. The High Court's decision in Addison & Co. supported the appellant's argument on unjust enrichment. The appellant's balance sheet reflected duty refund as receivable, with dealer confirmation of discount receipt. Considering these factors, the court ruled in favor of the appellant, allowing the refund claims and setting aside the previous orders.