2015 (1) TMI 266 - AT - Central Excise

Refund claim - exemption under Notification No. 506/86, dated 24-12-1986 - refund claim was sanctioned but was transferred to the Consumer Welfare Fund - Unjust enrichment - capital goods not in the possession of the appellant at the time when the Commissioner (Appeals) passed the order in 2004 - Held that - In this case the only reason for denial of the refund claim is that these capital goods were not in the possession of the appellant in 2004. It is admitted fact that these capital goods were procured in 1989 and if the formula of depreciation is adopted by the department is applied to these capital goods, the life of the capital goods is ten years only. Admittedly, in this case the ld. Commissioner (Appeals) observed after 15 years of the procurement of those goods that these capital goods are not in possession of the appellant. On the other hand, he is holding that these capital goods have been used by the appellant and not sold. As these capital goods were in possession of the appellant till they were obsolete and destroyed, therefore, the observation of the Commissioner (Appeals) that capital goods are not in the possession of the appellant is not sustainable. Accordingly, it is held that bar of unjust enrichment is not applicable to the facts of this case - Decided in favour of assessee.

Summary

Issues:
Appeal against rejection of refund claim based on unjust enrichment.

Analysis:
The appellant imported computer equipment with software in 1989 under Notification No. 506/86, paid duty, and filed a refund claim. Tribunal held the appellant entitled to refund of Rs. 10,41,379. However, Asstt. Commissioner sanctioned the claim but transferred it to Consumer Welfare Fund. Commissioner (Appeals) rejected the claim in 2004 stating the capital goods were not in appellant's possession, invoking unjust enrichment. Appellant argued that goods were consumed, scrapped, and destroyed, making possession irrelevant. Tribunal noted goods were procured in 1989, and Commissioner's observation in 2004 was unsustainable as goods were used by appellant till obsolete. Held unjust enrichment not applicable, allowing the refund claim.

This judgment revolves around the denial of a refund claim on the grounds of unjust enrichment. The appellant's claim for a refund under Notification No. 506/86 for computer equipment imported in 1989 was initially rejected, leading to an appeal. The Commissioner (Appeals) rejected the claim in 2004, citing lack of possession of the capital goods by the appellant. The appellant contended that the goods were used, consumed, and destroyed, making possession immaterial. The Tribunal found the Commissioner's observation unsustainable, as the goods were used by the appellant until rendered obsolete. Consequently, the Tribunal held that the bar of unjust enrichment did not apply in this case, ultimately allowing the refund claim.

The key issue in this case was the application of the doctrine of unjust enrichment to the refund claim. The appellant's claim for a refund of duty paid on imported goods was rejected due to the alleged lack of possession of the capital goods in 2004. The Tribunal, however, noted that the goods were procured in 1989 and had a lifespan of ten years. The Commissioner's finding that the goods were not in possession in 2004 was challenged by the appellant, who argued that the goods were used, scrapped, and destroyed. The Tribunal agreed with the appellant, holding that the doctrine of unjust enrichment was not applicable as the goods were in possession of the appellant until they became obsolete. Consequently, the refund claim was allowed, emphasizing the importance of the factual circumstances surrounding the possession and use of the capital goods in question.

In conclusion, the Tribunal's judgment in this case highlights the significance of establishing possession and use of goods when considering the doctrine of unjust enrichment in refund claims. The appellant's successful appeal against the rejection of the refund claim was based on the argument that the capital goods, though not in possession at a later date, were utilized and eventually destroyed, justifying the refund claim. The Tribunal's decision underscores the need to assess the factual timeline and circumstances surrounding the goods in question to determine the applicability of unjust enrichment, ultimately ensuring a fair and just outcome in such matters.