2015 (12) TMI 787 - AT - Customs

Denial of refund claim - Unjust enrichment - Held that - The Assistant Commissioner, while sanctioning the refund, has not gone into the fact, whether incidence of duty, for which refund is sought for, has been passed on or otherwise. In my view, even if it is a case of refund of revenue deposit, test of unjust enrichment has to be passed on. The appellant during the proceedings before the Commissioner (Appeals) has submitted a Chartered Accountant s certificate, which was issued on the basis of books of account of the appellant, wherein it has been certified that the amount of refund is shown in the balance sheet as recoverable from the Government. However, despite this submission of the appellant, the Commissioner (Appeals) has rejected the claim of the appellant on the ground that Chartered Accountant s certificate is not a conclusive evidence to prove that the incidence of duty has not been passed on. It is utter surprise that, if at all, the Commissioner (Appeals) is not satisfied with the Chartered Accountant s certificate, he should have called for other documents like balance sheet and other books of account to check the authenticity of the CA certificate, which he failed to do so. It is a settled position of law that, if the amount for which refund is sought for, has not been booked as an expenditure in the profit and loss account and shown in the asset side of the balance sheet as receivable, it is sufficient evidence that the incidence of duty has not been passed on. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Dispute over admissibility of exemption Notification No. 23/98
2. Demand of Customs duty and penalties imposed
3. Challenge of order before Tribunal leading to refund claim
4. Unjust enrichment issue in refund claim
5. Rejection of refund claim by Commissioner (Appeals)
6. Appeal against rejection of refund claim
7. Consideration of Chartered Accountant's certificate as evidence
8. Lack of verification of documents by Commissioner (Appeals)
9. Remand of the case for verification of books of accounts
10. Direction for granting refund and interest

Analysis:
The case involves a dispute regarding the admissibility of exemption Notification No. 23/98 related to the import of four motor graders. The Customs authorities issued a show cause notice for a demand of Customs duty amounting to Rs. 49,35,268. After various proceedings, the Tribunal set aside the demand based on a limitation issue. Subsequently, the appellant filed a refund claim of Rs. 29,90,000, which was initially sanctioned by the Assistant Commissioner without considering the aspect of unjust enrichment.

The main issue before the Tribunal was the application of the doctrine of unjust enrichment in the refund claim. The Assistant Commissioner had not determined whether the duty incidence had been passed on by the appellant. The Commissioner (Appeals) rejected the refund claim, stating that even in the case of a revenue deposit, unjust enrichment is applicable. The Tribunal noted that the Chartered Accountant's certificate submitted by the appellant indicated that the amount of refund was shown as recoverable from the Government in the balance sheet. However, the Commissioner (Appeals) dismissed this evidence, highlighting the need for additional verification of documents.

The Tribunal criticized the Commissioner (Appeals) for not thoroughly examining the appellant's documents to establish whether the duty incidence had been passed on. It emphasized that if the refund amount was not recorded as an expenditure in the profit and loss account but shown as receivable in the balance sheet, it indicated that the duty incidence had not been passed on. Consequently, the Tribunal allowed the appeal by remanding the case to the Assistant Commissioner for verification of the appellant's books of accounts to ensure the refund amount was shown as receivable.

In conclusion, the Tribunal directed the Assistant Commissioner to grant the refund if satisfied with the verification, along with interest as per the law. The adjudication of the refund matter was instructed to be completed within one month from the date of the order, resolving the issue of unjust enrichment and providing a clear directive for the refund process.