2008 (4) TMI 100 - AT - Central Excise

Refund claim were rejected on the ground of unjust enrichment - contention of appellant that the prompt payment discount was known to their customers and the customers who made payment promptly the payment was made after deducting the discounted amount and the credit notes were issued only to clear the accounts of the distributors in the account books is acceptable incidence of duty is not passed to distributor - hence refund is not rejectable

Summary

Issues:
Refund claim rejection on the ground of unjust enrichment due to prompt payment discount given by the appellant to distributors.

Analysis:
The appellant appealed against the rejection of refund claims based on unjust enrichment due to prompt payment discounts given to distributors. The Commissioner (Appeals) relied on a Larger Bench decision stating that passing on the duty to the buyer, even if credit notes were issued later, would invoke unjust enrichment. The appellant argued that prompt payment discounts were known to customers, who deducted the discounted amount before payment. The Adjudicating Authority confirmed this practice, noting distributors deducted the discount and credit notes were for accounting purposes only, not passing on duty incidence. The Tribunal's previous decisions supported this argument, emphasizing that if duty was not collected, unjust enrichment did not apply. The revenue contended that issuing credit notes after invoices passed on duty, invoking unjust enrichment. However, the Tribunal found that since distributors deducted discounts themselves and duty incidence was not passed on, unjust enrichment did not apply. Citing the Larger Bench decision, the Tribunal clarified that unjust enrichment applies only if duty burden is passed to customers, which was not the case here. Consequently, the impugned orders were set aside, and the appeals were allowed.