2008 (1) TMI 350 - HC - Customs

Refund arisen when found that the machinery imported was entitled to the benefit of concessional rate of duty as per Notification 21/02 - refund claim for a differential excess duty paid - After importation, the machinery was installed in the respondent textile mills and was very much available and being used for manufacture of goods - there is no material to contend that by refund of the differential duty, the respondent has unjustly enriched refund not deniable on ground of unjust enrichment

Issues Involved:
1. Whether the Tribunal's decision that the amount erroneously refunded could not be recovered by filing an appeal under section 129D of the Customs Act, 1962 unless a demand notice was issued under section 28(1) is correct in law.
2. Whether unjust enrichment by an individual company is permissible in law only because a demand notice under section 28(1) of the Customs Act was not issued for recovery of erroneous refund when the Department followed the appellate remedy available under section 129D of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Tribunal's Decision on Recovery of Erroneous Refund:
The Tribunal's decision was challenged on the grounds that the amount erroneously refunded could not be recovered by filing an appeal under section 129D of the Customs Act, 1962 unless a demand notice was issued under section 28(1). The appellant argued that the Supreme Court in the case of Asian Paints (India) Ltd. v. CCE, Mumbai, 2002 (142) E.L.T. 522 had held that an order issued under section 35E of the Central Excise Act would be equally sustainable in law for recovering dues of excise duty. However, the Tribunal maintained that any subsequent proceedings of the department to recover the amount from the party could only be on the ground of erroneous refund under section 28(1) of the Act, and not section 129D(2).

2. Unjust Enrichment and Demand Notice:
The issue of unjust enrichment was also raised, questioning whether it was permissible in law for an individual company to benefit from an erroneous refund simply because a demand notice under section 28(1) was not issued. The appellant cited the Supreme Court's decisions in Mafatlal Industries Ltd. v. UOI, 1997 (89) E.L.T. 247 (S.C.) and Sahakari Khand Udyog Mandal Ltd. v. CCE, 2005 (181) E.L.T. 328 (S.C.), which state that a refund claim can only succeed if the petitioner establishes that they have not passed on the burden of duty to another person. The Tribunal, however, found that the Commissioner (Appeals) did not examine the legal issue raised and did not follow the Tribunal's directions, leading to the conclusion that the respondent had not unjustly enriched themselves.

Case Facts:
The respondent textile mills imported machinery and paid duty under protest. The Commissioner (Appeals) allowed their appeal for a concessional rate of duty, and the refund was sanctioned. The Assistant Collector of Customs (Refund) appealed, arguing that the duty had not been passed on to buyers. The Commissioner (Appeals) initially allowed this appeal, citing unjust enrichment, but the Tribunal remanded the case for further examination. The Commissioner (Appeals) again upheld the initial order without addressing the Tribunal's directions, leading to the Tribunal setting aside the Commissioner's order.

Tribunal's Observations:
The Tribunal emphasized that the Commissioner (Appeals) did not follow its directions to examine the legal issue and wrongly confirmed his earlier orders on unjust enrichment. The Tribunal noted that the department did not appeal against the remand order, making it final and binding. The Tribunal expressed that the Commissioner (Appeals) showed disregard for the Tribunal's directions and failed to adjudicate the issue as required.

Legal Framework:
The judgment discussed the hierarchy and binding nature of appellate decisions under the Customs Act, 1962, highlighting sections 128, 128A, 129, 129A, and 129B. The Tribunal's decisions are binding on lower authorities, and failure to comply disrupts the hierarchical system of justice. The Supreme Court's decisions in Union of India v. Kamalakshi Finance Corporation Ltd., 1992 Supp (1) S.C.C. 443, and Tirupati Balaji Developers (P) Ltd. v. State of Bihar, 2004 AIR SCW 2522 reinforced this principle.

Conclusion:
The Tribunal correctly set aside the order of the Commissioner (Appeals) who did not follow the Tribunal's directions and wrongly applied the doctrine of unjust enrichment. The High Court dismissed the appeal, affirming the Tribunal's decision and emphasizing the necessity of following appellate directions to maintain judicial discipline and proper administration of tax laws.

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