2008 (5) TMI 182 - AT - Customs

Whether refund which arose consequential to tribunal s order of accepting declared value as T.V., not arose out of finalization of provisional assessment, is governed by unjust enrichment Held, yes because on date of finalization no amount was due to assessee duty paid by buyer directly on provisional release since incidence of duty was borne by buyer, not by assessee, assessee have no locus standi on that amount

Issues Involved:
1. Applicability of the doctrine of unjust enrichment.
2. Finalization of provisional assessment and entitlement to refund.
3. Appropriation of the bank guarantee and its implications.
4. Equity principles in taxation matters.
5. Passing on the incidence of duty to the buyer.

Detailed Analysis:

1. Applicability of the Doctrine of Unjust Enrichment:
The appellants contended that the doctrine of unjust enrichment does not apply to the amount paid during provisional assessment. However, the Tribunal rejected this argument, stating that the refund arose from an appellate order, not from the finalization of the provisional assessment. Therefore, the doctrine of unjust enrichment was applicable, as per the Supreme Court's decision in Mafatlal Industries v. UOI, which mandates that any refund following an appellate order is governed by Section 27 of the Customs Act, 1962.

2. Finalization of Provisional Assessment and Entitlement to Refund:
The Tribunal noted that the provisional assessment was finalized by enhancing the value and confiscating the goods. The amount became due only after the Tribunal's order, not at the time of finalization. Thus, the refund was subject to the doctrine of unjust enrichment. The Assistant Commissioner had credited the refund to the Consumer Welfare Fund, as the appellants failed to prove that they did not pass on the duty burden to the buyer.

3. Appropriation of the Bank Guarantee and Its Implications:
The appellants argued that the duty recovered from the bank guarantee should not be subject to unjust enrichment as it was a security. However, the Tribunal found that the bank guarantee was encashed by the department, and the amount was ultimately borne by the buyer, M/s. Shaw Wallace & Co. Ltd., through a counter-guarantee. Thus, the incidence of the amount was not borne by the appellants.

4. Equity Principles in Taxation Matters:
The appellants claimed that the Commissioner (Appeals) erred by applying equity principles contrary to settled law. The Tribunal referred to the Supreme Court's decision in Sahakari Khand Udyog Mandal Ltd. v. CCE & Cus, which held that the doctrine of unjust enrichment, based on equity, can be invoked to deny refunds if the claimant cannot prove that they bore the duty burden. Therefore, the Tribunal upheld the application of equity principles in this case.

5. Passing on the Incidence of Duty to the Buyer:
The Tribunal scrutinized the facts and found that the entire duty amount was paid by the buyer directly to Customs at the time of provisional release, not by the appellants. Additionally, the sale price of the goods was significantly higher than the cost, indicating that the duty burden was passed on to the buyer. The Tribunal also noted discrepancies in the appellants' statements regarding the sale price and the amount received from the buyer, further corroborating that the duty incidence was passed on.

Conclusion:
The Tribunal upheld the orders of the lower authorities, confirming that the refund amount was rightly credited to the Consumer Welfare Fund. The appellants' claims were found to be factually incorrect and misleading, aimed at obtaining a refund to which they were not entitled. The appeal was rejected, and the impugned orders were deemed factually correct, legal, and proper.

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