2008 (6) TMI 119 - AT - Central Excise

Refund claim on the ground that credit was reversed twice when inputs not received since inputs were not received, question of their use not arise and hence unjust enrichment not applicable When CA clearly indicate in his certificate that debit to sundry adjustment account does not amount to passing on expenses or losses to customers, principle of unjust enrichment cannot be applied refund credited to Consumer Welfare Account is not justified

Summary

Issues:
1. Reversal of Cenvat credit on inputs not received by the appellants.
2. Rejection of refund claim due to lack of accounting treatment evidence.
3. Application of doctrine of unjust enrichment.
4. Interpretation of proviso (c) to Section 11B(2) of the Central Excise Act, 1944.
5. Evaluation of Chartered Accountant certificate and its impact on passing on the incidence of duty to customers.

Analysis:
1. The appellants took credit on inputs not received by them, leading to a reversal of Cenvat credit. The subsequent refund claim was rejected by the Asst. Commissioner citing lack of accounting treatment evidence, including profit and loss account details. The rejection was upheld by the Commissioner (Appeals) due to insufficient proof that no duty incidence was passed on to customers.

2. The appellants argued that since the inputs were never received, the question of passing on duty incidence does not arise. They contended that refunds related to duty credits on inputs are not subject to unjust enrichment as per proviso (c) to Section 11B(2). Reference was made to tribunal decisions supporting this stance. The appellants also presented their profit and loss account and Chartered Accountant certificate to demonstrate non-passing of duty incidence to customers.

3. The Departmental Representative (DR) argued that even if inputs were not received, once the refund amount reflects in expenses, it can be indirectly recovered from customers. The DR emphasized the applicability of proviso (c) to Section 11B(2) and the necessity to prove non-passing of duty incidence to customers, especially in the absence of received inputs.

4. The Judge agreed with the DR that unjust enrichment applies unless the appellants prove the amount does not form part of their expenditure or is not recovered from customers. The proviso (c) to Section 11B(2) was deemed inapplicable as the inputs were not received, negating their use in compliance with regulations. However, the Judge found the rejection of the Chartered Accountant certificate by the Commissioner (Appeals) unfounded, emphasizing its clear statement that the duty incidence was not passed on to customers. The Judge upheld the certificate's validity and ruled in favor of the appellants, allowing the refund claim.

5. The Judge highlighted the specificity of the Chartered Accountant certificate in denying passing on of duty incidence to customers. The Judge dismissed the Revenue's vague objections and concluded that the refund should not be credited to the Consumer Welfare Account. The order of the Commissioner (Appeals) was set aside, and the appeal was allowed with consequential relief, affirming the appellants' entitlement to the refund.

This detailed analysis of the judgment addresses the issues raised, the arguments presented, and the judicial reasoning leading to the final decision in favor of the appellants.