2008 (7) TMI 223 - AT - Central Excise

Unjust enrichment - Excess payment of duty - refund claims rejected on ground that appellant had issued credit note for the differential value of the spares & insulation it is clear that there was a clerical error while preparing invoice and making payment of duty to dept. - invoiced amount in excess was never received by the appellant and accordingly the duty amount claimed as refund had also not been passed on to the buyer at any stage of transaction refund not deniable

Summary

Issues:
Refund claim for excess payment of duty due to clerical error in invoicing and issuance of credit notes leading to the rejection of the claim on grounds of unjust enrichment.

Analysis:
The appellants, engaged in manufacturing switch-gear and other products, filed two appeals regarding excess payment of Central Excise duty due to clerical errors in invoicing. In the first case, they cleared spares along with switchgears, invoiced at Rs. 6,70,675 instead of the agreed Rs. 1 lakh. Similarly, in the second case, insulation valued at Rs. 8,871.67 was invoiced at Rs. 3,16,275.42. The lower authorities rejected the refund claims citing the issuance of credit notes, invoking the doctrine of unjust enrichment based on the Grasim Industries case precedent.

During the hearing, the appellant's advocate argued that the issuance of credit notes should not automatically disqualify refund claims, referring to various tribunal and court decisions supporting their stance. They highlighted cases where credit notes did not impact refund claims when the buyer had not paid the invoice amount. The advocate emphasized that in the present cases, the credit notes were issued due to accounting requirements and not because the full amount had been received.

The advocate presented evidence to support their claim, including a customer letter detailing the actual payable amount, a Chartered Accountant's certificate confirming reduced payment and duty receipt, and a bank credit voucher showing actual payment received. The advocate clarified that credit notes were issued for transaction regularization, not due to full payment receipt. In contrast, the department argued that the issuance of credit notes was sufficient to deny the refund claims, citing relevant tribunal decisions.

The Member (T) analyzed the case records and arguments, concluding that there was a clear clerical error in invoicing, and the excess invoiced amount was never received by the appellants or passed on to the buyer. Notably, there was no evidence of the excess amount being received and then repaid via credit notes. The Member emphasized that the department could re-examine the issue if the appellants' claim of not receiving the excess amount was proven false. Consequently, both appeals were allowed, granting the appellants consequential relief from the excess duty payment.

In summary, the judgment addressed the refund claims arising from invoicing errors, the issuance of credit notes, and the application of the unjust enrichment principle. The decision emphasized the need for actual receipt and passing on of the excess amount to deny refund claims, highlighting the importance of evidence and accounting practices in such cases.