2016 (3) TMI 477 - AT - Central Excise

Refund claim - duty liability subsequent to clearance of their products - whether sanctioning of the refund will lead to unjust enrichment? - Held that - Hon ble High Court in the case of Commissioner of Central Excise Chandigarh vs. Modi Oil & General Mills (2007 (1) TMI 31 - HIGH COURT PUNJAB & HARYANA ) had held that any amount paid subsequent to clearance of the goods the question of unjust enrichment will not apply The appeal can be disposed of only on the point whether the appellant had discharged the duty liability subsequent to clearance of their products. It is very much clear that the payment of differential duty was made after clearance of the goods and amount was paid on insistence by the Preventive Officers on 8.11.2006. Subsequently on adjudication the said demand has been set aside by the adjudicating authority. On a specific query from the bench learned Counsel submits that the Revenue has not preferred any appeal against such dropping of the demand by the adjudicating authority. If that be so the denial of refund of an amount paid subsequent to clearance of the goods seems to be inappropriate on the face of the judgment by Hon ble Bombay High Court in the case of Rockett Engg. Corporation Ltd. (2014 (3) TMI 754 - BOMBAY HIGH COURT ) wherein it has been held that when duty is paid after clearance of goods on insistence of anti-evasion branch burden of duty is not passed on to the customers - Decided in favour of assessee

Issues involved:
Refund of duty amount debited by appellant under Section 4A, unjust enrichment doctrine application, treatment of duty payment as expenditure, relevance of C.A. certificate, applicability of judgments by Hon'ble High Courts Bombay and Punjab & Haryana, refund eligibility post-clearance of goods, denial of refund by lower authorities, appeal against dropping of demand, significance of revised balance sheet, doctrine of unjust enrichment based on equity, burden of duty passed on to customers, concurrent findings of fact, admissibility of refund.

Analysis:

Issue 1: Refund of duty amount debited by appellant under Section 4A
The appellant debited an amount of &8377; 2,13,034 on the direction of the Preventive Officer for reworked or repacked goods. The adjudicating authority held that the duty liability was correctly discharged as the goods were not covered under Section 4A on the date of clearance. The appellant sought a refund, which was initially credited to the Consumer Welfare Fund due to recording the amount as expenses in the Profit & Loss account. The C.A. certificate provided by the appellant was disputed by lower authorities for lack of clarity on how the view was reached.

Issue 2: Unjust enrichment doctrine application
The appellant argued that the duty payment was made post-clearance of goods on the Preventive Officer's insistence, citing judgments by Hon'ble High Courts Bombay and Punjab & Haryana. The appellant contended that the burden of duty was not passed on to customers in such cases. The lower authorities relied on the doctrine of unjust enrichment to deny the refund, emphasizing that the duty payment was treated as expenditure in the books of account.

Issue 3: Treatment of duty payment as expenditure
The Revenue contended that if duty payment is shown as expenditure, it implies passing on the duty directly or indirectly. They highlighted the importance of revised balance sheets to reflect the duty payment as receivable. The appellant's argument centered on the treatment of duty payment as receivable, emphasizing the significance of the Profit & Loss account entries in determining the passing on of duty burden.

Issue 4: Applicability of judgments by Hon'ble High Courts
The judgments by Hon'ble High Courts Bombay and Punjab & Haryana were pivotal in establishing that duty payment post-clearance does not lead to unjust enrichment. The appellant's reliance on these judgments underscored the non-applicability of the doctrine in cases where duty is paid after goods clearance.

Issue 5: Refund eligibility post-clearance of goods
The Tribunal analyzed the timing of duty payment vis-a-vis goods clearance to determine refund eligibility. The concurrent findings of fact indicated that the duty was paid subsequent to goods clearance, and the burden of duty was not transferred to customers. This factored into the decision to allow the appeal and grant consequential relief to the appellant.

Issue 6: Denial of refund by lower authorities
The lower authorities denied the refund based on the doctrine of unjust enrichment and the treatment of duty payment as expenditure. However, the Tribunal's assessment highlighted the significance of duty payment timing and the absence of duty burden transfer to customers post-clearance, leading to the reversal of the lower authorities' decision.

Issue 7: Appeal against dropping of demand
The Tribunal noted that the Revenue did not appeal the dropping of the demand by the adjudicating authority, indicating the inconsistency in denying the refund for duty paid after goods clearance. This inconsistency, coupled with the findings of the Hon'ble High Courts' judgments, influenced the Tribunal's decision to allow the appeal and set aside the impugned order.

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