2008 (8) TMI 177 - AT - Customs

Refund claim for excess paid custom duty on imported inputs which were consumed capitively - balance sheet of relevant period, shows the proper costing of the product - cost data shows that additional burden of excess customs duty paid by the appellants on the imported input was absorbed by them company has not increased the sales price to recover the extra amount paid towards Customs Duty during the period of consumption of the subject consignment - bar of unjust enrichment not attracted

Summary

Issues:
1. Claim for refund of Basic Customs Duty under Notification No. 36/94-Cus.
2. Application of the doctrine of unjust enrichment.
3. Burden of proof on importers to show duty burden not passed on.
4. Proper costing of the product and evidence of duty absorption.
5. Certification by Chartered Accountant regarding refund utilization.

Analysis:
1. The appellants imported 'Toluene Di Isocyanate' at a concessional rate of 20% Basic Customs Duty under Notification No. 36/94-Cus. A claim for refund of Rs. 4,00,788/- was filed after the duty was paid under protest, following a judgment by the Hon'ble Bombay High Court in Solar Pesticides. The refund was sanctioned but later challenged due to a Supreme Court decision reversing the High Court judgment (2000 (116) E.L.T. 401 (S.C.)). The issue revolved around the applicability of the concessional rate and subsequent refund claim.

2. The doctrine of unjust enrichment was central to the case, as the demand for recovery of the refund was based on the premise that the duty burden might have been passed on to consumers. The Apex Court decision in Allied Photographies India Ltd. was cited, emphasizing that uniformity in price does not conclusively prove that the duty burden was not transferred. The question of whether the bar of unjust enrichment applied to the appellants was a key consideration.

3. The burden of proof was on the importers to demonstrate that they had not passed on the duty burden. The Tribunal's order allowed the appeal by remanding the case for the importers to produce documentary evidence to discharge this burden. The Asstt. Commissioner confirmed the demand when the importers failed to provide sufficient evidence, leading to subsequent appeals and adjudication.

4. The proper costing of the product and evidence of duty absorption were crucial in determining whether the duty burden had been passed on. The Chartered Accountant's cost analysis of the finished product using imported input played a significant role. The analysis showed that the excess customs duty paid was absorbed by the importers without passing on the cost increase to customers, indicating non-transfer of duty burden.

5. The certification by the Chartered Accountant regarding the utilization of the refund amount further supported the appellants' case. The certification affirmed that the refund received had been credited appropriately, and the sales price had not been increased to recover the extra amount paid towards Customs Duty. This certification strengthened the appellants' argument against the presumption of unjust enrichment, leading to the appeal being allowed based on the evidence provided.