2007 (9) TMI 176 - AT - Central Excise

Recovery of erroneous refund Appellant job worker while supplying the physician samples paid duty & he not only collected job charges but also duty amounts Unjust enrichment applicable Recovery of refund is allowed but it is necessary that SCN must have been issued by authorities for recovery

Summary

Issues:
Appeal against rejection of refund claim based on unjust enrichment and erroneous refund.

Analysis:
The appellant manufactured medicaments for M/s Torrent Pharmaceuticals on a loan license basis, receiving raw materials and manufacturing as per specifications on a job work basis. They supplied the finished product and physician samples to M/s Torrent Pharmaceuticals, with a dispute over the value of the physician samples. The appellant's refund claim was initially rejected by the original authority but later sanctioned after a hearing. The department appealed against this decision, claiming that the appellant had passed on the duty burden to M/s Torrent Pharmaceuticals, invoking the doctrine of unjust enrichment.

The appellant argued that no show cause notice had been issued to recover the refund, citing CBEC's circular that demands for recovery of erroneous refunds must be made under Section 11A of the Central Excise Rules within the prescribed limitation period. They also contended that the doctrine of unjust enrichment did not apply as M/s Torrent Pharmaceuticals distributed physician samples free of cost. The department, represented by the ld SDR, supported the findings of the Commissioner (Appeals).

The Member (T) carefully considered both arguments and held that the appellant had collected duty amounts from M/s Torrent Pharmaceuticals, thus failing to clear the bar of unjust enrichment. The submission that the doctrine of unjust enrichment did not apply due to the free distribution of physician samples by M/s Torrent Pharmaceuticals was deemed unacceptable. The Member (T) acknowledged the requirement for a show cause notice under Section 11AC if the refund was to be treated as erroneous, but the lack of confirmation regarding the issuance of such a notice was not directly relevant to the decision. Consequently, the appeal against the rejection of the refund claim was dismissed.