2009 (1) TMI 136 - AT - Central Excise

Refund claim of sugar cess paid on imported refined sugar , when HC held that the sugar cess cannot be levied on imported sugar held that even in case of unconstitutional levy, the refund claim has to pass test of unjust enrichment As regards applicability of doctrine of unjust enrichment, I hold that the decision of nine Judges Bench in Mafatlal Industries is not applicable in the present case as that decision refers to a case where the Act itself has been declared unconstitutional and not the collection

Summary

Issues Involved:
- Challenge to levy of sugar cess on imported sugar
- Application of doctrine of unjust enrichment
- Proper authorization for appeal
- Interpretation of provisions of Sugar Cess Act, 1982

Analysis:

Challenge to Levy of Sugar Cess on Imported Sugar:
The case involved a challenge to the levy of sugar cess on imported refined sugar by M/s. Rice India. The Bombay High Court had ruled that sugar cess cannot be imposed on imported sugar. The importer filed a refund claim which was initially credited to the Consumer Welfare Fund. However, the Commissioner (Appeals) held that the levy of sugar cess was illegal and categorized it as an amount required to be returned, not a refund of duty under the Customs Act. The issue revolved around whether the doctrine of unjust enrichment applied to sugar cess.

Application of Doctrine of Unjust Enrichment:
The Revenue contended that the doctrine of unjust enrichment applied to sugar cess, citing Supreme Court and Bombay High Court decisions. They argued that unjust enrichment occurs when a person retains money that rightfully belongs to someone else. The absence of a statutory provision does not entitle a person to claim undue benefit. The Tribunal acknowledged the applicability of the doctrine of unjust enrichment and set aside the Commissioner (Appeals) order, emphasizing that the refund claim must pass the test of unjust enrichment.

Proper Authorization for Appeal:
The respondents raised a preliminary objection regarding the authorization for the appeal, arguing that it lacked proper reasons. The Tribunal found that the authorization clearly stated the reasons for considering the order not legal and proper, based on the grounds of appeal. The Tribunal distinguished this case from previous decisions cited by the respondents, upholding the validity of the authorization.

Interpretation of Provisions of Sugar Cess Act, 1982:
The respondents argued that the levy of sugar cess on imported sugar was unconstitutional as it was not manufactured in India, and the provisions of the Customs Act were not applicable for its recovery. They cited Supreme Court decisions and a writ petition filed in the Bombay High Court to support their claim. The Tribunal, however, found that the Sugar Cess Act had not been declared unconstitutional, distinguishing it from cases where the Act itself was struck down. The Tribunal remanded the matter back to the Commissioner (Appeals) to determine whether the duty incidence had been passed on to customers.

In conclusion, the Tribunal allowed the Revenue's appeal by way of limited remand, emphasizing the need to consider the doctrine of unjust enrichment and evidence of duty incidence passing to customers in the case of sugar cess refund claims.