2016 (12) TMI 1514 - AT - Central Excise

Refund claim - excise duty paid wrongly - unjust enrichment - Held that - Under Section 12B of Central Excise Act 1944 when the invoice is raised including the excise duty a presumption is raised that the incidence of duty is passed on. But this presumption is a rebuttable one. When the invoice was mistakenly raised including the duty and when excise duty was not collected there is no question of the burden of duty being passed on. The appellant paid excise duty wrongly and the same though included in invoice has not been collected from BHEL. The entry was made debiting the excise duty without actually collecting the excise duty - BHEL has categorically stated that they have not paid the excise duty raised in the invoice which establishes that the duty burden has not been passed on - refund is not hit by unjust enrichment - appellant is eligible for refund - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim rejection based on unjust enrichment doctrine.

Analysis:
The appellant filed a refund claim for excise duty wrongly paid after realizing that the goods supplied to BHEL were exempted from duty. The appellant did not collect the excise duty from BHEL and adjusted the amount in their accounts. The authorities rejected the refund claim citing unjust enrichment. The appellant argued that since the duty was not collected from BHEL, the doctrine of unjust enrichment does not apply.

The original authority and Commissioner (Appeals) did not consider the Chartered Accountant certificate and letter from BHEL provided by the appellant. The appellant rectified the entry in their books by crediting BHEL with the excise duty amount and debiting the excise duty receivable. The ledger account extract of BHEL reflected these entries.

BHEL confirmed in a letter that they did not pay the excise duty raised in the invoice. The appellant maintained that the duty burden was not passed on as it was not collected from BHEL. The appellant distinguished their case from the precedent cited by the department, where the duty refund was sought due to discounts passed on to buyers. The appellant's situation involved wrongly paid duty that was not collected, thus not passing on the burden.

The judge ruled in favor of the appellant, stating that the refund claim was not hit by unjust enrichment. The appellant was deemed eligible for the refund, and the order directing the refund to the Consumer Welfare Fund was set aside. The appeal was allowed with consequential reliefs, if any.

This judgment clarifies the application of the unjust enrichment doctrine in refund claims, emphasizing the importance of evidence and distinguishing between cases where duty is collected and cases where duty is not passed on to determine eligibility for refunds.