2008 (8) TMI 308 - AT - Central Excise

Refund of excise duty subject to unjust enrichment when rate of duty was reduced but assessee continued to pay higher duty on the basis of cum-duty price. Held that, all the invoices/Gate Passes on which the goods have been cleared show cum-duty price and increase/decrease has no bearing on sale price and in such a situation bar of unjust enrichment is not applicable. Excise duty stood included in the sale price of the goods cleared during the material period, indicating that the duty burden reached the customers, in which case the claim of the party for refund of the duty is hit by unjust enrichment. In the light of the binding case law, it is established that the respondent had passed on the excess duty, refund of which was claimed. Therefore, refund of the said amount would involve unjust enrichment. It is ordered that the duty found to have been paid in excess may be sanctioned and deposited in the Consumer Welfare Fund. The appeal filed by the Revenue is allowed

Summary

Issues:
Refund claim involving unjust enrichment due to excess duty paid on un-manufactured tobacco following a reduction in duty rate.

Analysis:
The case involved a dispute over a refund claim by M/s. Sindhur Beedi Works for the excess duty paid on un-manufactured tobacco after a reduction in duty rate from 60% ad valorem to 42% ad valorem. The respondents paid duty at the higher rate until they became aware of the rate reduction on 15-3-2001. The lower authorities calculated the excess amount paid based on the cum-duty price and the revised duty rate. The impugned order concluded that the refund of Rs. 57,750/- did not result in unjust enrichment. The appellant argued that the refund would indeed lead to unjust enrichment.

The Tribunal considered the arguments presented by both sides. The respondents relied on case law examples such as CCE v. Himachal Futuristic Communication Ltd. and GAIL v. CCE to support their claim that the refund did not involve unjust enrichment. These cases involved instances where the assessee paid excess duty without passing it on to buyers, leading to a different outcome regarding unjust enrichment.

Upon reviewing the case records and submissions, the Tribunal found that the respondents collected the same price and duty from customers before and after the duty rate reduction. The duty payment to the government remained consistent during the relevant period. The Tribunal noted that by maintaining the same cum-duty price post-reduction, the respondents effectively collected duty at the revised lower rate on a higher value. However, the respondents failed to establish that the excess duty paid had not been passed on to customers, a crucial factor in determining unjust enrichment.

The Tribunal referred to previous decisions on similar cases, such as India Agencies v. CC, Chennai and Sona Udyog v. CCE, Indore, which emphasized the burden of proof on the claimant to show that the duty burden was not passed on to customers. In this case, the Tribunal found that the excess duty paid had indeed been passed on, leading to a conclusion that the refund would result in unjust enrichment. Consequently, the Tribunal allowed the appeal filed by the Revenue, ordering the excess duty to be deposited in the Consumer Welfare Fund.