2017 (3) TMI 1088 - AT - Central Excise

Refund claim - unjust enrichment - rejection on the ground that the affidavit & SCN do not support the test as to unjust enrichment - Held that - the impugned order suffers from mistake of fact as the courts below have considered the first transfer from the factory to the Depot by way of sale which is a mistake apparent on the record. Further, where the appellant have written off the excess duty paid to the profits in the relevant accounting year, that does not amount to passing of duty to a third party. The presumption drawn by the Revenue has got no legs to stand - the claim of refund of the appellant is not hit by the doctrine of unjust enrichment - prior to the period 25/09/1999 when N/N. 43/1999-CE was issued bringing the doctrine of unjust enrichment applicable to the refund arising out of provisional assessment; is not applicable retrospectively - refund allowed - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
1. Whether the refund claim after finalization of Provisional Assessment is hit by unjust enrichment.

Analysis:
The appellant, a multinational company, filed an appeal against the Order-in-Appeal passed by the Commissioner of Central Excise & Customs. The issue revolved around the refund claim for the period from April 1998 to September 2000 and whether it was subject to unjust enrichment. The appellant transferred finished goods to its Depot under Provisional Assessment, and upon finalization of expenses, claimed a refund. The appellant's pricing methodology involved uniform sale prices or MRP across India. The initial refund claim of ?14,12,006 was partially allowed but credited to the Consumer Welfare Fund due to unjust enrichment concerns.

The subsequent appeal to the Commissioner (Appeals) was also rejected, emphasizing the absence of the refund amount as receivable in the appellant's balance sheet. The appellant argued that their accounting standards did not recognize contingent assets, and they absorbed excess duty paid without passing it on to buyers. The appellant's pricing structure was detailed to demonstrate the excess duty paid and not transferred to third parties. Reference was made to a Bombay High Court ruling on unjust enrichment, supporting the appellant's stance.

The Tribunal found that the appellant had paid excess duty, absorbed it in profits, and did not pass it on to consumers. The impugned order was deemed erroneous as it incorrectly viewed the initial transfer as a sale. The Tribunal held that writing off excess duty from profits did not constitute passing duty to a third party. It was concluded that the refund claim was not affected by unjust enrichment. Additionally, the doctrine of unjust enrichment was held not to apply retrospectively before a specific notification. The appeal was allowed, directing the refund disbursement with interest within 75 days.

In conclusion, the Tribunal's decision favored the appellant, ruling that the refund claim was not impacted by unjust enrichment, considering the specific circumstances and accounting practices followed by the appellant.