2017 (4) TMI 491 - AT - Central Excise

Refund claim - unjust enrichment - the amount of duty encashed under bank guarantee stood refundable to the appellant - Section 11B - Held that - the appellant at any stage did not submit any evidence to show that the amount for which they are seeking refund claim has not been passed on to any other person. Therefore the appellant have not discharged the burden of proof that the incidence of duty have not been passed on - amount of bank guarantee was encashed by the department towards recovery of the duty, once the bank guarantee amount has been encashed towards excise duty liability, amount has taken the characteristic of excise duty therefore encashed amount of bank guarantee which is nothing else than the excise duty is clearly governed by the provisions of unjust enrichment provided under Section 11B, therefore, unjust enrichment is clearly applicable - appeal dismissed - decided against appellant.

Summary

Issues:
Dispute over manufacture and valuation of job work goods, refund claim hit by unjust enrichment under Section 11B.

Analysis:
The case involved a dispute regarding the manufacture and valuation of job work goods, leading to proceedings against the appellant. The Hon'ble Supreme Court directed the appellant to deposit 50% of the duty amount and execute a bank guarantee for the remaining 50%. Subsequently, the bank guarantee was encashed against the duty demand. Upon resolution of the valuation dispute, the duty amount encashed under the bank guarantee became refundable to the appellant. The appellant filed a refund claim, which was initially sanctioned by the adjudicating authority. However, the amount was deposited into the consumer welfare fund citing unjust enrichment under Section 11B. The appellant's appeal before the Commissioner(Appeals) was rejected, leading to the appeal before the Tribunal.

The main contention raised by the appellant was that the amount for which the bank guarantee was encashed should not be subject to unjust enrichment under Section 11B. Citing a Supreme Court decision in Oswal Agro Mill Ltd Vs. CCE, the appellant argued that a bank guarantee is merely security and not a payment, thus not governed by Section 11B.

The Revenue, represented by the Ld. Asstt. Commissioner(A.R.), argued that any refundable amount must pass through the provisions of unjust enrichment as per the Supreme Court decision in Sahakari Khand Udyog Mandal Ltd Vs. Commissioner of C. Ex. & Cus. The Ld. Commissioner distinguished the Oswal Agro Mills case, asserting that the refundable amount was subject to unjust enrichment and correctly credited to the consumer welfare fund.

After considering the submissions and evidence, the Tribunal found that the appellant failed to prove that the duty incidence had not been passed on to another party. While acknowledging that a bank guarantee is not considered duty until encashed, in this case, the encashed amount took on the characteristics of excise duty. Therefore, the encashed amount was subject to the provisions of unjust enrichment under Section 11B. The Tribunal upheld the impugned order, dismissing the appeal based on the distinction from the Oswal Agro Mill case and the application of unjust enrichment to the encashed amount.

In conclusion, the Tribunal upheld the decision that the encashed amount from the bank guarantee, which represented the excise duty, was subject to unjust enrichment under Section 11B, leading to the amount being rightfully credited to the consumer welfare fund. The appeal was dismissed accordingly.