2017 (7) TMI 705 - HC - Customs

Recovery of erroneous refund - Benefit of N/N. 133/ 85 dated 19.04.1985 - Captive consumption - benefit of exemption was denied to the assessee company, since the assessee company proposed to set up captive power plant, to provide power to their own factory and so 30% basic customs duty was charged - the present appeal has been filed by the appellant department mainly on the ground that the Hon ble Apex Court in Union of India vs. Indian Charge Chrome 1999 (8) TMI 69 - SUPREME COURT OF INDIA has upheld the notification issued in Notification No.133/85 and observed that it is only an amendment notification for clarification - Held that - the original authority has held that the respondent company was entitled to the refund of ₹ 1,50,99,363/- together with interest of ₹ 2,32,84,458/- (totally amounting to ₹ 3,83,83,821/-). So, it is clear that the appellant department had accepted and complied with the order passed by this Court in the above Writ Petitions and had refunded the above said amount to the respondent company. However, pursuant to the refund of the above said amount to the respondent company, the appellant department has issued a show cause cum demand notice dated 04.08.2011 to the respondent company under Section 28 of the Customs Act, calling upon the respondent company to show cause as to why, the erroneously refunded amount of ₹ 3,83,83,821/- should not be recovered from the respondent with interest. The appellant department cannot take two parallel proceedings for the same issue i.e. Challenging the erroneously refunded duty amount by the appellant department to the respondent company - the Tribunal has rightly allowed the appeal filed by the respondent company and had dismissed the appeal filed by the appellant department and the same does not warrant any interference by this Court - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Validity of the explanation added by Notification No. 306/86 to Notification No. 133/85.
2. Entitlement of the assessee company to a refund of excess customs duty paid.
3. Applicability of the doctrine of unjust enrichment.
4. Binding nature of the Supreme Court's decision on lower courts and authorities.

Detailed Analysis:

1. Validity of the Explanation Added by Notification No. 306/86 to Notification No. 133/85:
The assessee company challenged the explanation added by Notification No. 306/86 to Notification No. 133/85, which excluded captive power plants from the exemption benefits. The High Court initially quashed the latter part of Notification No. 306/86, allowing the assessee company to claim the exemption. However, the Supreme Court later upheld the vires of Notification No. 306/86 in the case of Union of India vs. Indian Charge Chrome, stating that the amendment was merely clarificatory and intended to exclude captive power plants from the exemption granted to power projects.

2. Entitlement of the Assessee Company to a Refund of Excess Customs Duty Paid:
The assessee company paid customs duty under protest and later sought a refund of ?1,50,99,362.95. The High Court allowed the writ petitions filed by the assessee company, directing the department to refund the excess duty collected. The department's appeals and review applications against this order were dismissed, and the refund was sanctioned along with interest, totaling ?3,83,83,821/-. The Tribunal upheld the refund, stating that the department could not reopen the case without challenging the High Court's order.

3. Applicability of the Doctrine of Unjust Enrichment:
The department argued that the refund was subject to the doctrine of unjust enrichment, as per the Supreme Court's decision in Shahakari Khand Udyog Mandal Ltd. vs. Commissioner. However, the Tribunal held that since the refund was sanctioned based on the High Court's order, the doctrine of unjust enrichment did not apply. The Tribunal emphasized that the department could not challenge the refund without setting aside the High Court's order.

4. Binding Nature of the Supreme Court's Decision on Lower Courts and Authorities:
The department contended that the Supreme Court's decision in Union of India vs. Indian Charge Chrome, which upheld Notification No. 306/86, was binding on all courts and authorities under Article 141 of the Constitution. The Tribunal acknowledged this but noted that the department had not filed an appeal against the High Court's order, which had become final. The Tribunal stressed that the department could not circumvent the High Court's order by citing the Supreme Court's decision without directly challenging the High Court's ruling.

Conclusion:
The High Court dismissed the department's appeals, affirming the Tribunal's decision to uphold the refund granted to the assessee company. The Court reiterated that the department could not pursue parallel proceedings for the same issue and that the High Court's order, having attained finality, must be complied with. The Court also clarified that it had not expressed any opinion on the legality of the pending writ petition challenging the show cause cum demand notice issued by the department.