2017 (8) TMI 105 - HC - Central Excise

Refund claim - doctrine of unjust enrichment - Whether the CESTAT is justified in allowing the appeals of the respondent assessee and in permitting refund of excise duty to it under Section 11B of the Act even though the presumption of Section 12B of the Act was not successfully dislodged by the respondent assessee? Held that - when no presumption arises under Section 12B of the Act, it is not for the respondent assessee to dislodge any such presumption by adducing evidence to the contrary rather the burden lies upon the revenue to prove that the incidence of tax-duty was passed on by the respondent assessee to third parties which it had utterly failed to discharge - in the absence of any sale of any component or photo-copier drums to the customers in terms of the FSMA, there is no question of passing over the incidence of excise duty on anyone and the duty deposited under protest by the respondent assessee is out of its own pocket. A Division Bench of this court in Commissioner of Sales Tax NOIDA Vs. Atrenta India Pvt. Ltd. 2017 (4) TMI 563 - ALLAHABAD HIGH COURT in connection with the refund of Cenvat Credit Rules, 2004 held that where refund is otherwise admissible the interpretation should justify refund to the party as department cannot retain legally refundable revenue. Appeal dismissed - decided against appellant.

Summary

Issues:
- Whether the CESTAT was justified in allowing the appeals of the respondent assessee and permitting the refund of excise duty under Section 11B of the Act?
- Whether the presumption of Section 12B of the Act was successfully dislodged by the respondent assessee?
- Whether the doctrine of unjust enrichment applies in this case?

Analysis:
The judgment pertains to four Central Excise Appeals challenging the order of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) allowing the refund of excise duty deposited under protest by the respondent assessee. The main issue raised was whether CESTAT was correct in permitting the refund under Section 11B of the Act despite the presumption of Section 12B not being successfully dislodged by the respondent assessee.

The facts revealed that the respondent assessee, engaged in manufacturing photo-copier machines, entered into Full Service Maintenance Agreements (FSMA) with customers. A dispute arose regarding the levy of excise duty on reconditioning and installation of photo-copier drums. CESTAT eventually ruled in favor of the respondent assessee, stating that no excise duty was chargeable on the reconditioned drums. Subsequently, the respondent sought a refund of the excise duty paid under protest, which was initially rejected on grounds of unjust enrichment.

The appellant contended that the excise duty was passed on to the buyers, invoking Section 12B, and thus, the refund would lead to unjust enrichment. However, the respondent argued that no fresh sale occurred, and the excise duty was not realized from customers. CESTAT found that no duty was collected from customers, negating the presumption of Section 12B.

The judgment emphasized the doctrine of unjust enrichment, stating that it prevents one from benefiting at the expense of others. The Tribunal's factual finding that the incidence of excise duty was not passed on to customers was crucial. It was highlighted that in tax matters, refunding the tax deposited, even if the order is set aside, is not feasible due to the inability to return amounts to individual customers.

The judgment further delved into the terms of the FSMA, clarifying that the amount received was for various services, not solely for reconditioned drums. It was established that no actual sale transaction occurred, and thus, the excise duty could not be considered part of the contract money. The burden to prove passing on the tax-duty lay with the revenue, which it failed to discharge.

Additionally, the judgment distinguished previous cases cited by the revenue, emphasizing the unique circumstances of the present case. The court dismissed the appeal, citing no merit and no costs awarded. The detailed analysis covered the legal principles of unjust enrichment, burden of proof, and the specific contractual terms governing the transaction, providing a comprehensive understanding of the judgment.