2017 (12) TMI 329 - AT - Central Excise

Refund of excess duty paid - unjust enrichment - Held that - M/s Swan Mills had paid duty on Yarn used captively in manufacture of Fabrics which was otherwise not exempted - The Commissioner (Appeals) while remanding the case to the adjudicating authority had directed to take assistance of Assistant Director (Cost) to ascertain as to whether the incidence of duty was passed on or otherwise. The Deputy Commissioner got verified the books of accounts from the Assistant Director (Cost) and held that incidence of duty was not passed on and refund claim filed from the date of knowledge was within time - also, the Bar of unjust enrichment would not apply for refunds which has arisen out of deemed finalization of assessment i.e from the AD(cost) report/ certificate in which it was shown that the incidence of duty was not passed on. Time limitation - Held that - the refunds cannot be rejected on the grounds of time bar - reliance placed in the case of Commissioner of Central Excise, Raipur Versus M/s. Simplex Engineering & Foundary Works P. Ltd 2015 (11) TMI 662 - CESTAT NEW DELHI . In absence of anything contrary on record to such cost report the unjust enrichment and issue of time bar would not arise and the same cannot be grounds to reject the refunds - refund allowed - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Whether the refund claims are hit by limitation of time.
2. Whether the refund claims are hit by the doctrine of unjust enrichment.

Issue-wise Detailed Analysis:

1. Limitation of Time:
The Tribunal examined whether the refund claims were barred by limitation. The show cause notice did not propose to reject the claim on grounds of time bar but only on grounds of unjust enrichment. The Commissioner (Appeals) and the Department did not raise the issue of time bar initially. The Tribunal cited several legal precedents, including the cases of Commr. Of C. Ex., Raipur Vs. Simplex Engg. & Foundary Works P. Ltd. and Bajaj Auto Limited Vs. Union of India, to establish that the issue of limitation cannot be raised in the second round of litigation if it was not initially contested. The Tribunal concluded that the refunds cannot be rejected on the grounds of time bar.

2. Doctrine of Unjust Enrichment:
The Tribunal addressed whether the refund claims were affected by the doctrine of unjust enrichment, particularly in the context of captive consumption. The Commissioner (Appeals) had directed the adjudicating authority to verify whether the incidence of duty was passed on to the customers. The Assistant Director (Cost) verified the books of accounts and concluded that the incidence of duty was not passed on, thus supporting the refund claims. The Tribunal referred to the legal position that refunds arising from deemed finalization of assessment, such as from the AD (Cost) report, are not subject to the bar of unjust enrichment. This was supported by the adjudication orders dated 01.01.2001 and 09.01.2001, which confirmed that the duty incidence was absorbed by the company and not passed on to the customers. The Tribunal held that in the absence of any contrary evidence, the doctrine of unjust enrichment and the issue of time bar do not apply, and the refund claims are valid.

Conclusion:
The Tribunal allowed the appeals filed by M/s Swan Mills and dismissed the appeal filed by the Revenue, confirming that the refund claims were not barred by limitation and were not affected by the doctrine of unjust enrichment. The decision was pronounced in court on 14/11/2017.