2018 (7) TMI 191 - AT - Customs

Refund of BCD - unjust enrichment - whether the incidence of duty on the raw-materials which were imported should be deemed to have been passed on to the customers in the form of prices in the final products or not? - Held that - Appellant have not produced any evidence to substantiate that this portion was not included in the cost of their final products and thereby the burden has not been passed on to the consumers. Thus, they have failed in discharging their burden of proving that the unjust enrichment does not apply to their case - Even in their appeal filed before this Bench, they have not produced any documents to show that the doctrine of unjust enrichment does not apply to their case. If the person claiming the refund can show that the burden of duty has not been passed on to the customers, it should be given to such person. In this case, the Assistant Commissioner has erred in rejecting the claim on the ground of unjust enrichment. He should have sanctioned the amount and ordered it to be credited to the consumer welfare fund - the Order-in-Appeal is modified to that extent that the refund of the amount is sanctioned and ordered to be credited to the consumer welfare fund. Appeal disposed off.

Summary

Issues:
- Determination of unjust enrichment in a refund claim related to excess duty paid on imported raw materials.
- Burden of proof on the appellant to show that unjust enrichment does not apply in their case.
- Applicability of the doctrine of unjust enrichment in passing on the burden of duty to customers.
- Consideration of relevant case laws in determining unjust enrichment.

Analysis:
1. The appellant imported shredded steel scrap and declared a value which was later enhanced by the assessing officer. The appellant paid duty on the higher value and cleared the goods. Subsequently, a refund claim was filed for the excess duty paid. The lower authority rejected the claim citing failure to prove that the burden of duty was not passed on to consumers. The issue revolved around whether the duty on imported raw materials had been passed on to customers, as per the doctrine of unjust enrichment established by the Hon’ble Supreme Court in Solar Pesticides Pvt Ltd case.

2. The appellant argued that they did not pass on the burden of duty to customers and relied on various case laws to support their claim. However, they failed to provide substantial evidence to prove that the doctrine of unjust enrichment did not apply in their case. The burden of proof rested on the appellant to demonstrate that the duty burden was not transferred to consumers. The Assistant Commissioner erred in rejecting the claim solely on the ground of unjust enrichment without considering the option to credit the amount to the consumer welfare fund.

3. The Tribunal found that the appellant did not fulfill their responsibility of proving that unjust enrichment did not apply in their case. However, under Sec.27(2) of the Customs Act, if the burden of duty passing on to customers cannot be disproved, the amount should be credited to the consumer welfare fund. The Order-in-Appeal was modified to sanction the refund and direct the amount to be credited to the consumer welfare fund, as the appellant failed to demonstrate the non-applicability of unjust enrichment.

4. In conclusion, the Tribunal disposed of the appeal by upholding the concept of unjust enrichment and ordering the refund amount to be credited to the consumer welfare fund. The judgment highlighted the importance of proving non-transfer of duty burden to customers in refund claims involving imported raw materials and reiterated the legal principles established in relevant case laws.