2018 (8) TMI 1329 - AT - Central Excise

Refund claim - the respondent had received the differential Central Excise duty from its buyers through debit notes - unjust enrichment - Classification of goods - Bio-95 and Herbal Pet wash - Held that - It is evident that the respondent had enjoyed the duty benefit all along and utilised such amount for its business requirement. Hence, it cannot be said that the respondent had suffered any injury or loss on account of payment of such differential duty, for which the refund claimed amount should be paid to it and not credited to the Consumer Welfare Fund - Further, on perusal of the Balance Sheet for the year 2005-06, it is found that refund amount, in question, had not been reflected by the respondent under the heads of account of Loans & Advances, as claims receivable from the Central Excise Department. There is no merit in the impugned order, so far as it allowed the refund benefit in favour of the respondent - appeal allowed - decided in favor of Revenue.

Summary

Issues:
Classification of products under Central Excise Tariff Act, 1985; Eligibility for refund of Central Excise duty; Application of doctrine of unjust enrichment.

Classification Issue:
The case involved the classification of products Bio-95 and Herbal Pet wash under Chapter 34 of the Central Excise Tariff Act, 1985. The Department objected to the respondent's classification under sub-heading nos. 3402.10 & 3401.11, contending that they should be classified under sub-heading nos. 3402.90 & 3307.90 respectively. The Tribunal, in a previous order, held that the respondent had correctly classified the products under CTH 3402.10 & 3401.11. This classification dispute formed the basis of the subsequent refund claim by the respondent.

Refund Eligibility Issue:
Following the Tribunal's favorable order on classification, the respondent filed a refund application for the Central Excise duty paid during the investigation period. The Original Authority allowed the refund application, which was upheld by the Commissioner (Appeals). The Revenue, however, appealed the decision, arguing that the refund claim was hit by the doctrine of unjust enrichment due to the recovery of differential duty through debit notes.

Doctrine of Unjust Enrichment Issue:
The Revenue contended that the duty amount had been passed on to the buyers through debit notes and, even if refunded by the respondent, it was done in a subsequent financial year, not during the disputed period. The Revenue relied on the doctrine of unjust enrichment, citing relevant judgments to support its position. The respondent argued that the duty amount was paid back to the buyers post the Tribunal's order, thus claiming that the refund was not hit by unjust enrichment.

In the judgment, Member (Judicial) S K Mohanty analyzed the facts and submissions from both parties. The Member noted that the duty amount was recovered through a debit note in a previous financial year but was refunded to the buyers in a subsequent year, not during the disputed period. The Member found that the respondent had utilized the duty benefit and had not reflected the refund amount in its Balance Sheet as a claim receivable from the Central Excise Department for the relevant year. Relying on the judgments cited by the Revenue, the Member concluded that the refund claim was hit by the doctrine of unjust enrichment. Consequently, the impugned order allowing the refund benefit in favor of the respondent was set aside, and the appeal filed by the Revenue was allowed. The cross objection filed by the respondent was disposed of accordingly.