2018 (12) TMI 1169 - AT - Central Excise

Refund of reversed CENVAT credit - time limitation - unjust enrichment - Held that - The payment was made lastly in February, 2011 without protest and refund claim was filed on 22.06.2017. But such payment being made at the insistence of the Department cannot be considered as time barred and provisions of Section 11B are not applicable in the present case - However, he has not dealt with Section 11B explanation (EC) whereby the period of one year should be computed from the date of judgment decree, order or direction of the Appellate Tribunal. This being not challenged before the Commissioner, no finding is required in this aspect that refund was filed within the prescribed period of limitation. Unjust enrichment - Held that - It can be noticed that referring to the Balance Sheet of 2005-06 & 2006-07 and for the financial year of 2015-16 & 2016-17 the Adjudicating Authority has given his findings at para 27 that the appellant had not shown the amount of refund claim of ₹ 1,66,600/- as receivable amount in their Balance Sheet and the Chartered Accountant has not certified that the said amount has been shown in the Balance Sheet to be receivable . Therefore while holding that doctrine of unjust enrichment is applicable to all the cases of refund irrespective of the amount as refund of duty or otherwise - learned Commissioner (Appeals) has accepted the Chartered Accountant certificate as a piece of evidence to the extent that incidence of tax has not been passed on directly to any other person and in respect of indirect passing of such incidence of duty, his logic was that the amount has been booked as expenditure in the books of account and not as receivable that would clearly establish that the amount has been absorbed in the costing of final products. This finding appears to be erroneous. There is no hesitation to hold that rejection of refund claim of the appellant, which it is entitled to get by virtue as the order of this Tribunal, on the ground of unjust enrichment without any iota of proof of such unjust enrichment is erroneous and is not infirmity to the law - appeal allowed.

Issues involved:
Denial of refund of reversed CENVAT credit, applicability of doctrine of unjust enrichment, time bar for refund application, interpretation of Balance Sheet entries, reliance on judicial precedents.

Analysis:

1. Denial of refund of reversed CENVAT credit:
The case involved the denial of a refund of reversed CENVAT credit by the Assistant Commissioner of Central Tax, Solapur. The appellant, engaged in the manufacture of sugar and molasses, had reversed the credit of a specific amount as noted in an audit. This denial led to a series of legal proceedings culminating in the present appeal before the CESTAT Mumbai. The appellant had filed a refund application after a favorable order from the CESTAT, but it was refused, prompting the current appeal.

2. Applicability of doctrine of unjust enrichment:
The primary grounds for refusal of the refund were based on the doctrine of unjust enrichment. The appellant argued that the amount was not reversed on protest and that unjust enrichment did not apply since the amount was shown as an expenditure in their books of account. The appellant relied on various judicial decisions to support their argument that the reversal of credit should be considered as a pre-deposit, making unjust enrichment inapplicable. The Department, however, supported the reasoning of the Commissioner (Appeals) and argued that the doctrine of unjust enrichment should apply to deny the refund.

3. Time bar for refund application:
The Adjudicating Authority had initially found the refund application to be time-barred, but it was argued that the payment was made at the insistence of the Department and hence should not be considered as such. The provisions of Section 11B regarding the limitation period were discussed, with a reference to the computation from the date of the Appellate Tribunal's judgment decree.

4. Interpretation of Balance Sheet entries:
The Adjudicating Authority analyzed the Balance Sheet entries of the appellant for different financial years to determine if the amount claimed as a refund was shown as receivable. The Commissioner (Appeals) rejected the refund claim based on the finding that the amount had been absorbed in the costing of the final products, indirectly passing on the duty. The appellant contested this interpretation, highlighting errors in the analysis of the Balance Sheet entries and the absence of proof of unjust enrichment.

5. Reliance on judicial precedents:
Throughout the proceedings, both parties relied on various judicial precedents to support their arguments regarding the applicability of the doctrine of unjust enrichment and the interpretation of relevant legal provisions. The appellant cited specific cases to establish their position, while the Department referenced decisions to justify the denial of the refund.

In conclusion, the CESTAT Mumbai allowed the appeal, setting aside the rejection of the refund order. The appellant was granted the refund amount along with applicable interest within a specified timeframe. The judgment highlighted the importance of proving unjust enrichment and the correct interpretation of financial records in such cases.

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