2019 (9) TMI 279 - AT - Central Excise

Refund of duty paid under mistake - rejection on the ground that the appellant could not substantiate their claim regarding reversal of Cenvat Credit under Rule 6(3)(iii) of the Cenvat Credit Rules, 2004 - HELD THAT - In the instant case, the appellants have exported goods on payment of duty. The fact of export is not challenged and the purpose of the procedure export under bond is just to ensure that the goods are exported. In the instant case, since the fact of export of goods is not under challenge, even if the Cenvat Credit is not reversed in respect of these exports, the appellant would be principle covered by the clause (v) of sub-Rule 6 of Rule 6 of Cenvat Credit Rules, 2004 and therefore, exempted from the provision of sub rule (1), (2), (3) (4) of the Rule 6 of Cenvat Credit Rules, 2004. Rebate claim - rejection of claim was that the goods cleared by the appellant were exempted under notification 12/2012-CE dated 17/03/2012 and, therefore, the payment made by the appellant was not duty and in these circumstances, no claim of the refund can be filed - HELD THAT - In view of the fact that the goods are exempted and not liable to pay duty, however, the appellant chose to pay duty knowingly, is also established from the fact that in the other unit of the appellant, the appellant was asked to reverse the said amount, which the appellant did on 16.06.2011. In the instant case, the appellant has chosen to pay duty in the year 2013 and thus, it can be said that it was a voluntary act - In view of the fact that the goods are exempted and not liable to pay duty, however, the appellant chose to pay duty knowingly, is also established from the fact that in the other unit of the appellant, the appellant was asked to reverse the said amount, which the appellant did on 16.06.2011. In the instant case, the appellant has chosen to pay duty in the year 2013 and thus, it can be said that it was a voluntary act. Refund claim - unjust enrichment - HELD THAT - A perusal of sub-section (1) of section 11B of the Central Excise Act shows that provision of unjust enrichment is applicable to all refunds. However, in proviso to sub section 11B(2), certain exemptions have been carved out. One such exemption relates to rebate of duty on excisable goods exported out of India - It is seen that in the instant case the refund claim by the appellant does not relate to rebate of duty. The refund has been claimed on the ground of erroneous payment of duty. In view of the clear provision of section 11B(1), the onus of establishing the lack of unjust enrichment in this case is on the appellant. The appellants are entitled to refund - the same can be given only when they pass the test of unjust enrichment - matter remanded for such reconsideration - appeal allowed by way of remand.

Summary

Issues:
1. Refund claim rejection based on duty paid on goods exempted but exported
2. Reversal of Cenvat Credit on inputs
3. Application of principle of unjust enrichment

Issue 1: Refund claim rejection based on duty paid on goods exempted but exported
The appellant, engaged in manufacturing medicaments, filed a refund claim for duty paid on goods cleared for export, claiming it was paid by mistake. The claim was rejected by the Original Adjudicating Authority citing failure to substantiate the reversal of Cenvat Credit and the goods being exempted under a notification. The rejection was based on Circular No. 940/01/2011-CX and the recovery of duty amount from foreign buyers. The appellant argued that the duty was paid voluntarily and relied on legal precedents supporting refund claims for exports. The Tribunal found that since the goods were exempted, the appellant was entitled to claim a refund despite paying duty voluntarily.

Issue 2: Reversal of Cenvat Credit on inputs
The lower authorities concluded that the appellant failed to prove the reversal of Cenvat Credit on exempted goods under Rule 6(3) of the Cenvat Credit Rules. However, the Tribunal noted that the export under bond exempted the clearance from certain rules, and since the fact of export was not disputed, the appellant was covered by the exemption clause. Therefore, the appellant was not required to reverse the Cenvat Credit on exported goods.

Issue 3: Application of principle of unjust enrichment
The lower authorities held that the appellant recovered the duty amount from foreign buyers, leading to unjust enrichment. The appellant disputed this, citing a government decision and lack of relevant case laws supporting unjust enrichment in export scenarios. The Tribunal observed that the refund claim was based on erroneous payment of duty, not rebate, and that the onus of proving lack of unjust enrichment lay with the appellant. The Tribunal directed the matter to be remanded to the Original Adjudicating Authority for the appellant to provide evidence regarding unjust enrichment.

In conclusion, the Tribunal allowed the appeal by way of remand, stating that the appellant was entitled to a refund subject to proving lack of unjust enrichment. The impugned order was set aside, and the matter was remanded for further proceedings.