2019 (10) TMI 1157 - AT - Customs

Whether redemption fine and penalty are subject to the doctrine of unjust enrichment? HELD THAT - The Hon ble High Court in the matter of United Spirits Ltd. (supra) after considering the decisions of the Hon ble Supreme Court in the matters of Sahakari Khand Udyog Mandal 2005 (3) TMI 116 - SUPREME COURT as well as Mafatlal (supra) which were relied upon by the learned Commissioner while rejecting the Appeal of the Appellants held that the principle of unjust enrichment is not attracted in case of fine and the same was approved by the Hon ble Supreme Court in 2015 (5) TMI 371 - SUPREME COURT . In my view the learned Commissioner ought to have gone through both the decisions of Hon ble Supreme Court in order to see whether the said decisions are applicable on the facts of the case or in other words whether the same can be applied for rejecting the claim of refund of redemption fine and penalty on the ground of unjust enrichment. The principle of unjust enrichment is not applicable so far as the redemption fine or penalty is concerned - Appeal allowed.

Summary

Issues:
- Whether redemption fine and penalty are subject to the doctrine of unjust enrichment?

Analysis:
The appeal challenged an order regarding the redemption fine and penalty imposed on the import of a re-manufactured engine. The Adjudicating Authority had ordered confiscation of the engine with an option to redeem it by paying a fine and penalty. The appellants paid the amounts but later filed a refund claim, which was initially allowed but credited to the Consumer Welfare Fund due to the principle of unjust enrichment. The Commissioner (Appeals) upheld this decision, stating that the appellants failed to prove that the amounts were not passed on to others.

During the hearing, the appellants argued that the principle of unjust enrichment does not apply to the refund of redemption fine and penalty. They cited Supreme Court decisions and submitted a Chartered Accountant's certificate to support their claim that the amounts were not passed on. The revenue representative supported the findings of the impugned order.

The issue of unjust enrichment in cases of redemption fine and penalty was settled by the Supreme Court in the case of CC, Raigad vs. M/s. Finacord Chemicals (P) Ltd. & Ors. The Court held that the doctrine of unjust enrichment does not apply to fines, penalties, or refund of pre-deposits. The High Court of Bombay's decision on this matter was affirmed by the Supreme Court. The Customs Act, 1962 restricts the application of unjust enrichment only to duty, cess, tax, and fees, not to fines, penalties, or pre-deposits.

Considering the Supreme Court's rulings, the Tribunal concluded that the principle of unjust enrichment does not apply to redemption fines or penalties. Therefore, the appeal was allowed, granting consequential relief to the appellants as per the law.