2020 (3) TMI 370 - AT - Central Excise

Refund of CENVAT Credit - doctrine of unjust enrichment - rejection of refund on the ground that the appellant herein did not produce any evidence to show that the incidence of service tax has not been passed on to any other person - HELD THAT - Insofar as establishing the issue of doctrine of unjust enrichment is concerned, posting of the refund figure in the balance sheet under the head Claims Receivable is recognised as an acceptable principle in the accounting policy. Thus, on reflection of the refund amount in the balance sheet under such heads of account, without making any specific treatment/entry of the same in the profit and loss account should prove the fact that the incidence of duty of the tax amount has not been passed on to any other person. Thus, we are of the considered view that the balance sheet should be considered as the primary evidence and not secondary evidence, as held in the impugned order. Inasmuch as the appellant herein has specifically produced the profit loss account as well as the balance sheet for the relevant period, both before the original as well as first appellate authority, to demonstrate that the incidence of duty has not been passed on to any other person and the same has in fact, been borne by it. Since entry in the accounting head of Loans and Advances under the column of Claims Receivable is sacrosanct for consideration of the issue of applicability of the doctrine of unjust enrichment, the case in hand merits consideration in favour of appellant and thus, the amount in question should appropriately be paid to the claimant-appellant instead of it being credit to the Consumer Welfare Fund. There are no merits in the impugned order passed by the Ld. Commissioner (Appeals) - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim rejection based on unjust enrichment doctrine.

Analysis:
The appellant filed a refund claim for CENVAT Credit, which was initially sanctioned by the Asst. Commissioner but later rejected by the Commissioner (Appeals) based on unjust enrichment. The Commissioner held that the appellant failed to prove that the service tax incidence was not passed on to others, disregarding the Chartered Accountant's certificate and balance sheet as insufficient evidence. The appellant argued that the balance sheet clearly showed the claim as "Claims Receivable," indicating the tax burden was not transferred. The Tribunal noted that the balance sheet entry under "Claims Receivable" is a valid accounting principle to demonstrate non-transfer of tax burden. The Tribunal distinguished a previous case where the High Court denied a refund based solely on a Chartered Accountant certificate, emphasizing that in this case, the appellant provided both profit & loss account and balance sheet as primary evidence. Relying on the Madras High Court's decision, the Tribunal concluded that the appellant's evidence was sufficient to establish non-transfer of tax burden, thus allowing the appeal and setting aside the Commissioner's order.

In conclusion, the Tribunal found that the Commissioner's order rejecting the refund claim based on unjust enrichment was erroneous. By considering the balance sheet entry under "Claims Receivable" as primary evidence and distinguishing a previous case where only a certificate was provided, the Tribunal allowed the appeal in favor of the appellant, directing the refund to be paid to the appellant instead of being credited to the Consumer Welfare Fund.