2021 (9) TMI 919 - AT - Customs

Refund of Customs Duty - denial on the ground of principles of unjust enrichment - refund is denied since the said amount was not shown as receivable as on 31st March, 2011 the said amount became expenditure and consequently became part of the cost of the product, for which the incident has been passed on - HELD THAT - The fact is not under dispute that the value of three bills of entries in question was included in the closing stock on 31st March, 2011. As per the grounds of appeal, only because the amount of refund was not shown as receivable as on 31st March, 2011 in the balance sheet the said amount stand expensed and become a cost of product. Even though the amount was not shown as receivable but it is included in the closing stock as on 31st March, 2011. The said amount has not become part of expenditure and therefore, cannot be treated as absorbed in the cost of final product. In the financial year 2011-12 admittedly the said amount shown as receivable in the balance sheet as on 30th September, 2011. With this fact it is clear that right from the closing position of 31st March till 30th September, 2011 the amount of refund has not been absorbed in the cost of final product. Therefore, the question of passing of incident of the said amount does not arise. Appeal dismissed - decided against Revenue.

Summary

Issues:
Refund hit by unjust enrichment due to non-inclusion in balance sheet as receivable on 31st March, 2011.

Analysis:
The appeal concerned a refund claim disputed by the revenue, arguing that the amount was not shown as receivable in the balance sheet on 31st March, 2011, leading to unjust enrichment. The revenue contended that since the amount was not reflected as receivable, it became part of the cost of the product, thus making the refund inadmissible. The Commissioner (Appeals) had allowed the refund, stating that the amount was included in the closing stock on 31st March, 2011, and subsequently shown as receivable in the balance sheet on 30th September, 2011. The respondent argued that due to provisional assessment, the exact amount could not be determined by 31st March, 2011, and was later accounted for. The Commissioner found that the amount was not absorbed in the cost of the final product, thus not subject to unjust enrichment.

The Commissioner's detailed analysis highlighted that duty on goods in stock is carried forward to the next financial year as per accounting principles and not treated as an expense, necessitating it to be posted as receivable in the subsequent year. The Commissioner noted that the appellant had booked the disputed amount as receivable on 31st March, 2011, and did not find unjust enrichment regarding the refund on three bills of entry. The Tribunal disagreed with the revenue's argument that the amount had become part of expenditure due to non-inclusion as receivable, emphasizing that the amount was included in the closing stock and not absorbed in the cost of the final product until later accounted for. Consequently, the Tribunal upheld the Commissioner's decision, dismissing the revenue's appeal.

In conclusion, the Tribunal affirmed that the refund claim was not hit by unjust enrichment, as the amount in question was accounted for in the closing stock on 31st March, 2011, and subsequently shown as receivable in the balance sheet on 30th September, 2011. The decision emphasized that the amount had not been absorbed in the cost of the final product during the relevant period, thus rejecting the revenue's contention of unjust enrichment.