2022 (6) TMI 776 - AT - Service Tax

Rejection of refund claim against pre-deposit - compliance to Section 35F (Pre 2014 amendment) - HELD THAT - For the purpose of filing an appeal, confirmed duty demand in the order to be appealed against alongwith interest and penalty are to be deposited with the adjudicating authority. Accordingly, letter under reference i.e. Appellant s letter dated 21.08.2009 has been sent that borne testimony to the fact that such amount was deposited in confirmation of the order dated 27.07.2009 with its annexure issued on 12.08.2009 and it is a clear revolution of the fact that Appellant was to file an appeal against such order before the Commissioner of Central Excise Customs (Appeals), Pune. There was a noting in it that such payment as full settlement of the amount demanded was without prejudice to the appeal to be filed. This being the facts and evidence on record, there is no second opinion that can emerge that such payment made by the Appellant towards discharge of duty confirmed alongwith interest and penalty was in the form of pre-deposit so as to acquire right of appeal and therefore the Circular of the CBEC Board referred by the Appellant namely Circular Nos. 1053/2/2017-CX, 984/8/2014-CX, 275/37/2k-CX.8A would clearly apply wherein it was stipulated that a simple application would be sufficient for the purpose of processing the refund and Appellant would not be subjected to the process of refund of duty as contemplated under Section 11B of the Central Excise Act, 1944. There is no such authority that would show that any amount being shown as expenditure would automatically get credited in the income side as if it is realised from a third party/person. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Rejection of refund claim against pre-deposit under Section 35F.
2. Applicability of Section 11B of the Central Excise Act for refund of pre-deposit.
3. Doctrine of unjust enrichment in the context of refund claims.
4. Interpretation of accounting treatment in unjust enrichment cases.

Analysis:
1. The appeal challenges the rejection of a refund claim against a pre-deposit made in compliance with Section 35F, following an Order-in-Original confirming duty demand, interest, and penalty, subsequently set aside by CESTAT. The appellant sought a refund after the CESTAT's order, which was indirectly denied through an adjudication order and an appeal process. The Commissioner of Central Tax (Appeals-II) sanctioned the refund but directed it to be transferred to the Consumer Welfare Fund, alleging unjust enrichment. The legality of this order is contested.

2. The appellant argued that Section 11B of the Central Excise Act should not apply to refunds of pre-deposits made under Section 35F, contending that the doctrine of unjust enrichment should not bar such refunds. The payment was made under protest to acquire the right of appeal, and the burden of duty was not passed to consumers. The appellant relied on relevant judgments to support their position, emphasizing that the order of the Commissioner (Appeals) should be set aside.

3. The Respondent-Department maintained that the order passed by the Commissioner (Appeals) was rational, citing the need to establish no unjust enrichment in accounting statements. However, the appellant's submissions and legal precedents highlighted that the burden of duty had not been passed to consumers and that the doctrine of unjust enrichment should not apply to the refund claim in this case.

4. The Tribunal analyzed Section 35F of the Central Excise Act, noting that the pre-deposit was made to acquire the right of appeal, not as a duty liability. The Tribunal rejected the argument that showing the amount as expenditure in accounting records automatically leads to unjust enrichment, emphasizing that the burden of proof for unjust enrichment was not established. The order of the Commissioner of Central Tax (Appeals-II) was set aside, and the appellant was directed to receive the deposited amount with interest from the Respondent-Department within three months.