1991 (8) TMI 91 - HC - Central Excise

Summary

Issues:
1. Classification of goods for excise duty payment.
2. Claim for refund of excess duty paid under protest.
3. Application of the doctrine of unjust enrichment in excise duty cases.

Analysis:

Issue 1: Classification of goods for excise duty payment
The petitioners, a registered partnership firm manufacturing electrical items, sought approval for a revised classification list under Heading 8537 of the Central Excise Tariff Act. Initially, duty was paid at a higher rate under Heading 8536.90. The petitioners contended that duty should be paid under Heading 85.37, which has a lower duty rate. The claim was eventually accepted, and the revised classification list was approved with effect from a specified date.

Issue 2: Claim for refund of excess duty paid under protest
After the approval of the revised classification list, the petitioners filed a refund claim for the excess duty paid under protest. The Assistant Collector of Central Excise issued a show cause notice questioning the refund claim, citing a previous court decision suggesting that refunding the excess duty would lead to unjust enrichment. The petitioners argued that subsequent judgments clarified that the defense of unjust enrichment does not apply when duty is paid under protest. Despite presenting these judgments, the Department persisted with the show cause notice, prompting the petitioners to challenge its legality.

Issue 3: Application of the doctrine of unjust enrichment in excise duty cases
The Court reiterated that the doctrine of unjust enrichment does not apply when duty is paid under protest. The petitioners had successfully demonstrated that duty should be levied under a specific heading with a lower duty rate. Therefore, the Department was not justified in denying the refund based solely on the previous decision cited in the show cause notice. The Court held that the issuance of the show cause notice was without jurisdiction and ordered its quashing. The respondents were directed to refund the amount after verification within two weeks, with interest payable at 15% per annum if the amount was not repaid within the stipulated period. Additionally, the respondents were ordered to pay the costs to the petitioners.

In conclusion, the Court ruled in favor of the petitioners, emphasizing that the doctrine of unjust enrichment does not apply when duty is paid under protest, and the Department cannot withhold a refund based on an outdated legal precedent.