2023 (7) TMI 946 - AT - Central Excise

Principles of unjust enrichment - incidence of duty has been passed on to the dealers or not - Refund of duty paid under protest - classification of water filters - HELD THAT - The appellant has collected excise duty by issuing invoice to their dealers and thereafter has issued credit notes as mark of returning the excise duty. However, it has to be borne in mind that the dealers have already passed on the said duty element to the consumers while selling the water filters to the consumers. There is no evidence that the appellant has returned the excise duty to the ultimate consumers. The Hon ble Supreme Court in the case of M/S. ADISON AND CO. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE 2017 (5) TMI 50 - SC ORDER / 2016 (8) TMI 1071 - SUPREME COURT had occasion to consider the very same point and held that by merely issuing credit notes subsequent to the clearance of goods, the assessee cannot be said to have passed the bar of unjust enrichment envisaged under Section 12B of the Central Excise Act, 1944. Thus, the order passed by the authorities below is legal and proper and does not require any interference - the impugned order is sustained - appeal dismissed.

Summary

Issues:
Classification of goods under different subheadings of CETA, eligibility for benefit of Notification No.4/97-CE, refund of duty under protest, unjust enrichment in refund claim.

Classification Issue:
The appellant initially classified their water filters under sub heading 8421.10 of CETA 1985 but later sought classification under sub heading 7323.10. The department contended that the filters are rightly classified under 8421.10. The Commissioner (Appeals) held in favor of the appellant, classifying the goods under 7323.10 and granting benefit under Notification No.4/97-CE.

Refund Issue:
The appellant filed a claim for refund of duty paid under protest, amounting to Rs.28,63,257, for the period between September 1997 and March 2000. The refund sanctioning authority partially rejected the claim, crediting the balance amount to the Consumer Welfare Fund due to the principle of unjust enrichment.

Unjust Enrichment Issue:
The appellant contended that the excise duty collected from dealers was returned through credit notes, thus not passing on the duty to consumers. However, the authorities found that the duty element was passed on to consumers by the dealers, and the appellant failed to establish that the duty was not passed on to the ultimate consumer. Citing the decision in M/s. Addison and Co. Ltd., it was held that issuing credit notes does not absolve the appellant from the bar of unjust enrichment. The appeal was dismissed based on this finding.

This judgment addresses the issues of classification of goods under different subheadings of CETA, eligibility for benefit under Notification No.4/97-CE, refund claim of duty paid under protest, and the principle of unjust enrichment in refund claims. The decision upheld the classification of the goods under sub heading 7323.10, granted the benefit of the notification, and dismissed the appeal regarding the refund claim due to unjust enrichment. The appellant's argument that issuing credit notes to dealers absolved them from passing on the duty element to consumers was rejected based on the precedent set by the Hon'ble Supreme Court in M/s. Addison and Co. Ltd. case.