2006 (4) TMI 5 - AT - Central Excise

Central Excise The bar of unjust enrichment is applicable in the case refund claim, arisen out of the clearance of goods from a unit working under compound levy scheme based on capacity of production

Summary

Issues:
1. Interpretation of the bar of unjust enrichment on refunds arising from clearances under the Compounded Levy Scheme based on production capacity.

Analysis:
The Appellate Tribunal was faced with the question of whether the bar of unjust enrichment would apply to refunds arising from clearances under the Compounded Levy Scheme based on production capacity. The Tribunal noted conflicting decisions in the cases of Kothi Steel Ltd. and K.B. Rolling Mills. In the Kothi Steel Ltd. case, it was held that the bar of unjust enrichment does not apply to refunds arising from adjustments under Section 3A(5) of the Central Excise Act. On the other hand, in the K.B. Rolling Mills case, it was held that the bar of unjust enrichment does apply to refunds under the Compounded Levy Scheme. The Tribunal did not delve into the issue of whether the appellant was actually working under the Compounded Levy Scheme, as the main issue at hand was the applicability of the bar of unjust enrichment to such refunds.

The Revenue relied on the Supreme Court decision in the case of Sahakari Khand Udyog Mandal Ltd., where it was established that the doctrine of unjust enrichment prevents inequitable enrichment at the expense of another. The Supreme Court emphasized that the obligation of unjust enrichment is not based on contract or tort but on quasi-contract or the doctrine of restitution. The Tribunal acknowledged that the doctrine of unjust enrichment is based on equity and has been consistently applied in various cases. It was emphasized that regardless of the statutory provision, the doctrine can be invoked to deny benefits to those not entitled. The Tribunal highlighted the importance of showing payment, non-passing of burden to consumers, and potential loss in claiming a refund.

Ultimately, the Tribunal concluded that the bar of unjust enrichment applies to refunds, irrespective of statutory provisions. The Tribunal aligned with the Supreme Court's decision, stating that any contrary view is not considered good law. Consequently, the question of law referred to the Larger Bench was answered in favor of the Revenue based on the Supreme Court's decision. The Registry was directed to place the matter before the Regular Bench for further proceedings.