2003 (6) TMI 92 - AT - Central Excise

Refund of excess duty paid on Electro Static Precipitators (ESPs) - Unjust enrichment - capital goods - HELD THAT - We have perused the judgment of the Hon'ble Apex Court in the case of Solar Pesticides Pvt. Ltd. 2000 (2) TMI 237 - SUPREME COURT and we note that the issue that arose for consideration before the Apex Court was whether the doctrine of unjust enrichment is applicable in respect of raw material imported and consumed in the manufacture of a final product and the Hon'ble Apex Court has held that the principle of unjust enrichment incorporated in Section 27 of the Customs Act (corresponding Section 11B of the CE Act) would be applicable in respect of imported raw material and captively consumed in the manufacture a final product and duty is considered to have been passed on when the duty paid on raw material has been added to the price of the finished goods and the Hon'ble Apex Court has not said anything about captive consumption of capital goods. We also note that the Apex Court in the noted judgment has distinguished their judgment in the case of Bhadrachalam Paperboards Ltd. v. Govt. of Andhra Pradesh 1998 (8) TMI 93 - SUPREME COURT . The learned JDR has invited our attention to the decision of the West Zonal Bench of the Tribunal in the case of CC (Import) v. Godrej Boyce 2001 (2) TMI 233 - CEGAT, MUMBAI it was held that the judgment of the Supreme Court in the case of U.O.I. v. Solar Pesticides 2000 (2) TMI 237 - SUPREME COURT makes it clear that the doctrine of unjust enrichment would apply to capital goods also. As noted above, the above noted judgment of the Hon'ble Apex Court in the cases of Solar Pesticides does not say anything about capital goods and it deals only with captive consumption of imported raw material. Be that as it may, in the instant case, the facts are entirely different as noted above as capital goods viz. ESPs have been only used captively for pollution control purpose and the same were not used for processing or manufacturing of any final product, hence there is no question of passing of the burden of duty to anyone. Thus, we are of the considered opinion that in the facts and circumstances of the case, the order-in-appeal passed by the Commissioner (Appeals), is not legal and proper and we set aside the same, restore the Order-in-Original No. 8/99, dated 31-1-99 passed by the original authority and allow the appeal with consequential relief, if any.

Summary

Issues involved:
The issue involves the eligibility for refund of excess duty paid on Electro Static Precipitators (ESPs) purchased by the appellants, the application of the doctrine of unjust enrichment, and the interpretation of relevant provisions of the Central Excise Act.

Comprehensive Details:

1. Eligibility for Refund:
The appellants purchased ESPs at a concessional rate of duty but paid full duty as the manufacturer could not provide the required pollution control certificate. After obtaining the certificate post-purchase, the supplier claimed a refund of the excess duty paid. Despite multiple proceedings and appeals, the refund was not granted due to unjust enrichment concerns.

2. Doctrine of Unjust Enrichment:
The Commissioner (Appeals) rejected the refund claim citing lack of evidence that duty had not been passed on to customers. However, the Tribunal found that the goods were used for captive consumption at a power plant for pollution control, with no duty passed on to buyers. Citing legal precedents, including the Bhadrachalam Paperboards Ltd. case, it was established that unjust enrichment does not apply when duty is not transferred to customers.

3. Interpretation of Central Excise Act:
The Tribunal criticized the Commissioner (Appeals) for importing provisions of the Income-tax Act into a Central Excise dispute. It emphasized that the dispute revolved around the eligibility for refund concerning capital goods, not the passing on of duty to consumers. The judgment clarified that the doctrine of unjust enrichment does not automatically apply to capital goods, especially when used for captive consumption without any sale of final products.

In conclusion, the Tribunal set aside the Commissioner (Appeals) order, reinstated the original authority's decision, and allowed the appeal in favor of the appellants, emphasizing the unique circumstances of the case and the inapplicability of the doctrine of unjust enrichment in the given context.