2025 (1) TMI 136 - AT - Central Excise

Refund of amounts deposited - amount paid voluntarity or is paid under protest - rejection on the ground of being barred by limitation as provided by Section 11B of the Central Excise Act, 1944 - applicability of principles of unjust enrichment - HELD THAT - It is evident that the amounts have been deposited as per the direction of the departmental officers in respect of certain shortages detected at the time of visit. The amounts so deposited on the direction of the departmental officer cannot be said to be voluntary deposit. Further appellant have contested the demand and have finally succeeded in getting the same set aside by the tribunal. As the appellant was contesting the demand the amount paid by them were necessarily not paid voluntarily but were paid under compulsion from the officer and were paid under protest. Further it needs to be noted that the amounts paid by the appellant were in respect of the shortages of the raw material detected by the officers at the time of visit. The amounts deposited could not have acquired the character of duty till the time they have been cleared from the premises of the appellant. Tribunal has clearly held that the charge of clandestine clearance of these goods cannot be established. Hence the amounts deposited do not acquire the character of duty . The expressions used in the Section 11B are in respect of refund of Duty and not the refund of deposits made complying with the directions of the officers. It is a settled law that any amount which becomes due to the appellant consequent to an Appellate order the deposits should have been refunded to the appellant - In case of GS. RADIATORS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, LUDHIANA 2004 (10) TMI 158 - CESTAT, NEW DELHI it was held that ' such payment will be considered as payment under protest. Tribunal under its Final Order had given direction to give consequential relief to the appellants which should have been given by the department. But instead of giving them refund, they rejected it on time-bar which is not correct. In view of the above, I find that payment made by the appellants has to be considered as payment under protest and the refund should be allowed to them if otherwise in order.' Conclusion - The amounts so deposited on the direction of the departmental officer cannot be said to be voluntary deposit. Payments made under protest during an ongoing dispute are not subject to the limitation period under Section 11B of the Central Excise Act, 1944. Such payments do not attract the doctrine of unjust enrichment. There is no reasonable ground for rejection of the refund claim - Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The judgment primarily revolves around the following core legal issues:

Whether the refund claim filed by the appellant is barred by limitation under Section 11B of the Central Excise Act, 1944.
Whether the amounts deposited by the appellant during the investigation can be considered as a voluntary payment or a payment under protest.
The applicability of the doctrine of unjust enrichment to the refund claim.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Limitation under Section 11B of the Central Excise Act, 1944

Relevant Legal Framework and Precedents: Section 11B of the Central Excise Act, 1944 prescribes a limitation period for filing refund claims. Precedents such as G S Radiators Ltd and Hawkins Cookers Ltd were considered to determine the applicability of the limitation period in cases of amounts deposited under protest.
Court's Interpretation and Reasoning: The court observed that the amounts deposited by the appellant were not voluntary but were made under the compulsion of departmental officers. Hence, the limitation period under Section 11B does not apply.
Key Evidence and Findings: The court noted that the appellant contested the demand and succeeded in getting it set aside by the tribunal, indicating that the payment was not voluntary.
Application of Law to Facts: The court applied the principle that amounts deposited under protest during an ongoing dispute are not subject to the limitation period of Section 11B.
Treatment of Competing Arguments: The court dismissed the argument that the refund claim was time-barred, emphasizing that the payments were made under protest.
Conclusions: The court concluded that the refund claim is not barred by limitation and should be allowed.

Issue 2: Voluntary Payment vs. Payment Under Protest

Relevant Legal Framework and Precedents: The court referred to previous judgments where payments made under departmental directions were considered as payments under protest.
Court's Interpretation and Reasoning: The court reasoned that the amounts paid by the appellant were under the direction of the officers and not voluntary, thus qualifying as payments under protest.
Key Evidence and Findings: The court found that the appellant had contested the demand and the tribunal had set aside the demand, reinforcing the characterization of the payment as under protest.
Application of Law to Facts: The court applied the principle that payments made under protest are not subject to the same limitations as voluntary payments.
Treatment of Competing Arguments: The court rejected the notion that the payments were voluntary, highlighting the coercive circumstances under which they were made.
Conclusions: The court concluded that the payments were made under protest and thus not subject to the limitation period.

Issue 3: Applicability of Unjust Enrichment

Relevant Legal Framework and Precedents: The court examined the doctrine of unjust enrichment and its applicability to refund claims.
Court's Interpretation and Reasoning: The court noted that the amounts paid did not acquire the character of duty and were not subject to the doctrine of unjust enrichment.
Key Evidence and Findings: The court found that the amounts were not duties but deposits made under protest, thus not triggering unjust enrichment concerns.
Application of Law to Facts: The court applied the principle that unjust enrichment does not apply to deposits made under protest.
Treatment of Competing Arguments: The court dismissed arguments related to unjust enrichment, emphasizing the nature of the payment as a deposit rather than a duty.
Conclusions: The court concluded that the doctrine of unjust enrichment does not apply to the refund claim.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The amounts so deposited on the direction of the departmental officer cannot be said to be voluntary deposit. Further appellant have contested the demand and have finally succeeded in getting the same set aside by the tribunal."
Core Principles Established: Payments made under protest during an ongoing dispute are not subject to the limitation period under Section 11B of the Central Excise Act, 1944. Such payments do not attract the doctrine of unjust enrichment.
Final Determinations on Each Issue: The appeals are allowed, and the refund claim is not barred by limitation. The amounts deposited by the appellant are considered as payments under protest and are not subject to unjust enrichment.

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