2007 (1) TMI 2 - SC - Central Excise

Refund Unjust enrichment Duty payment were made under protest- Matter remitted to assistant Collector whether duty element had been passed on to customer - Order of CEGAT set aside

Summary

Issues:
Challenge to the judgment of the Customs, Excise and Gold (Control) Appellate Tribunal regarding the application of the bar of unjust enrichment to claim for refund made under protest.

Analysis:
The case involved a dispute where the respondent, formerly known as M/s. Birla Jute & Industries Ltd., claimed a refund of Central Excise duty under Notification No. 36/87-C.E. The Department denied the rebate, leading the respondent to pay the duty under protest between March 1987 to March 1990. Initially, the respondent was granted the benefit of the notification by the Collector (Appeals). Subsequently, the Central Excise Authorities held that the duty had been passed on to customers, leading to a partial refund and crediting the rest to the Consumer Welfare Fund.

The Assistant Collector found that the duty incidence had been passed on to customers, which was upheld by the Commissioner (Appeals) based on the principle of unjust enrichment as per the decision in Mafatlal Industries Ltd. v. UOI. However, the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) allowed the appeals filed by the respondent, citing the payment made under protest as a reason to not apply the principle of unjust enrichment. The appellant contested this decision, referring to the judgment in Commissioner of Central Excise, Mumbai-II v. Allied Photographic India Ltd.

The legal argument centered around the amendments to Section 11B of the Central Excise Act, 1944, and the application of the concept of unjust enrichment introduced in 1991. The three-Judge Bench clarified the distinction between duty paid under protest and under provisional assessment, emphasizing that Section 11B dealt with the claim for refund, while Rule 9B dealt with making the refund. The judgment highlighted that the burden of proof was on the applicant to show that the duty incidence had not been passed on.

The Supreme Court, considering the above analysis, concluded that the CEGAT's order could not be sustained. The crucial question of whether the duty element had been passed on to the customer was deemed to require factual adjudication. Therefore, the matter was remitted to the Assistant Collector for further examination, allowing both parties to present supporting materials. It was clarified that the Court had not expressed any opinion on the impact of this adjudication on the proceedings before the Appellate Authority For Industrial & Financial Reconstruction.

In the end, the appeals were disposed of without any order as to costs, emphasizing the need for a factual determination on the passing on of the duty element to customers.