2008 (7) TMI 660 - AT - Central Excise

Refund - Unjust enrichment - Held that - The consistent case of the appellants has been that they had collected the disputed duty amount from its buyer on an understanding that the same would be returned to them if the item was decided to be non-excisable. The appellants have established this claim with documentary evidence submitted before the lower authorities - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Refund of excise duty on preparations containing self-generated alcohols
- Unjust enrichment claim by revenue authorities
- Applicability of post-clearance adjustments in duty burden passing

Refund of excise duty on preparations containing self-generated alcohols:
The appeal was filed against an Order-in-Appeal where the Commissioner (Appeals) upheld the original authority's decision to credit the refund to the Consumer Welfare Fund due to unjust enrichment. The appellant had paid an amount under protest for clearances of preparations containing self-generated alcohols, later deemed non-excisable. The buyer raised debit notes for the duty paid, indicating the duty burden was passed on. However, the Tribunal found that the duty was not required as the item was non-excisable, and the amount recovered by the customer was not duty but a refund. The Tribunal distinguished post-clearance adjustments and held that the refund would not lead to unjust enrichment.

Unjust enrichment claim by revenue authorities:
The revenue authorities contended that the appellant had passed on the duty burden to the customer, justifying the decision to credit the refund to the Consumer Welfare Fund. They relied on the Larger Bench decision in S. Kumar's case, emphasizing that post-clearance adjustments did not affect the duty burden passing. However, the Tribunal disagreed, stating that the duty was not payable in the first place, and the recovery by the customer was not a duty burden but a return of the amount collected. The Tribunal found no unjust enrichment as the original amount collected was returned.

Applicability of post-clearance adjustments in duty burden passing:
The appellant cited the ONGC case to support their claim for the refund. The Tribunal noted that in the ONGC case, the duty was mistakenly collected and later returned to the customer, making ONGC eligible for a refund. Similarly, the appellant had collected the disputed duty amount with the understanding of its return if the item was non-excisable, supported by documentary evidence. The Tribunal allowed the appeal, emphasizing that the duty was not passed on but returned, aligning with the ONGC case's principles.

In conclusion, the Tribunal allowed the appeal filed by M/s. Om Pharmaceuticals Ltd., ruling in favor of the appellant due to the non-excisability of the item and the absence of unjust enrichment in the refund claim.