2012 (9) TMI 311 - AT - Customs

Refund - burden of proof Held that - Where a person claims refund of fine or penalty, there can be no presumption that he has passed on this incidence to any other person - If the department seeks to deny cash refund to such a person on the ground of unjust enrichment, the burden is on them to show that the incidence of fine/penalty has been passed on by the claimant to any other person - refund is not hit by the bar of unjust enrichment In favor of assessee

Summary

Issues:
1. Applicability of the doctrine of unjust enrichment in a case involving the reduction of fine and penalty.

Analysis:
The appeal in question was filed against an order regarding the refund of a specific amount arising from the reduction of fine and penalty by the Commissioner (Appeals). The main issue to be decided was whether the doctrine of unjust enrichment applied in this scenario where the appellant had paid the fine and penalty as per the earlier order. The appellant argued that the amount claimed as a refund did not represent duty or tax that could be passed on to the consumer, thus the principle of unjust enrichment should not apply. They provided evidence, including a certificate from a Chartered Accountant and balance sheet entries, to support their claim that the amount was not passed on to any other person.

The Commissioner (Appeals) noted discrepancies in the appellant's documentation but agreed that the refund claim was rejected under a section covering only duty, not penalty and redemption fine. The Commissioner (Appeals) ultimately agreed with the appellant's contention that the reduction on the ground of unjust enrichment was not valid in this case. However, the appellate tribunal found that the doctrine of unjust enrichment should not apply if it is not substantiated that the burden of duty, penalty, and fine was passed on to others. Referring to relevant case laws, the tribunal emphasized the burden of proof in cases of unjust enrichment, especially when dealing with fines and penalties.

In a detailed analysis, the tribunal cited a judgment emphasizing that the burden of proof regarding unjust enrichment in cases of fines or penalties must be approached on equitable principles. The tribunal highlighted that the burden lies on the department to show that the incidence of fines or penalties claimed as a refund was passed on to the buyer or consumer. It was clarified that while duties can be passed on, fines and penalties, being penal in nature, cannot be transferred to others. The tribunal concluded that the doctrine of unjust enrichment should work in the reverse direction concerning fines and penalties compared to duties, as statutes presume that the burden of duty can be passed on, but penalties cannot.

In the final decision, the tribunal set aside the order of the Commissioner (Appeals) and allowed the appeal, indicating that the refund was not barred by the doctrine of unjust enrichment in this case. The judgment highlighted the importance of equitable principles and burden of proof in cases involving the refund of fines and penalties, ultimately ruling in favor of the appellant based on the specific circumstances and legal principles involved.