2014 (10) TMI 634 - AT - Central Excise

Denial of refund claim - Unjust enrichment - Held that - Appellant is a job worker who is engaged in the activity of processing of unprocessed fabrics. For processing, the appellant is manufacturing printing paste on which he is not paying duty on their job charges. Only on persuasion of the department, the appellant paid duty on the activity of manufacturing of printing paste which used in their job work activity, under protest. Later-on it was held that the activity of manufacturing of printing paste does not amounts to manufacture therefore, duty is not payable at all. In the circumstance, when the goods are duty-free therefore, the provisions of Central Excise Act, 1944 are not applicable as held by the Hon ble High Court of Bombay in the case of Biochem Pharmaceuticals (2006 (1) TMI 272 - CESTAT, MUMBAI). When the provisions of Central Excise are not applicable in that case bar of unjust enrichment is also not applicable. Therefore, relying on the decision of Biochem Pharmaceuticals (supra), I hold that in this case bar of unjust enrichment is not applicable - Decided in favour of assessee.

Summary

Issues:
Refund claim rejected on grounds of unjust enrichment.

Analysis:
The appellant, a job worker, processed fabrics and cleared them to the principal manufacturer. Duty was levied on the printing paste used in the job work, which the appellant paid under protest. However, a High Court judgment clarified that manufacturing printing paste did not amount to manufacture, making the duty payment unnecessary. The adjudicating authority sanctioned the refund claim, but the Commissioner (Appeals) set it aside due to unjust enrichment concerns. The appellant argued that since the activity did not constitute manufacture, the Central Excise Act did not apply, and unjust enrichment was not relevant. Citing legal precedents, the appellant contended that the duty incidence was not passed on to buyers. The Revenue, however, invoked the concept of unjust enrichment based on a Supreme Court ruling. The Tribunal noted that the duty-free status of the goods rendered the Central Excise Act inapplicable, aligning with the Biochem Pharmaceuticals case. Consequently, the bar of unjust enrichment was deemed inapplicable. The Tribunal set aside the impugned order, allowing the appeal with any consequential relief.

This judgment delves into the application of unjust enrichment in a scenario where duty was paid under protest but later found to be unnecessary due to a clarification on manufacturing activities. The Tribunal's analysis focused on the legal framework and relevant precedents to determine the applicability of the Central Excise Act and unjust enrichment principles. By aligning with the Biochem Pharmaceuticals case and considering the duty-free nature of the goods, the Tribunal concluded that unjust enrichment was not a valid concern in this context. The decision highlights the importance of legal interpretations and precedents in resolving refund claims and unjust enrichment issues in indirect tax matters.