2015 (1) TMI 371 - AT - Central Excise

Denial of refund claim - Unjust enrichment - Held that - lower adjudicating authority recorded that the appellant produced a Certificate from the Chartered Account certifying that as per Book of Accounts the duty incidence has not been passed on to any third party and after recording that this certificate has not been supported by any corroborative evidence rejected the refund claim as unsubstantiated. Learned Commissioner (Appeals) also similarly rejected the refund claim. We wish to record here that ground of unjust enrichment cannot be a ground for rejecting a refund claim. The question of unjust enrichment comes into play only after when it is decided whether refund is sanctionable or otherwise. We find that both the lower authorities have not given findings whether the refund is sanctionable or otherwise and straightway rejected the refund claim on the ground of unjust enrichment. It is pertinent that after finding whether the refund is sanctionable or not the authorities have to either refund the amount to the appellant or they have to credit the amount to the Fund. In these circumstances the case is remanded to the lower adjudicating authority to decide the refund on its merits - Decided in favour of assesse.

Summary

Issues:
Refund claim under Notification 6/2000-C.E. (Sl. 72) for duty paid on imported consignments of tyres, flaps, and tubes used in the manufacture of motor vehicles. Rejection of refund claim by lower adjudicating authority and Commissioner (Appeals) based on unjust enrichment without determining the sanctionability of the refund.

Analysis:
The case involved a refund claim for duty paid on imported consignments of tyres, flaps, and tubes used in the manufacture of motor vehicles under Notification 6/2000-C.E. (Sl. 72). The appellant claimed a refund of &8377; 26,674 on the grounds that the items were eligible for exemption from duty. However, the lower adjudicating authority rejected the claim, stating that the appellant failed to prove that the duty incidence had not been passed on to customers as required by Section 28 of the Customs Act, 1962. The Commissioner (Appeals) upheld this decision, emphasizing the lack of evidence that the duty incidence was not passed on and the insufficiency of the certificate from the External Auditor without supporting documentation like sale invoices.

The Tribunal noted that both lower authorities rejected the refund claim on the basis of unjust enrichment without determining whether the refund was sanctionable. The Tribunal clarified that unjust enrichment should be considered only after deciding the refund's sanctionability. Therefore, the authorities were directed to first determine the refund's merit and then address the issue of unjust enrichment. The case was remanded to the lower adjudicating authority for a fresh decision on the refund claim based on its merits, followed by a determination on unjust enrichment.

In conclusion, the appeal was allowed by way of remand, highlighting the importance of assessing the sanctionability of a refund claim before considering the doctrine of unjust enrichment. The judgment emphasized the procedural requirement for authorities to first establish whether a refund is due before addressing issues related to unjust enrichment.