2015 (4) TMI 158 - AT - Customs

Denial of refund claim - Unjust enrichment - whether the refund amount has to be credited to the Consumer Welfare Fund as per the mandates of Section 27(2) of the Customs Act, 1962 by applying the doctrine of unjust enrichment, or the same is required to be paid to the appellant - Held that - As per the first proviso to sub-section (2) of the said section, the amount of duty as determined by the statutory authority shall, instead of being credited to the said Fund, be paid to the applicant, if such amount is relatable to the duty paid by the importer, if he had not passed on the incidence of such duty to any other person. Section 28D of the Act contains fiction to the effect that every person who has paid the duty on any goods under the Act shall be deemed to have passed on the full incidence of the duty to the buyer of the goods. This presumption is rebuttable by the person who claims refund of the duties. Therefore every person claiming refund under Section 27 of the Act has to demonstrate by relevant documentary evidence that he is not benefited by unjust enrichment. If the incidence of duty paid is borne by another/any other person, then the person claiming the refund will be unjustly enriched at the cost of other(s). Thus, in such eventuality, the refund amount shall be credited to the said Fund, instead of sanctioning in favour of the applicant. Showing the excess amount of Customs duty in the Balance Sheet for the period 2011-12, that to after rejection of the refund application by the original authority, is not at all relevant since the said amount was admittedly considered in the cost of production for the year 2008-09 and was absorbed in the sale value. Therefore, as per my opinion, the appellant has no locus standi to seek refund from the revenue to be unjustly enriched at the expense of some other person. In absence of any plausible evidence, the certificate furnished by the appellant cannot be relied on to arrive at the conclusion that the refund claimed amount has not been loaded in the costing of the garments sold in the year of import. If the refund is sanctioned to the assessee without proper verification of the books of account, there is every possibility of enrichment by the receipt of a benefit to which he is not entitled to, and accordingly, the advantage of refund benefit at some other's cost and expense will be unjust. Considering the said view, the doctrine of unjust enrichment was incorporated in the Customs statute in the year 1991 consequent to the enactment of the Central Excise and Customs Law (Amendment) Act, 1991. The effect of the amendment is that every assessee seeking refund of any duty to prove that he had not passed on the burden of such duty to any other person. - Thus, it is erroneous to assume that the provisions of Income Tax Act will be applicable for refund of customs duty. Refund amount has not been collected or retained illegally by the exchequer, rather the refund claim has been sanctioned and the amount has been credited to the Consumer Welfare Fund, in absence of any evidence produced by the appellant that the incidence of such duty amount has been borne by it and not passed on to any other person. Even assuming that the amount has been collected without the authority of law, still the doctrine of unjust enrichment is applicable for its refund to the applicant as per the ruling of Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. -Vs. - Union of India, reported in 1996 (12) TMI 50 - SUPREME COURT OF INDIA . - Decided against assessee.

Issues Involved:
1. Re-assessment of Bill of Entry and refund claim.
2. Application of the doctrine of unjust enrichment.
3. Verification of documentary evidence for refund claim.
4. Applicability of Income Tax Act provisions to Customs duty refunds.
5. Treatment of excess duty as a deposit.
6. Relevance of export orders and pricing in the context of unjust enrichment.

Issue-wise Detailed Analysis:

1. Re-assessment of Bill of Entry and refund claim:
The appellant imported Fusible Prints from Hong Kong and declared the value in US$ instead of Hong Kong $. This mistake led to excess duty payment, and the appellant requested re-assessment. The Commissioner (Appeals) directed the re-assessment, resulting in a duty reduction from Rs. 5,51,193/- to Rs. 75,247/-. The appellant claimed a refund of the excess duty paid, which was rejected by the Assistant Commissioner (Refunds) due to the doctrine of unjust enrichment.

2. Application of the doctrine of unjust enrichment:
The core issue was whether the refund should be credited to the Consumer Welfare Fund under Section 27(2) of the Customs Act, 1962, due to unjust enrichment. The doctrine implies that if the duty incidence is passed on to another person, refunding the amount to the appellant would result in unjust enrichment.

3. Verification of documentary evidence for refund claim:
The appellant provided Chartered Accountant's certificates and balance sheets to prove that the excess duty was not passed on to the buyers. However, the Tribunal found that the duty was included in the cost of production and passed on to the buyers in the sale price of garments. The Tribunal relied on the Supreme Court's judgment in Union of India v. Solar Pesticides Pvt. Ltd., which held that duty incidence passed indirectly through product pricing constitutes passing on the duty burden.

4. Applicability of Income Tax Act provisions to Customs duty refunds:
The appellant argued that showing the refund amount as 'receivable' in the balance sheet should negate unjust enrichment. The Tribunal rejected this, stating that Income Tax Act provisions do not apply to Customs duty refunds. Customs duties are indirect taxes, and the burden is usually passed on to the customer, unlike direct taxes under the Income Tax Act.

5. Treatment of excess duty as a deposit:
The appellant claimed that excess duty collected without authority should be treated as a deposit, exempting it from unjust enrichment. The Tribunal disagreed, referencing the Supreme Court's ruling in Mafatlal Industries Ltd. v. Union of India, which upheld the doctrine of unjust enrichment even for amounts collected without authority.

6. Relevance of export orders and pricing in the context of unjust enrichment:
The appellant contended that since export orders were received before importation and prices remained constant, there was no unjust enrichment. The Tribunal found no documentary evidence to support that the imported materials were used exclusively for exported garments. The uniform export price did not conclusively prove that the duty burden was not passed on.

Conclusion:
The Tribunal upheld the lower authorities' decision to credit the refund amount to the Consumer Welfare Fund, as the appellant failed to prove that the duty incidence was not passed on to the buyers. The appeal was rejected, affirming the application of the doctrine of unjust enrichment and the proper verification of documentary evidence for refund claims.

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