2015 (5) TMI 239 - AT - Customs

Denial of refund claim - Unjust enrichment - provisional duty was paid - later found that goods were covered by the Advance License - Held that - It is clear from the facts that consequent to Hon ble High Court s direction, an amount of ₹ 6,13,139/- was paid as duty even though the Bill of Entry was assessed provisionally. Therefore, the case of Veekay Products Ltd. (2013 (9) TMI 587 - CESTAT MUMBAI) is not applicable. - duty was finally assessed by the order of the Commissioner. At the time of provisional assessment, the amount was paid as duty and the goods were released. Clearly when the amount has been paid as duty, the test of unjust enrichment will have to be applied. - Simply stating that the goods were sold at a loss does not establish that the duty incidence was not passed. - C.A. certificate dated 19.11.2010 clearly states that the amount of duty has been added to the cost of material purchased in the balance-sheet. This establishes that burden of duty was passed to the customers - appellant has not been able to clear the test of unjust enrichment - Decided against assessee.

Summary

Issues:
1. Refund of import duty credited to Consumer Welfare Fund
2. Application of unjust enrichment in cases of provisional assessment

Analysis:
Issue 1: Refund of import duty credited to Consumer Welfare Fund
The appellant imported 'Vitamin B2 Riboflavin' under a Bill of Entry, which was restricted for import. The goods were confiscated due to the unavailability of the original Advance License, with an option to redeem on payment of fine and penalty. After a legal battle, the Commissioner of Customs ordered re-assessment and the appellant applied for a refund of Rs. 6,13,139/- along with interest. The adjudicating authority sanctioned the refund but credited it to the Consumer Welfare Fund due to the bar of unjust enrichment not being cleared. The appellant argued that since the goods were initially cleared under provisional assessment, the duty incidence was not passed on to customers, citing relevant judgments. However, the C.A. certificate indicated that the duty amount was added to the cost of material purchased, demonstrating the burden of duty was passed to customers. The Tribunal concluded that the appellant failed to prove that duty incidence was not passed on, thus rejecting the appeal.

Issue 2: Application of unjust enrichment in cases of provisional assessment
The Tribunal analyzed whether the amount paid as duty was on account of duty or not. Despite the provisional assessment, the appellant paid Rs. 6,13,139/- as duty following the High Court's direction. The Tribunal noted that when duty is paid and goods are released, the test of unjust enrichment must be applied. The appellant's failure to submit an invoice to justify that duty incidence was not passed on, coupled with the C.A. certificate indicating duty was added to the cost of material purchased, established that the burden of duty was indeed transferred to customers. As per Section 28D of the Customs Act, the appellant needed to prove that duty incidence was not passed on, which was not satisfactorily demonstrated. Consequently, the Tribunal upheld the decision to credit the refund to the Consumer Welfare Fund due to the appellant's inability to clear the test of unjust enrichment.

This judgment highlights the importance of proving non-passing of duty incidence in refund cases, especially in situations involving provisional assessment. The burden lies on the appellant to demonstrate that customers did not bear the duty burden, failing which the refund may be credited to the Consumer Welfare Fund.