2016 (2) TMI 650 - AT - Customs

Recovery of refund - refund alleged to have been erroneously paid to the appellants, on the ground that the appellants have not satisfied that they have not passed on the incidence of duty - Held that - It is thus clear that the Re-assessment was done immediately and also that the appellants had shown the excess payment of safeguard duty as refund receivable in their books of accounts. It is also certified that the said excess duty element has not been taken into the costing of the final products. Therefore, it is transparent that the excess duty has not been passed on and the principle of unjust enrichment has not been violated. The appellants are clearly eligible for the refund of the excess payment of duty. - Demand set aside - Decided in favor of assessee.

Summary

Issues:
Recovery of erroneously paid duty refund based on unjust enrichment principle.

Analysis:
The case involved M/s. Rama Cylinders Pvt Ltd. disputing the recovery of a refund of &8377; 36,03,939/- ordered by the Commissioner (Appeals) due to alleged erroneous payment of duty. The dispute arose from the import of seamless steel tubes with an outer diameter of 317 mm, where safeguard duty was mistakenly paid at 20% instead of the actual duty amount. The claimant filed for a refund under Section 27 of the Customs Act, 1962, supported by a certificate from a Chartered Accountant stating that the excess duty was not passed on to any other party. The adjudicating authority initially sanctioned the refund, but the Revenue appealed to the Commissioner (Appeals) who ordered the recovery of the refund amount.

During the proceedings, the appellants argued that the duty incidence was not passed on as the imported goods were used in their manufacturing process, and the excess duty element was not included in the cost of the final products. They relied on a Tribunal decision in a similar case to support their claim. On the other hand, the Revenue contended that the appellants failed to provide sufficient evidence beyond the Chartered Accountant's certificate to prove non-passing of duty incidence. The Revenue argued that even if the goods were used in manufacturing, the duty incidence could still be passed on if the higher duty element was factored into the final goods' cost.

Upon careful evaluation, the Tribunal found that the Customs EDI system had initially assessed the duty incorrectly but was promptly updated the next day, leading to a re-assessment of the duty amount. The appellants had demonstrated through the Chartered Accountant's certificate and their accounting practices that the excess duty had not been passed on to any party. The Tribunal referenced a previous case to support its conclusion that the burden of duty had not been transferred to the buyer, thus rejecting the principle of unjust enrichment. Consequently, the Tribunal set aside the Commissioner (Appeals) order and allowed the appeal in favor of the appellants.

In conclusion, the Tribunal's decision focused on the timely correction of the duty assessment, the lack of evidence indicating passing on of duty incidence, and the adherence to accounting practices that prevented the burden of duty from being shifted to others. The case highlighted the importance of proper documentation and accounting procedures in establishing eligibility for duty refunds and avoiding unjust enrichment issues.