2017 (5) TMI 144 - AT - Central Excise

Unjust enrichment - refund claim - Held that - M/s.Indian Oil Corporation Ltd., by letter dated 23rd December 2010, in respect of recovery of excess payment of Excise Duty, debit notes have been issued to the appellants. Thus, it is clearly evident that the appellant initially passed the incidence of duty to its customers - There is no corroborative evidence on record that the customer returned the duty amount to the appellant and therefore, the refund claim was rightly rejected on the ground of unjust enrichment - appeal dismissed - decided against appellant.

Summary

Issues:
Refund claim rejection based on unjust enrichment.

Analysis:
The case involved the appellant engaged in repacking lubricating oils, Hydraulic Brake Fluids, and Anti-Freezing preparations under specific chapters of the Central Excise Tariff Act, 1985. The appellant paid a higher duty rate of 14% ad valorem instead of 8% ad valorem during a certain period and subsequently filed a refund claim for the excess payment. The Adjudicating Authority rejected the refund claim of ?14,06,532 on the grounds of unjust enrichment, as it was observed that the ultimate buyers did not suffer any real loss by bearing the duty burden. The Commissioner(Appeals) upheld the Adjudication Order.

Upon hearing both sides and examining the records, it was found that the appellant initially passed on the duty incidence to its customers, as evidenced by debit notes issued by M/s. Indian Oil Corporation Ltd. The Hon'ble Supreme Court precedent highlighted the principle of unjust enrichment, emphasizing that a refund claim can only succeed if the burden of duty has not been passed on to another person. The doctrine of unjust enrichment was deemed just and salutary, preventing individuals from collecting duty from both buyers and the State.

The judgment cited relevant case law, emphasizing that a claim for refund can only be allowed if the burden of duty has not been passed on. The High Court's erroneous interpretation of Section 11B was noted, and the importance of verifying who ultimately bore the duty burden was highlighted. It was concluded that in the present case, the appellant failed to provide evidence that the duty amount was returned by customers, leading to the rightful rejection of the refund claim on grounds of unjust enrichment.

In light of the discussions and legal precedents, the appellate tribunal found no reason to interfere with the decisions of the lower authorities and consequently rejected the appellant's appeal. The judgment was pronounced in open court on 27.04.2017.