2017 (11) TMI 749 - AT - Central Excise

Refund claim - doctrine of unjust enrichment under Section 11B - Held that - The appellant is a unit of Ministry of Defence. They have manufactured vehicles such as Shaktiman Trucks and supply the same for defence use. The bar of unjust enrichment will be applicable in those cases where the incidence of excise duty involved has been passed on to some other person - In the present case, it is obvious that the Ministry of Defence cannot pass on the incidence of duty to any other agency. Consequently, the refund will be payable in cash - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Refund claim by a Government of India undertaking under Ministry of Defence.
- Application of doctrine of unjust enrichment under Section 11B.
- Eligibility for refund on merits.
- Payment of refund in cash.

Analysis:
The case involved three appeals with a common issue, where the appellant, a Government of India undertaking under the Ministry of Defence, sought refund of duty paid for goods not received. The appellant received supplies of motor vehicle parts for manufacturing vehicles exclusively for the Indian Army. The department noted discrepancies in goods received and duty paid, leading to refund claims rejected by the Assistant Commissioner based on the doctrine of unjust enrichment under Section 11B. The first appellate authority acknowledged the merit of the refund claims but upheld the denial due to unjust enrichment.

During the hearing, the appellant's counsel argued for cash refund, asserting that as a Ministry of Defence unit, the incidence of duty could not have been passed on to buyers since the vehicles were manufactured for the Ministry's use. The appellant contended that unjust enrichment did not apply in their case. On the other hand, the Departmental Representative reiterated the stance taken in the impugned orders.

The Tribunal recognized that the appellant's refund claims were valid on merits. However, the crucial issue was whether the duty incidence had been transferred to buyers, triggering unjust enrichment. Given the nature of the appellant's operations as a Ministry of Defence unit supplying vehicles for defense purposes, it was evident that the Ministry could not shift the duty burden to any other entity. Consequently, the Tribunal held that the refund should be paid in cash, as the doctrine of unjust enrichment did not apply in this scenario.

In conclusion, the Tribunal set aside the impugned orders, allowing the appeals and directing the payment of the refund in cash to the appellant, a unit of the Ministry of Defence, for the duty paid on goods not received, as the doctrine of unjust enrichment was inapplicable in this context.