2018 (4) TMI 156 - AT - Central Excise

Refund claim - principles of natural justice - pre-deposit made by assessee - Held that - any amount deposited during the investigation will be in the nature of pre-deposit made by the assessee and principle of unjust enrichment will not be applicable in such cases - impugned order not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appeal against denial of CENVAT credit on shared capital goods.
2. Claim for refund rejected based on unjust enrichment principle.
3. Application of principles of unjust enrichment in refund cases.

Analysis:
1. The appeal was against the denial of CENVAT credit on capital goods shared with a tenant. The appellant availed credit on DG sets and Air Compressors shared with M/S, MHB Filters India. The Commissioner(Appeals) upheld the denial of credit, which was later appealed in CESTAT. The Tribunal allowed the appeal, stating that credit cannot be disallowed just because a portion of electricity generated was sold to others. The appellant then filed a refund claim, which was rejected based on lack of evidence that the duty amount was not passed on to customers. The Original authority found the duty amount debited in the P&L Account, indicating passing on the duty burden. The present appeal challenged this decision.

2. The appellant argued that the refund should not be rejected based on unjust enrichment as they reversed the credit during investigation. Citing various decisions, the appellant contended that the principles of unjust enrichment should not apply when credit is reversed due to ineligibility. The appellant relied on cases like CCE vs. Motorola India Pvt. Ltd. and SKF Technologies (I) Pvt. Ltd. vs. CC, Bangalore to support their claim. Additionally, the appellant referenced Suessen Asia Pvt. Ltd. vs. CCE, Pune, and Lakshmi Gayatri Iron & Steel Pvt. Ltd. vs. CCE&ST, Hyderabad to emphasize that reversal of credit does not amount to duty, thus unjust enrichment should not be a bar to refunds.

3. The AR reiterated the findings of the impugned order, but the Tribunal, after considering submissions and referenced decisions, found in favor of the appellant. The Tribunal noted that the appellant reversed the amount during investigation, and the refund was transferred to the Consumer Welfare Fund based on unjust enrichment principles. However, the Tribunal, following the decisions cited by the appellant, held that amounts deposited during investigation are akin to pre-deposits by the assessee, and unjust enrichment principles should not apply in such cases. Consequently, the Tribunal set aside the impugned order, allowing the appeal with consequential relief.

Conclusion:
The Tribunal allowed the appeal against the denial of CENVAT credit on shared capital goods and rejected the rejection of the refund claim based on the principle of unjust enrichment. The Tribunal held that in cases where amounts are reversed during investigation, the principle of unjust enrichment should not be applied, as per established legal precedents.