2023 (6) TMI 161 - AT - Customs

Applicability of doctrine of unjust enrichment - Refund of Customs Duty paid in excess - failure to recognize the refund as duty receivables for the said period in their Books of Account - Section 27 of the Customs Act, 1962 - HELD THAT - The Department has mainly relied upon statutory provisions whereby certain presumptions are made with regard to passing of incidence of duty unless there is evidence to the contrary. Admittedly, in this case, on reassessment the rate of duty was reduced and as consequence respondents filed refund claims. The Respondents, at that point of time, were aware of the quantum of refund even though they had to go through the procedural requirement of filing refund claim. In fact they have clearly specified the amount of refund which they were eligible as consequence to reassessment also. At this point also they have not shown this amount as receivable in any of their books of account nor any such evidence was produced before the competent authority sanctioning refund to the effect that they had not passed on total amount of applicable Customs Duty to their customers except for the CA s Certificate. The statutory provisions concerning grant of refund and application of unjust enrichment are very clear. The Respondents were required to give clear evidence to the sanctioning authority that they had not collected the duty or had only partially collected the duty instead of full duty by way of any relevant document. They have clearly failed to do so. In fact, the statutory provisions clearly provided for the documents which would show the element of duty in the price and if such documents were produced it would have clearly shown the exact amount of duty included in the price or otherwise. They have not produced any such documents. Therefore, in the absence of any such evidence, merely producing CA certificate would not suffice to shift the burden of presumption for the purpose of Section 27 read with Section 28C of the Customs Act. In the present case, barring CA certificate, no other evidence has been produced by the Respondents before the Adjudicating Authority. As against this, the Department has clearly brought out certain evidence like the Respondents having not shown this amount as receivables in their books of account during the relevant time or not having produced any documents etc., as envisaged under Section 28C of the Customs Act. All these evidence leading to the conclusion that they have treated the duty as an element of expenditure and therefore, forming part of the Profit Loss account and not as receivables - in the facts of the case, they have clearly not been able to clear the bar of unjust enrichment by not having produced sufficient evidence before the original authority. Thus, in the absence of any verifiable and positive evidence from the Respondents, the Original Authority has rightly granted the refund on merits but ordered for crediting it to Consumer Welfare Fund and therefore, there is not infirmity in the Order of the Original Authority which was, however, set aside by the Commissioner (Appeals) as discussed in foregoing paras, therefore, the Order of the Commissioner (Appeals) is not correct and is liable to be set aside and the Order of the Original Authority is liable to be restored. The Impugned Orders of the Commissioner (Appeals) setting aside the Orders of the Original Authority, are set aside - Appeal allowed.

Summary

Issues Involved:
1. Whether the refund claim filed by Respondents for refund of Customs Duty paid in excess is hit by the bar of unjust enrichment.
2. Whether the Tribunal should set aside the orders passed on the issue raised in the present review order under Section 129B of the Customs Act, 1962.

Summary:

Issue 1: Bar of Unjust Enrichment

The Department's appeal contested the Commissioner (Appeals-I)'s decision to refund the excess Customs Duty to the Respondents instead of crediting it to the Consumer Welfare Fund. The Department argued that the Respondents failed to show the refund amount as receivable in their Balance Sheet, implying that the duty incidence was passed on to their customers. The Department relied on statutory provisions under Section 27 and Section 28C of the Customs Act, 1962, which require clear evidence that the incidence of duty has not been passed on. The Department also cited several case laws, including the judgment in the case of HPCL [2015 (317) ELT 3798 (CESTAT-Mumbai)], to support their claim that merely producing a CA certificate is insufficient to prove that the duty incidence was not passed on.

The Respondents contended that the refund amount could not be shown as receivable in earlier financial years as reassessment and refund sanction were completed in subsequent years. They argued that the CBEC Circular relied upon by the Department was not applicable and that the Department's insistence was unsustainable under the 'doctrine of impossibility'. The Respondents also distinguished the HPCL case on the grounds that it pertained to Central Excise and involved different legal issues.

The Tribunal found that the Respondents failed to produce sufficient evidence, such as relevant documents showing the duty element in the price, to counter the statutory presumption of duty incidence being passed on. The Tribunal held that merely producing a CA certificate was inadequate to shift the burden of proof.

Issue 2: Setting Aside Orders Under Section 129B

The Tribunal concluded that the Commissioner (Appeals-I) incorrectly set aside the Original Authority's order, which had rightly granted the refund on merits but ordered it to be credited to the Consumer Welfare Fund. The Tribunal emphasized that the statutory provisions and case laws clearly indicate that the burden of proof lies on the claimant to produce tangible evidence that the duty incidence was not passed on.

The Tribunal set aside the Impugned Orders of the Commissioner (Appeals-I) and restored the Orders of the Original Authority, thereby allowing the Appeals filed by the Revenue.

Conclusion:

The Tribunal allowed the Department's appeals, setting aside the Commissioner (Appeals-I)'s orders and restoring the Original Authority's orders, which directed the refund amount to be credited to the Consumer Welfare Fund due to the bar of unjust enrichment.