2023 (9) TMI 288 - AT - Central Excise

Refund claim - goods used for captive consumption - Applicability of principles of unjust enrichment - HELD THAT - With disposal of appeal by the Tribunal, the MODVAT credit utilized was rendered legal and the other debit being moneys paid other than as duty. That the duty so legalized may be presumed to have been passed on with the value of the goods cleared is not in issue. The issue concerns the payment made again on 7th August 2000 and could neither have been expense of 2000-01 nor duty of 2000-01. The conclusion that recognition as income in the year of sanction, which it undoubtedly was, does not automatically turn that into expense of earlier years. In UNION OF INDIA VERSUS SOLAR PESTICIDE PVT. LTD. 2000 (2) TMI 237 - SUPREME COURT it was held that evidence of duty incidence not having been passed on cannot be claimed to be unavailable and, therefore, entitling claimant to exclusion from the onus of section 11B of Central Excise Act, 1944 does not bar the test of unjust enrichment. Appellant has furnished certification from Chartered Accountant that amount was not debited against any particular clearance. Without evaluation of the pricing practice of the appellant for lubricant , discard of the certification on supposition of it having been treated as expense and, therefore, built into the manufacturing cost of products cleared after 2000 is neither logical nor consistent with obligation of appellate authorities to restrict fact finding only upon evidence. In a departmental appeal, that should have been preferred as a ground of appeal on the basis of computation; a finding without such factual evaluation, in circumstances of that onus resting on the reviewing authority, cannot sustain. The certification by Chartered Accountant, considering the contents therein, suffice for discharging obligation to demonstrate that incidence of such duty has not been passed on - impugned order set aside - appeal allowed.

Summary

Issues:
The limited issue in this dispute is the applicability of the test of 'unjust enrichment' on the claim for return of 'deposits' made during investigation.

Issue 1: Applicability of 'unjust enrichment' test on claim for return of 'deposits':
The dispute involved M/s Indian Oil Corporation Ltd against the order of Commissioner of Central Excise (Appeals) which set aside the sanction of refund allowed under section 11B of Central Excise Act, 1944. The appellant had been availing MODVAT credit on 'tin cans' used for packing and sale of 'lubricants'. The lower authorities recorded that a specific amount had been debited in the 'personal ledger account (PLA)' even before the demand was adjudicated. The first appellate authority found that the appellant was eligible for sanction, subject to the bar of 'unjust enrichment'. The appellant argued that the debit of 'PLA' was a reversal of CENVAT credit utilized and not against clearance of goods, supported by a Chartered Accountant's certificate. The Tribunal accepted the contention that the appellant was entitled to the refund amount.

Issue 2: Interpretation of 'unjust enrichment' in the context of duty payment and credit utilization:
The appellant had taken MODVAT credit on 'tin cans' between August 1994 and November 2006, which was held as ineligible. The disputed duty payment and the amount debited in the 'PLA' account were related to the same goods. The Tribunal's decision legalized the MODVAT credit utilized, distinguishing it from the other debit. The issue revolved around the payment made on a specific date and its classification as 'income' in the year of sanction, not automatically turning it into an 'expense' of earlier years. The appellant provided a certification from a Chartered Accountant to demonstrate that duty incidence had not been passed on, which was accepted by the Tribunal.

Separate Judgement by the Tribunal:
The Tribunal set aside the impugned order and allowed the appeal, emphasizing the need for proper evaluation of facts and evidence regarding duty payment, credit utilization, and the 'unjust enrichment' test. The certification by the Chartered Accountant was considered sufficient to discharge the obligation to show that duty incidence had not been passed on, leading to the decision in favor of the appellant.