TaxTMI 
TaxTMI 
TaxTMI 
Both frameworks share the same equitable foundation — preventing anyone from receiving a refund if they have already passed the tax burden to another (usually the consumer). But they differ slightly in scope, procedure, and exceptions.
Unjust Enrichment under Customs Law vs. GST Law (India)
Aspect | ||
Relevant Section | ||
Core Principle | Refund only if incidence of duty not passed on to another person. | Refund only if incidence of tax not passed on to another person. |
Who Can Claim | Importer/exporter or person who paid the duty. | Registered person or applicant who paid GST. |
Burden of Proof | On the claimant to prove that duty incidence not passed on. | On the claimant to prove tax incidence not passed on. |
Evidence Required | CA certificate, invoices, balance sheet entries, etc. | CA/CMA certificate, credit/debit notes, accounting records, etc. |
Refund Process | Verified by Customs authorities; unjust enrichment check mandatory. | Verified by GST officer; unjust enrichment check mandatory before sanction. |
If Burden Passed On | Refund amount credited to the Consumer Welfare Fundunder Sec. 27(2) & 12C. | Refund amount credited to Consumer Welfare Fund under Sec. 57 of CGST Act. |
Exceptions (Refund Payable to Applicant) | Certain cases excluded, e.g., refund of duty on exports or provisional assessment adjustments. | Specific cases excluded under Section 54(8), e.g.:• Refund of tax on exports (zero-rated supplies)• Refund of unutilized ITC• Refund of tax paid on supplies not made• Refund of tax borne by applicant (not passed on). |
Judicial Precedents | Mafatlal Industries, Solar Pesticides, Allied Photographics | VKC Footsteps India Pvt. Ltd. v. Union of India (2021) — emphasized legislative intent to prevent unjust enrichment, even in refund of ITC. |
Consumer Welfare Fund | Established under Central Excise Act, applied to Customs via Section 27A. | Established under Section 57 of CGST Act for welfare of consumers. |
Underlying Principle | Preventing the importer/exporter from gaining undue benefit from excess duty refund. | Preventing taxpayers from getting refunds where the ultimate consumer has already borne the GST. |
Key Points of Comparison
1. Common Objective
Both laws aim to prevent double benefit — ensuring that the economic burden and legal incidence of tax/duty are not separated unfairly.
In simpler terms:
Refunds are only allowed when the taxpayer truly bore the burden.
2. Procedural Difference
- Under Customs, refunds typically arise from import/export duty assessments (e.g., wrong classification, exemption errors).
- Under GST, refunds can arise from multiple situations — exports, inverted duty structure, excess payments, etc.
3. Presumption of Passing On
Both laws presume that the burden has been passed on, unless proven otherwise.
This is a rebuttable presumption, meaning the claimant must provide convincing evidence to show otherwise.
4. Exceptions to Unjust Enrichment (Refund Directly Payable)
Under Customs (Sec. 27(2)):
Refund payable to claimant if:
- Duty was paid under provisional assessment and adjustment shows excess.
- Duty was paid but goods were not cleared or exported.
- Refund relates to import by government or its agencies.
Under GST (Sec. 54(8)):
Refund payable to claimant if:
- Refund is of tax paid on zero-rated supplies (exports/SEZ).
- Refund is of unutilized ITC.
- Refund of tax paid on supplies not made.
- Refund of tax borne by applicant (and not passed on).
5. Judicial Standpoint
Law | Judicial Emphasis |
Customs Law | Supreme Court in Mafatlal Industries ? All refunds, whether based on constitutional grounds or otherwise, must pass the unjust enrichment test. |
GST Law | Supreme Court in VKC Footsteps (2021) ? Legislature intentionally restricted refund categories to prevent unjust enrichment and protect revenue. |
6. Consumer Welfare Fund as Safeguard
Both regimes divert refund amounts (when unjust enrichment applies) to the Consumer Welfare Fund, symbolizing that any excess collected should benefit the public, not the claimant.
Summary Table
Feature | CGST Act, 2017 | |
Refund Section | ||
Unjust Enrichment Clause | ||
Presumption | Refund normally implies unjust enrichment unless rebutted | Same presumption applies |
Fund for Denied Refunds | Consumer Welfare Fund | Consumer Welfare Fund |
Proof Requirement | On claimant | On claimant |
Key Cases | Mafatlal, Solar Pesticides | VKC Footsteps |
Exceptions | Limited | Broader (exports, ITC, etc.) |
In essence:
Both under Customs and GST, the principle of unjust enrichment ensures that refunds go only to those who have truly borne the burden of tax or duty — and not to those who have already shifted it to someone else.
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