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Issues: (i) whether refund of customs duty arising on finalisation of provisional assessment could be adjusted against a duty demand that had not attained finality, and (ii) whether the refund claim required examination on the principle of unjust enrichment in customs matters.
Issue (i): whether refund of customs duty arising on finalisation of provisional assessment could be adjusted against a duty demand that had not attained finality
Analysis: The refund sanctioned had been appropriated towards demands raised under separate adjudication orders which were still under challenge. A refund cannot be set off against a demand that has not attained finality, particularly when the related adjudication is pending in appeal. The adjustment was therefore not legally sustainable.
Conclusion: The adjustment against the pending demand was impermissible and the assessee succeeded on this issue.
Issue (ii): whether the refund claim required examination on the principle of unjust enrichment in customs matters
Analysis: The decision notes that the Central Excise position on refund after finalisation of provisional assessment was affected by the absence of a statutory bar before the amendment to Rule 9B(5), but that reasoning could not be mechanically applied to customs refunds. Section 18 of the Customs Act stood on a different footing, and every refund under the customs regime had to be tested on unjust enrichment where the statutory refund mechanism so required. The lower authority had not properly examined this aspect, so reconsideration was necessary.
Conclusion: The refund claim had to be re-examined on the question of unjust enrichment and the matter was remitted for fresh decision.
Final Conclusion: The assessee succeeded on the illegality of adjustment against a non-final demand, but both appeals were sent back for reconsideration of the refund claims on unjust enrichment under the customs law.
Ratio Decidendi: A refund cannot be appropriated against a duty demand that is still pending challenge and has not attained finality, and customs refunds arising from provisional assessment must be examined on the applicable principle of unjust enrichment.
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