Appellate Tribunal CESTAT Mumbai: Refund granted for duplicate duty payment on seized goods

The Appellate Tribunal CESTAT, Mumbai, ruled in a case involving the seizure of goods initially cleared on payment of duty but later returned due to defects. Despite the goods being seized under the belief of non-payment, subsequent evidence proved the initial duty payment. The appellants, who were forced to deposit duty a second time, sought a refund, which was denied due to lack of proof of duty not being recovered from customers. The plea of unjust enrichment was rejected as duty was paid initially, and subsequent duty payment was compelled. The Commissioner (Appeals)'s decision was overturned, and the appeal was allowed with consequential relief.

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Issues involved: Unjust enrichment, refund of duty paid second time, seizure of goods, plea of unjust enrichment, clearance of goods on payment of duty.

The judgment by the Appellate Tribunal CESTAT, Mumbai, involved a case where goods were cleared on payment of duty, but later returned by the customer due to defects. The goods were stored in the appellant's office premises and seized under the belief that duty was not paid. Subsequently, documents were produced proving the initial duty payment, leading to the setting aside of confiscation and penalty. However, the appellants were forced to deposit duty a second time, for which they sought a refund. The refund was denied on the basis of lack of evidence showing that duty was not recovered from customers, resulting in the transfer of the refund to the welfare fund.

The appellants contended that the plea of unjust enrichment cannot be raised if duty is paid subsequent to goods clearance, unless there is proof of subsequent duty recovery. As it was acknowledged that duty was initially paid and the goods were seized under the mistaken belief of non-payment, with subsequent duty payment being forced, the plea of unjust enrichment was deemed invalid. Since the initial duty payment was accepted and not being claimed for refund, the question of duty recovery did not arise. The Commissioner (Appeals)'s decision was overturned, and the appeal was allowed with consequential relief.

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