2009 (8) TMI 1059 - AT - Central Excise

Appellate court grants refund claim under unjust enrichment doctrine, emphasizing importance of credit notes.

BHARAT BIJLEE LTD. Versus COMMISSIONER OF CENTRAL EXCISE, BELAPUR

The appellate court allowed the appeal, setting aside the rejection of the refund claim based on the unjust enrichment doctrine. The court found that the ... Refund claim - unjust enrichment - price variation clause - Held that: - the duty incidence has not been passed by the appellant to its customers - in the case of UOI v. A.K. Spintex Ltd. [2008 (11) TMI 89 - RAJASTHAN HIGH COURT], the Court is also of the view that after issuance of the debit note by their customers and the corresponding credit note by seller, the price of the goods stood reduced to the extent of debit/credit note and in such circumstances the incidence of duty could not have been assumed to have been passed on to the buyer. In this case also, the credit not was issued to the buyer and the payment has also been realized by the appellant after the adjustment of the credit note. The incidence of duty has not been passed on to the customers. The refund claim is not hit by the bar of unjust enrichment. Appeal allowed - decided in favor of appellant. Issues:Denial of refund claim on the ground of unjust enrichment.Analysis:The appellant's refund claim was rejected due to the belief that the duty incidence had been transferred to the customers. The case involved the appellant, a manufacturer of Electric Transformers, supplying units to Chhattisgarh Electricity Board with an IEEMA price variation clause in the purchase order. The lower authorities rejected the refund claim, stating that the subsequent issue of credit notes was irrelevant, and the duty incidence had been passed on to the customers.The appellate authority upheld the rejection, questioning how the appellant charged excess price if the agreed price was subject to variation as per the IEEMA formula. The appellant argued that the goods were cleared as per the purchase order, which allowed for price revisions, and credit notes were issued before payment clearance. Citing legal precedents, the appellant contended that the price of goods is reduced upon issuing debit and credit notes, and the duty incidence cannot be assumed to have been passed on in such cases.Upon review, the judge found that the duty incidence had not been transferred to the customers, aligning with previous court decisions. The judge noted that the price of goods was reduced by the credit note issued to the buyer, and payment was realized after adjusting the credit note. Consequently, the refund claim was deemed not affected by unjust enrichment, leading to the setting aside of the impugned order and allowing the appeal with any consequential relief.Overall, the judgment focused on the crucial issue of unjust enrichment concerning the denial of a refund claim based on the assumption of duty passing on to customers, emphasizing the significance of credit notes in determining the actual transfer of duty incidence and citing relevant legal precedents to support the decision.