2011 (5) TMI 705 - HC - Central Excise

Court rules refund claim subject to unjust enrichment principle under Central Excise Act

The Court dismissed the petition, ruling that the refund claim was subject to the principle of unjust enrichment as per section 11B of the Central Excise ... Writ – refund - Assistant Collector of Central Excise, Rajkot by an order dated 26th June, 1987 unilaterally modified the Classification List filed by the petitioner company under S.H. 7208.00 and classified the same under S.H. 7308.90 attracting 15% ad valorem duty - petitioner paid duty under protest at the rate modified by the said authority - order, the Court observed that since the duty was paid by the petitioner company under protest, the respondent authorities will have to refund the same in case the classification list submitted by the petitioner company is approved. In the light of the principles enunciated by the Supreme Court in the case of Commissioner of Central Excise, Mumbai-II vs. Allied Photographics India Ltd. (2004 -TMI - 46926 - SUPREME COURT OF INDIA), it is apparent that the duty paid under protest falls under section 11B of the Act and as such, would attract the principles of unjust enrichment. - assessee had not disputed that they had collected the duty paid under protest from the customers, it is apparent that this is a clear case of unjust enrichment and as such, no infirmity can be found in the impugned order in sanctioning the refund claim of Rs.38,87,472.72 but crediting the same into the Consumer Welfare Fund of India established under section 12C of the Act - petition fails and is accordingly dismissed Issues Involved:1. Entitlement to refund of excise duty paid under protest.2. Provisional assessment of duty until final classification by the Supreme Court.3. Applicability of the principle of unjust enrichment.Issue-wise Detailed Analysis:1. Entitlement to Refund of Excise Duty Paid Under Protest:The petitioners sought a writ declaring the order dated 4.12.2003 by respondent No.3 as illegal and directing a refund of Rs.38,87,472.72 paid under protest, with interest. The petitioners argued that the High Court's order dated 31st December 1987, which directed a refund if the classification list was approved, created a legal right for the refund. The Supreme Court's dismissal of the revenue's appeal further solidified this right. However, the respondents contended that the refund was subject to section 11B of the Central Excise Act, 1944, which includes the principle of unjust enrichment. The Court noted that despite the High Court's earlier order, section 11B(3) mandates that refunds must comply with sub-section (2), which includes unjust enrichment considerations. Thus, the petitioners' reliance on the earlier High Court order did not override the statutory provisions of section 11B.2. Provisional Assessment of Duty Until Final Classification by the Supreme Court:The petitioners claimed that the assessment was provisional until the Supreme Court finalized the classification in their favor. The respondents countered that no provisional assessment was sought or ordered under rule 9B of the Central Excise Rules, 1944. The Court examined rule 9B, which requires a written request for provisional assessment and the execution of a bond. The petitioners failed to provide evidence of such a request or bond. The Court found no indication that the assessment was provisional, as the RT-12 returns were assessed finally at the relevant time. Therefore, the assessment was not considered provisional, and the bar of unjust enrichment applied.3. Applicability of the Principle of Unjust Enrichment:The petitioners argued that the principle of unjust enrichment did not apply as the duty was paid under protest. They relied on the Supreme Court's decision in Sinkhai Synthetics and Chemicals (P) Ltd., which held that unjust enrichment does not apply to duties paid under protest. However, the respondents pointed out that this decision was deemed per incuriam by the Supreme Court in Commissioner of Central Excise, Mumbai-II vs. Allied Photographics India Ltd., which clarified that duties paid under protest are subject to section 11B and the principle of unjust enrichment. The Court agreed with the respondents, noting that the petitioners had collected the duty from customers, making it a case of unjust enrichment. Consequently, the adjudicating authority's order to credit the refund to the Consumer Welfare Fund was upheld.Conclusion:The Court dismissed the petition, ruling that the refund claim was subject to the principle of unjust enrichment as per section 11B of the Central Excise Act. The assessment was not provisional, and the petitioners had collected the duty from customers, justifying the crediting of the refund to the Consumer Welfare Fund. The impugned order was found to be in accordance with statutory provisions and the Supreme Court's decision in Allied Photographics India Ltd.