Refund on returned goods escapes unjust enrichment where duty was not passed on and Rule 173L compliance was shown

Refund of duty on goods returned undelivered was not barred by unjust enrichment where the assessee complied with Rule 173L, maintained accounting entries and issued credit notes showing reversal of the sale and duty element. On those facts, the incidence of duty was not passed on to the buyer, so the statutory bar did not apply. The commentary also states that Section 11B was not attracted to a refund arising under Rule 173L in such circumstances, and the Revenue did not rebut the assessee's evidence of non-passing of duty.

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Issues: Whether the refund claim in respect of returned goods was hit by unjust enrichment and whether Section 11B applied to a refund arising under Rule 173L.

Analysis: The goods had been returned undelivered and the respondent had complied with Rule 173L of the Central Excise Rules, 1944 by filing the requisite intimation. The refund was supported by accounting entries and credit notes showing reversal of the earlier sale and duty element. In such circumstances, where the goods were not ultimately sold and the incidence of duty was not passed on to the buyer, the statutory bar of unjust enrichment did not operate. The Tribunal also noted that in cases of goods returned under Rule 173L, Section 11B was not attracted, and the Revenue had not rebutted the respondent's showing that the duty burden had not been passed on.

Conclusion: The refund was not barred by unjust enrichment, Section 11B did not prevent the refund on these facts, and the order allowing the refund was ly upheld in favour of the assessee.

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