Unjust enrichment does not bar refund of penalty, because penal liability cannot legally be passed on to another person.

Penal liability was held to stand on a different legal footing from duty or interest, because a penalty is imposed for an offence and cannot, as a matter of law, be passed on to another person. The Tribunal rejected the department's presumption that recording the penalty as expenditure meant the burden had been shifted, and held that the doctrine of unjust enrichment was not applicable to refund of penalty. The assessee was therefore entitled to refund of the penalty amount with consequential relief.

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Issues: Whether refund of penalty paid after the penalties were set aside was barred by the doctrine of unjust enrichment.

Analysis: The refund claim had been credited to the Consumer Welfare Fund on the premise that the assessee had not shown that the burden of the penalty had not been passed on. The reasoning proceeded on the footing that if the penalty amount was reflected as expenditure, the burden must be treated as passed on. The Tribunal rejected that approach, holding that penal liability stands on a different footing from duty or interest. It relied on the principle that a penalty is imposed for an offence and, as a matter of law, cannot be transferred to another person who did not commit the offence. The Tribunal further found support in earlier judicial observations that unjust enrichment has not been applied to fine or penalty and held that the department could not insist on the same burden-shifting presumption as in duty cases.

Conclusion: The assessee was entitled to refund of the penalty amount with consequential relief; the doctrine of unjust enrichment was held inapplicable to the refund of penalty.

Ratio Decidendi: The doctrine of unjust enrichment does not apply to refund of penalty, because penal liability is not legally capable of being passed on to another person.

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