Excise refund under captive consumption exemption fails when credit reversal is belated and unjust enrichment is not disproved.

Refund of excise duty under Notification No. 67/95-CE required that CENVAT credit on inputs used for captively consumed intermediate goods not be availed at the relevant time; a reversal made only after clearance and after filing the refund claim did not cure the defect, and the exemption and consequential refund were therefore unsustainable. The claim was also barred by unjust enrichment because the assessee did not prove that the duty incidence had not been passed on: sale below cost and an accountant's certificate were not conclusive, and the refund amount being treated in the profit and loss account supported the statutory bar.

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Issues: (i) Whether the assessee was entitled to refund and exemption benefit under Notification No. 67/95-CE when CENVAT credit on inputs used in the manufacture of captively consumed intermediate goods was reversed only after clearance and after filing of the refund claim. (ii) Whether the refund claim was barred by unjust enrichment.

Issue (i): Whether the assessee was entitled to refund and exemption benefit under Notification No. 67/95-CE when CENVAT credit on inputs used in the manufacture of captively consumed intermediate goods was reversed only after clearance and after filing of the refund claim.

Analysis: The exemption for captively consumed goods depended on non-availment of CENVAT credit on the inputs used in the manufacture of the intermediate product. The assessee had availed credit and did not reverse it at the time of captive consumption or at the time of filing the refund claim. A later reversal could not cure the failure to satisfy the exemption condition for the entire relevant period. The record also did not establish reversal for the whole period covered by the refund claim.

Conclusion: The claim for exemption and consequential refund was not sustainable.

Issue (ii): Whether the refund claim was barred by unjust enrichment.

Analysis: Mere sale of finished products below cost, or a certificate from an accountant, was not conclusive proof that the duty incidence had not been passed on. The refund amount was not shown as receivable in the books and was taken to the profit and loss account, which supported the conclusion that the burden had not been shown to have been borne by the assessee. The statutory bar under the refund provisions required proof that the incidence of duty had not been passed on, and that burden was not discharged.

Conclusion: The refund claim was hit by unjust enrichment.

Final Conclusion: The appellate order granting refund could not be sustained, and the Revenue succeeded in challenging it.

Ratio Decidendi: A refund of excise duty can be granted only when the exemption condition is satisfied at the relevant time and the claimant proves that the incidence of duty has not been passed on; a belated reversal of credit and accounting treatment of the refund as expenditure are insufficient to overcome the statutory bar.

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