Refund of excess duty on duplicated ethanol levy allowed; unjust enrichment not applied in a controlled pricing regime.

Duty paid twice on ethanol used in the manufacture of Ethanol Blended Motor Spirit was held refundable because the same ingredient had borne duty at procurement and again in the final product, creating excess duty payment. The tribunal also held that unjust enrichment did not apply where the end-product price was fixed under a controlled pricing regime, since the duty incidence could not reasonably be treated as passed on to buyers. The refund rejection orders were therefore set aside and consequential relief granted.

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Issues: (i) whether the assessee was entitled to refund of duty paid twice on ethanol used in the manufacture of Ethanol Blended Motor Spirit; (ii) whether the refund claim was barred by unjust enrichment.

Issue (i): whether the assessee was entitled to refund of duty paid twice on ethanol used in the manufacture of Ethanol Blended Motor Spirit.

Analysis: The assessee had paid duty on ethanol at the stage of procurement and again paid duty on the blended product. The duty duplication was not in dispute. The controversy arose because the departmental permission earlier granted treated the blending activity as not amounting to manufacture. In view of that mistaken departmental understanding, the assessee was not to be made to bear duty twice on the same ingredient. The claim for refund was therefore examined as a claim to recover excess duty borne by the assessee.

Conclusion: The assessee was entitled to refund of the excess duty paid on the ethanol component.

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

Analysis: The sale price of the petroleum product was fixed by the Government in the controlled pricing regime. Where the price of the end product is statutorily or administratively fixed, the incidence of duty cannot ordinarily be presumed to have been passed on to the buyer. On that basis, the bar of unjust enrichment was held inapplicable on the facts.

Conclusion: The refund claim was not barred by unjust enrichment.

Final Conclusion: The appeals succeeded and the impugned orders rejecting refund were set aside, with consequential relief to the assessee.

Ratio Decidendi: In a price-controlled regime, where duty duplication is established and the incidence of duty cannot reasonably be treated as passed on, the doctrine of unjust enrichment does not bar refund of excess duty.

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