Full credit on duty-paid naphtha allowed where assessee bore the entire incidence; refund also survived unjust enrichment challenge.

The 10% restriction on credit for naphtha could not be applied mechanically where the entire duty incidence was borne by the assessee itself; on those facts, the full duty actually paid was creditable and the higher credit claim succeeded. The refund claim was also not barred by unjust enrichment because a Chartered Accountant's certificate showing that the duty burden had not been passed on to buyers was accepted in the absence of contrary evidence from the Revenue. The order rejecting refund was therefore set aside, with consequential credit relief.

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Issues: (i) Whether the appellant was entitled to avail credit of duty on naphtha at 15% instead of being restricted to 10% under the amending notification; and (ii) whether the refund claim was hit by unjust enrichment.

Issue (i): Whether the appellant was entitled to avail credit of duty on naphtha at 15% instead of being restricted to 10% under the amending notification.

Analysis: The restriction to 10% under the scheme was intended to apply where the duty incidence on the relevant petroleum products was actually borne only to that extent, the balance being absorbed by public sector refineries. In the present case, the entire duty incidence was borne by the appellant when the naphtha was used otherwise than for the intended purpose under Rule 196 of the Central Excise Rules 1944. The rationale of the 10% restriction therefore did not fit the facts, and the appellant was entitled to credit of the full duty actually paid.

Conclusion: The appellant was entitled to credit at 15% on the facts of the case and the restriction to 10% was inapplicable.

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

Analysis: The appellant produced a Chartered Accountant's certificate to show that the duty burden had not been passed on to buyers. In the absence of any contrary expert material from the Revenue, such a certificate was accepted as sufficient evidence of non-recovery of the amount from consumers, and the initial burden stood discharged.

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

Final Conclusion: The order rejecting refund was set aside and the appellant succeeded on both merits and unjust enrichment, with consequential credit relief.

Ratio Decidendi: Where the actual duty incidence is borne by the assessee itself, a limitation on credit framed for cases where only a lesser incidence is borne cannot be mechanically applied, and a duly supported Chartered Accountant's certificate may suffice to rebut unjust enrichment unless displaced by contrary evidence.

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