Unjust enrichment and refund of deposits: investigation payments under protest and appeal pre-deposits require proof of passing on incidence.

Amounts deposited during investigation under protest and pre-deposits made to pursue an appeal are not automatically barred by unjust enrichment unless the incidence is shown to have been passed on. Refund denial must rest on a reasoned enquiry into that issue, and a cryptic appellate order that does not address the material is unsustainable. On the stated facts, both the investigation deposit and the appeal pre-deposit were held refundable, and the refund order was set aside.

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Issues: (i) Whether the amount of Rs. 6 lakhs deposited during investigation was refundable without attracting the doctrine of unjust enrichment. (ii) Whether the amount of Rs. 4 lakhs deposited as pre-deposit during the pendency of the appeal was hit by the doctrine of unjust enrichment. (iii) Whether the Commissioner (Appeals) was justified in setting aside the refund order without proper enquiry and reasons.

Issue (i): Whether the amount of Rs. 6 lakhs deposited during investigation was refundable without attracting the doctrine of unjust enrichment.

Analysis: The amount was paid pursuant to directions of the investigating authority in a preventive proceeding and the dispute remained under litigation. The factual matrix did not show any finding that the incidence of the amount had been passed on to buyers. In such circumstances, the presumption under unjust enrichment was not attracted, and the payment was treated as one made under protest. The conclusion was also supported by the principle that duty paid after clearance, in the absence of passing on, does not automatically attract unjust enrichment.

Conclusion: The amount of Rs. 6 lakhs was refundable and was not barred by unjust enrichment.

Issue (ii): Whether the amount of Rs. 4 lakhs deposited as pre-deposit during the pendency of the appeal was hit by the doctrine of unjust enrichment.

Analysis: A pre-deposit made for prosecuting an appeal is not payment of duty in the substantive sense and stands on a different footing from duty collected from customers. The legal position applied was that such deposit is not governed by the refund bar under unjust enrichment, and therefore the statutory presumption did not apply to the amount deposited as a condition for appeal.

Conclusion: The pre-deposit of Rs. 4 lakhs was refundable and was not hit by unjust enrichment.

Issue (iii): Whether the Commissioner (Appeals) was justified in setting aside the refund order without proper enquiry and reasons.

Analysis: The appellate order did not record any adequate finding on the core issue of unjust enrichment and did not reflect the further enquiry contemplated by the statute. A mere criticism of reliance on the chartered accountant's certificate, without a reasoned examination of the material, rendered the order cryptic and non-speaking. The order was therefore vitiated for failure to exercise jurisdiction properly.

Conclusion: The Commissioner (Appeals)'s order was unsustainable and was set aside.

Final Conclusion: The refund claim succeeded, with the appellate order being annulled and the assessee obtaining consequential relief.

Ratio Decidendi: Amounts deposited during investigation under protest and amounts deposited as pre-deposit for an appeal are not automatically hit by the doctrine of unjust enrichment in the absence of proof that the incidence was passed on, and a refund denial must rest on a reasoned enquiry into that question.

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