Unjust enrichment does not bar refund where duty-paid capital goods were used, became obsolete, and were later destroyed.

Refund of duty paid on imported capital goods was considered in the context of the unjust enrichment bar under Notification No. 506/86. The article states that the goods had been imported for use in a project, later became obsolete and were destroyed, and that denial of refund solely because they were no longer in the importer's possession at adjudication was inconsistent with the recorded facts. On that basis, unjust enrichment was treated as inapplicable and the refund claim was allowed in favour of the assessee.

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Issues: Whether the bar of unjust enrichment applied to the refund claim arising from duty paid on imported capital goods covered by Notification No. 506/86 dated 24-12-1986.

Analysis: The capital goods were imported in 1989 and used by the appellant for a project. The sole basis for denying refund was the observation that the goods were not in the appellant's possession in 2004. The record showed that the goods had been used and later became obsolete and destroyed, and the finding that they were not in possession at that stage was inconsistent with the admitted factual position. In these circumstances, the refund could not be denied on the ground of unjust enrichment.

Conclusion: The bar of unjust enrichment was held inapplicable, and the refund claim was allowed in favour of the assessee.

Ratio Decidendi: Where duty-paid capital goods are used by the importer and later become obsolete or destroyed, refund cannot be denied on a misplaced application of unjust enrichment merely because the goods are no longer in possession at the time of adjudication.

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