2015 (8) TMI 801 - AT - Customs

Tribunal upholds denial of refund, stresses compliance with unjust enrichment test under Customs Act

M/s Hero Honda Motors Ltd. Versus CCE, New Delhi (Import & General)

The Tribunal upheld the denial of the refund, emphasizing the requirement to meet the test of unjust enrichment as per Section 27(1) of the Customs Act, ... Claim for Refund – Unjust Enrichment – Appellant contended that Section 27(3) of Customs Act, 1962 does not require meeting of test of unjust enrichment – Whether refund arose shall be granted meeting tests of unjust enrichment – Held that:- section 27(3) of Act, while permitting refund arising out of sub-section (2) nowhere states that Section 27(1) was not applicable to refund arising under that section – Had intention been to oust test of unjust enrichment, there would have been overriding mandate in sub section (2) itself – Therefore sub section (1) and sub section (3) operate on their own field and all refunds undergo test by sub section (1) of Section 27 – This could be said by following apex Court judgement in case of Sahakari Khand Udyog Vs. CCE [2005 (3) TMI 116 - SUPREME COURT OF INDIA] – Both authorities had no evidence before them as to meeting of test of unjust enrichment by appellant – However Tribunal being final court of fact no evidence was found in relation to overruling unjust enrichment thus, it was difficult to impeach first appellate order – For said reason Impugned order upheld – Decided against Assesse. Issues:- Whether the refund arose as per the Tribunal's order shall be granted meeting the test of unjust enrichment.- Interpretation of Section 27(1) and Section 27(3) of the Customs Act, 1962 regarding unjust enrichment for refund claims.Analysis:1. The primary issue before the Appellate Tribunal was whether the refund arising from a previous order passed by the Tribunal should be granted while meeting the test of unjust enrichment. The Tribunal emphasized that Section 27(1) of the Customs Act, 1962 imposes a bar against unjust enrichment for refund claims. The appellant failed to prove to the authorities below that it would not be unjustly enriched at the expense of the public, leading to the denial of the refund.2. The appellant contended that Section 27(3) of the Customs Act does not necessitate meeting the test of unjust enrichment for refunds. However, the Tribunal clarified that Section 27 should not be interpreted in fragments, and Section 27(1) applies to all refunds, including those arising under Section 27(3). Citing the Supreme Court judgment in Sahakari Khand Udyog Vs. CCE, the Tribunal highlighted that the test of unjust enrichment is a mandatory requirement for all refunds under Section 27.3. Despite the appellant's submission that all documents were filed, both the authorities below lacked evidence regarding the appellant meeting the test of unjust enrichment. The Tribunal, as the final court of fact, thoroughly examined the case but found no evidence to overturn the decision of the first appellate authority. Without concrete proof against unjust enrichment, the Tribunal upheld the denial of the refund, resulting in the dismissal of the appeal.4. In conclusion, the Tribunal reiterated the importance of complying with the test of unjust enrichment as mandated by Section 27(1) of the Customs Act, 1962 for all refund claims. The judgment underscores the necessity for appellants to provide substantial evidence to demonstrate that the refund will not lead to unjust enrichment, failing which the refund may be rightfully denied.