Unjust enrichment in refund claims fails where higher duty shown in invoices was not actually recovered from customers.

Refund of duty was held not to be barred by unjust enrichment where invoices showed a higher duty rate but the evidence, including customer letters, established that buyers had paid only the reduced amount and had deducted the excess charged. The decisive point was that actual passing on of the duty burden was not proved; mere reflection of a higher amount in invoices, or the later issue of credit notes, did not by itself establish unjust enrichment. On that basis, the refund claim was sustainable and rejection of refund was unsustainable.

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Issues: Whether the refund claim was barred by unjust enrichment when the appellant had issued invoices showing a higher duty rate but produced evidence that customers had objected and had paid only the reduced duty.

Analysis: The refund arose from the reduction in duty pursuant to the notification increasing deemed credit on inputs used in the manufacture of processed man made fabric. The dispute was confined to a short period during which the invoices reflected duty at the higher rate, but the customers' letters showed that they had paid only the reduced amount and had deducted the excess charged. On these facts, the burden of duty was not established to have been passed on to customers. The principle applied by the Larger Bench in the cited precedent was that mere issuance of credit notes does not defeat unjust enrichment where duty was actually collected, but where collection itself is not proved, refund cannot be denied on that ground.

Conclusion: The bar of unjust enrichment did not apply, and the refund claim was allowable.

Final Conclusion: The rejection of refund was unsustainable and the assessee was entitled to refund.

Ratio Decidendi: Where the evidence shows that the higher duty shown in invoices was not actually recovered from customers, refund cannot be denied on the ground of unjust enrichment merely because the invoices reflected the higher amount or credit notes were later issued.

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