Provisional customs assessment refunds are subject to limitation and unjust enrichment when duty incidence has been passed on.

Amounts recovered by encashment of a bank guarantee furnished during provisional customs assessment are treated as duty paid under the refund scheme, not as a pre-deposit in appeal. Refund is therefore governed by Section 27 of the Customs Act, 1962, including the limitation period computed from adjustment after final assessment, and a claim filed beyond that period is time-barred. The claimant must also prove that the duty burden was not passed on. Where the record shows Modvat credit was taken and no contrary evidence is produced, the doctrine of unjust enrichment bars refund.

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Issues: (i) Whether refund of the amount recovered by encashment of the bank guarantee furnished in the course of provisional assessment was governed by the limitation under Section 27 of the Customs Act, 1962; (ii) whether the refund claim was barred by unjust enrichment.

Issue (i): Whether refund of the amount recovered by encashment of the bank guarantee furnished in the course of provisional assessment was governed by the limitation under Section 27 of the Customs Act, 1962.

Analysis: The amount was furnished as security in the context of provisional assessment and was encashed after the final order of assessment. Such amount was treated as duty paid under the provisional assessment scheme and not as a pre-deposit made in aid of an appeal under Section 35F of the Customs Act, 1962. Refund arising on finalisation of provisional assessment is linked with Section 18 of the Customs Act, 1962, but the scheme operates with Section 27 of the Customs Act, 1962, including the limitation provision and Explanation II, which computes limitation from the date of adjustment after final assessment. The claim was filed beyond the prescribed period.

Conclusion: The refund claim was subject to Section 27 of the Customs Act, 1962 and was time-barred, against the assessee.

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

Analysis: The claimant was required to establish that the duty burden had not been passed on. The record showed that a substantial part of the disputed amount had been taken as Modvat credit, and no material was produced to discharge the burden against passing on. The doctrine of unjust enrichment therefore applied to the refund claim.

Conclusion: The refund claim failed the test of unjust enrichment, against the assessee.

Final Conclusion: The majority held that the amount recovered on provisional assessment was refundable only in accordance with the Customs refund scheme, and the claim was defeated both by limitation and by failure to prove absence of passing on of duty incidence.

Ratio Decidendi: Amounts recovered in the course of provisional assessment of customs duty are governed by the refund and limitation provisions applicable to duty refunds, and any claimant seeking refund must also establish that the duty incidence was not passed on.

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