2016 (12) TMI 839 - AT - Central Excise

Appellate Tribunal clarifies unjust enrichment test for duty refund claims

The Appellate Tribunal upheld the Commissioner (Appeals)' decision, dismissing the Revenue's appeal regarding the eligibility for a refund claim due to ... Recovery of refund already made - unjust enrichment - Refund claim - unjust enrichment - finalization of provisional assessment - Held that: - It is fairly well settled that the test of unjust enrichment prescribed in Section 11B of the Central Excise Act, 1944, will be applicable only to the net adjusted duty arising as refund and not to the duty passed on in each invoice - the Commissioner (Appeals) have allowed the refund to be paid and in support of his contention held that the authority while passing the order has not correctly followed the word duty passed on. Here the word is duty and not Cenvat Credit and further words duty passed on materialises only when the duty involved has been collected from buyer and as in the case the duty collected is as per final bills made subsequent to final assessment order, the duty reimbursed against the final bills only can be said to have passed on and not the duty indicated in invoices and paid by appellant to exchequer making the payment on provisional basis as per the provisional assessment order made by authority. In above terms the appellant is entitled for the refund of excess duty paid provisionally at the time of clearance of goods. Refund allowed in cash - appeal dismissed - decided against Revenue. Issues:1. Eligibility for refund claim due to excess duty payment.2. Application of the test of unjust enrichment.3. Interpretation of duty passed on in each invoice.4. Consideration of price revision clause in payment.Analysis:1. The appeal addressed the eligibility of the assessee for a refund claim due to the payment of excess duty amounting to Rs. 14,43,333. The department initially sanctioned the refund claim, but later issued a show cause notice for recovery, citing unjust enrichment concerns as the reason for recall.2. The primary contention revolved around the application of the test of unjust enrichment as per Section 11B of the Central Excise Act, 1944. The Commissioner (Appeals) held that the test should apply to the net adjusted duty arising as a refund, not to the duty passed on in each invoice. This interpretation was supported by a precedent set by the Hon'ble High Court of Karnataka.3. The Commissioner (Appeals) further analyzed the duty passed on in each invoice, emphasizing that the duty reimbursement was not reduced in case of negative price variation. The final prices were determined post-provisional assessment, and payments were made accordingly. The judgment distinguished the duty passed on in final bills from that indicated in invoices paid provisionally.4. The consideration of the price revision clause in payment was crucial in determining the eligibility for the refund claim. The Commissioner (Appeals) highlighted that the appellant had not passed on the duty incidence claimed for refund, especially in cases of negative price variation. The department's argument of unjust enrichment lacked evidence and was deemed insufficient to deny the appellant's entitlement to the refund.In conclusion, the Appellate Tribunal upheld the Commissioner (Appeals)' decision, dismissing the Revenue's appeal. The judgment emphasized the correct interpretation of the duty reimbursement process post-provisional assessment and the application of the unjust enrichment test to the net adjusted duty for refund claims.