Customs refund claims remain subject to unjust enrichment for duty-related amounts, but redemption fine is outside that doctrine.

Refunds arising from finalisation of provisional assessment under the Customs Act remain subject to Section 27 and the doctrine of unjust enrichment, so duty-related amounts cannot be refunded unless the incidence was not passed on. The same bar applies to the balance amount appropriated towards duty after confiscation was set aside and the deposit was adjusted partly towards duty and partly towards fine. By contrast, redemption fine under Section 125 is not a duty levy, is compensatory in nature, and is outside the scope of unjust enrichment; the assessee was entitled to refund of the balance fine with interest.

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Issues: (i) Whether refund arising on finalisation of provisional assessment under the Customs Act, 1962 is subject to the doctrine of unjust enrichment; (ii) Whether the doctrine of unjust enrichment applies to the balance amount deposited towards the value of confiscated goods after confiscation is set aside and the amount is adjusted partly towards duty and partly towards fine; (iii) Whether redemption fine is subject to the doctrine of unjust enrichment.

Issue (i): Whether refund arising on finalisation of provisional assessment under the Customs Act, 1962 is subject to the doctrine of unjust enrichment.

Analysis: The statutory scheme under Section 27 of the Customs Act, 1962 requires refund claims to satisfy the condition that the incidence of duty has not been passed on. Section 18 contemplates provisional assessment and final adjustment, but the refund that arises after finalisation remains governed by the refund machinery under Section 27. The distinction drawn in excise cases on provisional assessment did not displace the customs refund provisions. The doctrine of unjust enrichment therefore continues to apply to refund arising from final assessment under the Customs Act.

Conclusion: This issue was decided against the assessee and in favour of Revenue.

Issue (ii): Whether the doctrine of unjust enrichment applies to the balance amount deposited towards the value of confiscated goods after confiscation is set aside and the amount is adjusted partly towards duty and partly towards fine.

Analysis: The amount appropriated towards additional duty was treated as a duty-related recovery and remained subject to the statutory refund restrictions under Section 27. The Court rejected the contention that the deposit, because it represented the value of goods or arose in the context of confiscation proceedings, escaped the statutory requirement against passing on the incidence. The adjustment relating to duty therefore remained within the doctrine of unjust enrichment.

Conclusion: This issue was decided against the assessee and in favour of Revenue.

Issue (iii): Whether redemption fine is subject to the doctrine of unjust enrichment.

Analysis: Redemption fine under Section 125 of the Customs Act, 1962 is not duty, tax, cess, or a like levy capable of being passed on to a buyer. It is compensatory in nature for release of confiscated goods and is distinct from duty-related recovery. Since the statutory bar in Section 27 is confined to refund of duty, the doctrine of unjust enrichment was held inapplicable to redemption fine. The assessee was entitled to refund of the balance fine with interest as ordered earlier.

Conclusion: This issue was decided in favour of the assessee.

Final Conclusion: The Court held that unjust enrichment applies to the duty-related refund claims arising under the Customs Act, but not to redemption fine, and directed refund of the balance fine with interest while sustaining the credit of duty-related amounts to the Fund.

Ratio Decidendi: Under the Customs Act, refund of duty arising on finalisation of provisional assessment remains subject to Section 27 and the doctrine of unjust enrichment, whereas redemption fine under Section 125 is not a duty levy and is not governed by that doctrine.

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