Refund claim finality and unjust enrichment: lower authorities cannot reopen merits once limitation is settled, absent proof of passing on duty.

After refund entitlement and limitation had attained finality, the HC held that the lower authorities could not reopen the refund claim on merits and were confined only to the question of unjust enrichment. The Court further held that refund could be denied under Section 11B of the Central Excise Act, 1944 only on a clear finding that the duty burden had been passed on. As the authorities acted on conjecture and did not establish passing on of duty, the bar of unjust enrichment was not made out and the refund claim was upheld.

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Issues: (i) Whether, after the Commissioner (Appeals) had finally held the refund claim to be maintainable and not barred by limitation, the adjudicating authority and the appellate authority could again examine the refund claim on merits instead of confining the enquiry to unjust enrichment; (ii) whether the assessee had established that the duty burden had not been passed on so as to avoid the bar of unjust enrichment under Section 11B of the Central Excise Act, 1944.

Issue (i): Whether, after the Commissioner (Appeals) had finally held the refund claim to be maintainable and not barred by limitation, the adjudicating authority and the appellate authority could again examine the refund claim on merits instead of confining the enquiry to unjust enrichment.

Analysis: The earlier appellate order had concluded that the refund claim for the relevant period was not time-barred and that the entitlement to refund had attained finality. The only surviving enquiry, therefore, was whether actual refund would result in unjust enrichment. Once that issue had been finally settled, it was impermissible for the lower authorities to reopen the merits of the refund claim.

Conclusion: The authorities below were not entitled to re-examine the refund claim on merits; the enquiry was confined to unjust enrichment, and the issue is answered in favour of the assessee.

Issue (ii): Whether the assessee had established that the duty burden had not been passed on so as to avoid the bar of unjust enrichment under Section 11B of the Central Excise Act, 1944.

Analysis: The authorities proceeded on conjectures and sought negative proof, instead of recording a clear finding that the duty burden had in fact been passed on. The Court held that the proper inquiry was whether there was proof of passing on of duty and that, absent such a finding, the refusal of refund on unjust enrichment was unsustainable. The approach adopted by the lower authorities was therefore erroneous.

Conclusion: The assessee was not shown to have passed on the duty burden, and the bar of unjust enrichment was not established against it.

Final Conclusion: The revenue appeals fail, and the assessee's entitlement to refund for the disputed period stands upheld.

Ratio Decidendi: Once the entitlement to refund and the question of limitation have attained finality, the only surviving issue is unjust enrichment, which must be decided on a clear finding that the duty incidence was passed on before refund can be denied.

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