Unjust enrichment does not bar refund where excess tax was borne by the assessee during a classification dispute and not passed on to buyers.

The Gujarat HC held that the product fell under Entry 182(4) of Schedule II, Part A of the Gujarat Sales Tax Act, 1969, not the residuary Entry 195. As the assessee had collected tax from customers at the lower rate and later deposited the additional amount from its own funds during the classification dispute to avoid interest and penalty, the burden was not passed on to buyers. The court therefore rejected the unjust enrichment objection and allowed refund of the excess tax with applicable interest, directing consequential refund orders within the stipulated time.

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Issues: Whether the petitioner was entitled to refund of excess sales tax paid during the pendency of the classification dispute, together with applicable interest, and whether the claim was barred by unjust enrichment.

Analysis: The products were held to fall under Entry 182(4) of Schedule II, Part A of the Gujarat Sales Tax Act, 1969 and not under the residuary Entry 195. The record showed that during the relevant sales period the petitioner had collected and paid tax at the lower rate from its customers, while the additional amount was deposited later in 2001 only to avoid interest and penalty during the dispute. On that basis, the excess payment could not have been recovered from buyers and was borne by the petitioner. The authorities had already accepted the challans for the year 1999-2000 and granted refund on the same footing.

Conclusion: The petitioner was entitled to refund of the excess amount of Rs. 15,00,000/- with applicable interest, and the objection based on unjust enrichment failed.

Final Conclusion: The refund claim was allowed, and the authorities were directed to pass consequential orders granting the refund with interest within the stipulated time.

Ratio Decidendi: Where excess tax is paid by the assessee from its own funds during the pendency of a classification dispute and the burden of that tax was not passed on to customers, the doctrine of unjust enrichment does not defeat refund with interest.

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