Unjust enrichment does not bar refund when the duty incidence is not passed on and the prior rejection basis is already set aside.

Refund of duty paid on LSHFHS diesel supplied to the Indian Navy was held admissible because the earlier ground for rejection, based on Leader Engineering Works, had already been set aside and was not challenged by Revenue. On the material produced, including correspondence and certificates from BPCL and departmental authorities, the duty-related transaction between IOC and BPCL was treated as fully and finally settled, so the incidence of duty could not be said to have been passed on to the claimant. The refund denial on unjust enrichment grounds was therefore unsustainable, and the refund claim was restored.

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Issues: Whether the appellant was entitled to refund of duty paid on LSHFHS diesel supplied to the Indian Navy under Notification No. 64/95-CE, and whether the refund was barred on the ground that the duty incidence had been passed on.

Analysis: The original rejection of refund rested only on the application of the decision in Leader Engineering Works, and that basis had already been set aside by the Commissioner (Appeals) without challenge by Revenue. In the proceedings for consequential relief, the appellant produced correspondence and certificates from BPCL and the departmental authorities indicating that the duty-related transaction between IOC and BPCL had been settled in full and final terms. On that material, the duty burden could not be said to have been passed on to the appellant in a manner denying refund.

Conclusion: The appellant was entitled to the refund, and the denial of refund was unsustainable.

Final Conclusion: The appeal succeeded and the refund claim was restored.

Ratio Decidendi: Where the prior basis for rejecting a refund claim has been set aside and the record establishes that the duty incidence was not treated as passed on to the claimant, refund cannot be denied on the ground of unjust enrichment.

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