2018 (11) TMI 1143 - AT - Central Excise

Tribunal upholds refund denial citing unjust enrichment principle and statutory limitations.

India Medtronic Pvt. Ltd. Versus C.C.E. & S.T. -Vadodara

The Tribunal held that the refund claim was governed by Section 11B of the Central Excise Act, 1944, and the principle of unjust enrichment applied. The ... Refund claim - unjust enrichment - section 11B of Central Excise Act, 1944 - matter was remanded to test the issue of unjust enrichment, whether the appellants have passed on the incidence of refund to any other person or otherwise? - Held that:- There is no dispute that the amount of ₹ 38 lakhs was paid by the appellant as duty under the head ‘Excise duty’ which on the adjudication was appropriated against the confirmed demand. Therefore, it cannot be said that amount of ₹ 38 lakhs deposited by the appellant is not towards duty but only as a pre deposit. Even if it is considered that the amount paid is not duty, the only mechanism provided in Central Excise Act for refund is under section 11B of Central Excise 1944. The issue is decided in the case of M/S. PETRONET LNG LIMITED VERSUS COMMISSIONER OF CUSTOMS, AHMEDABAD [2018 (8) TMI 111 - CESTAT AHMEDABAD], where it was held that the core issue decided is duty or deposit, the refund is governed by section 11B of the Central Excise 1944. The issue of unjust enrichment has to be dealt with before sanctioning of any refund - Appeal dismissed - decided against appellant. Issues Involved:1. Whether the refund claim filed by the appellant is governed by Section 11B of the Central Excise Act, 1944.2. Whether the amount paid by the appellant was a 'deposit' or 'duty'.3. Applicability of the principle of unjust enrichment.Detailed Analysis:1. Applicability of Section 11B of the Central Excise Act, 1944:The appellant argued that the refund sought was in respect of a demand of duty raised by a show cause notice dated 09.03.1999, which was later set aside. They contended that since the amount was paid before adjudication, it should be considered a deposit and not duty, thus Section 11B, which deals with the refund of duty, would not be applicable. The appellant cited several judgments to support their claim that the provision of unjust enrichment under Section 11B should not apply to deposits.However, the Tribunal found that the amount of Rs. 38 lakhs was paid by the appellant as duty under the head 'Excise duty' and was appropriated against the confirmed demand. Therefore, it could not be considered merely a deposit. The Tribunal referenced multiple judgments, including the decision in the case of Petronet LNG Ltd., which established that any refund filed before the Customs/Central Excise authorities must be processed under the provisions of Section 27 of the Customs Act, 1962, or Section 11B of the Central Excise Act, 1944.2. Nature of the Amount Paid (Deposit vs. Duty):The Tribunal noted that the amount of Rs. 38 lakhs was paid as excise duty and appropriated against a confirmed demand. Even if considered a deposit, the only mechanism for a refund under the Central Excise Act is Section 11B. Thus, the Tribunal concluded that the amount paid was indeed duty and not merely a deposit. The Tribunal cited the judgment in the case of Collector of Central Excise, Chandigarh vs. Doaba Co-operative Sugar Mills, which held that any refund of duty recovered without authority of law must still adhere to the limitations prescribed under the Customs/Central Excise Act.3. Principle of Unjust Enrichment:The Tribunal emphasized that the principle of unjust enrichment must be considered before sanctioning any refund. The Tribunal referenced the judgment in the case of Mafatlal Industries Limited vs. UOI, which endorsed the view that all refund claims under the Customs and Central Excise Acts must pass the test of unjust enrichment. Consequently, the Tribunal upheld the order of the Commissioner (Appeals), which remanded the matter to the Adjudicating Authority to verify whether the incidence of refund had been passed on to any other person.Conclusion:The Tribunal concluded that the refund claim was governed by Section 11B of the Central Excise Act, 1944, and the principle of unjust enrichment was applicable. The Tribunal upheld the order of the Commissioner (Appeals) and dismissed the appeal, affirming that the refund could only be sanctioned after verifying that the incidence of refund had not been passed on to any other person. The Tribunal reiterated that it was bound by the provisions of the Act and could not bypass the statutory limitations.Pronouncement:The appeal was dismissed, and the order was pronounced in the open Court on 20/11/2018.