Refund of excise duty through PLA and Cenvat credit turns on unjust enrichment and proper Rule 14 recovery notice

Refund of excise duty paid through PLA was not barred by unjust enrichment where invoices reflected nil duty, the goods were shown as exempt, and documentary evidence such as Chartered Accountant certificates, ER-1 returns and an affidavit supported non-passing of the duty burden; accounting entries alone were insufficient to prove unjust enrichment. Refund of duty paid by utilising Cenvat credit also could not be denied merely because the final product was exempt, since the admissibility of credit could not be examined for the first time in refund proceedings and any recovery of wrongly availed credit had to be pursued under Rule 14 through proper notice. The refund denial was accordingly set aside.

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Issues: (i) Whether refund of excise duty paid through PLA was barred by unjust enrichment; (ii) Whether refund of excise duty paid by utilisation of Cenvat credit could be denied on the ground that the final product was exempt and no notice under Rule 14 of the Cenvat Credit Rules, 2004 was issued.

Issue (i): Whether refund of excise duty paid through PLA was barred by unjust enrichment.

Analysis: The invoices showed nil duty and the goods were declared exempt. Chartered Accountant certificates, ER-1 returns and the manager's affidavit supported the case that the duty burden was not passed on. The mere accounting treatment in the profit and loss account could not, by itself, establish passing on of duty, and documentary evidence could not be discarded without contrary evidence from the Department.

Conclusion: The bar of unjust enrichment was not attracted and refund of duty paid through PLA could not be denied.

Issue (ii): Whether refund of excise duty paid by utilisation of Cenvat credit could be denied on the ground that the final product was exempt and no notice under Rule 14 of the Cenvat Credit Rules, 2004 was issued.

Analysis: The Department had required payment of duty despite the assessee's claim to exemption, and it had not objected to the mode of payment when duty was paid through Cenvat credit. In a refund proceeding, the eligibility of Cenvat credit could not be examined for the first time. Recovery or denial of wrongly availed credit had to be pursued under Rule 14 by proper notice, and in the absence of such notice the refund claim could not be rejected on that basis.

Conclusion: Refund of duty paid through Cenvat credit could not be denied on the ground that the credit was inadmissible, and the assessee was entitled to refund.

Final Conclusion: The order denying the refund was set aside and the assessee was held entitled to refund of the entire duty paid under protest with consequential benefits.

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