Refund of investigation deposits not barred by unjust enrichment, while separate recovery for alleged tax collection may still proceed.

Amounts deposited during investigation or pending adjudication are treated as deposits under protest, not as payment of tax in the ordinary sense, so unjust enrichment does not bar refund. On that basis, crediting the sum to the Consumer Welfare Fund was inconsistent with settled law, and the assessee remained entitled to refund. At the same time, any separate allegation that the assessee collected service tax from customers had to be examined independently under the statutory recovery mechanism, after notice and opportunity, and the refund proceedings did not preclude such action.

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Issues: (i) Whether an amount deposited during investigation could be denied refund on the ground of unjust enrichment and directed to be credited to the Consumer Welfare Fund; (ii) Whether the Department could, if so advised, proceed under the statutory mechanism for recovery of any amount allegedly collected as service tax from customers.

Issue (i): Whether an amount deposited during investigation could be denied refund on the ground of unjust enrichment and directed to be credited to the Consumer Welfare Fund.

Analysis: Amounts deposited during the pendency of investigation or adjudication are in the nature of deposits made under protest and are not payments of duty or tax in the ordinary sense. On that footing, the bar of unjust enrichment does not apply to refund of such amounts. Since the disputed sum had been deposited before issuance of the show cause notice and the refund was sanctioned, directing credit to the Consumer Welfare Fund on the ground of unjust enrichment was inconsistent with the settled legal position.

Conclusion: The refund could not be denied on the ground of unjust enrichment, and the amount was refundable to the assessee.

Issue (ii): Whether the Department could, if so advised, proceed under the statutory mechanism for recovery of any amount allegedly collected as service tax from customers.

Analysis: If the assessee had in fact collected any amount from customers as representing service tax, that question required separate examination under the statutory provisions governing recovery of such collections. The assessee had to be given an opportunity to establish that only service charges were collected and not service tax. The earlier findings in the refund proceedings were not to preclude such independent action in accordance with law.

Conclusion: The Department was left free to proceed under the relevant recovery provisions in accordance with law after due notice and opportunity.

Final Conclusion: The refund order was set aside to the extent it had directed credit to the Consumer Welfare Fund, and the assessee was held entitled to refund of the deposited amount, while the Department's right to pursue any independent recovery action for alleged tax collection was preserved.

Ratio Decidendi: Money deposited during investigation or pending adjudication is treated as a deposit under protest, so the doctrine of unjust enrichment does not bar its refund; any separate allegation that the assessee collected tax from customers must be pursued under the specific statutory recovery mechanism after notice and hearing.

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