Refund of duty paid under mistake of law cannot be denied on limitation or unjust enrichment without proof of passing on burden.

Excise duty paid under mistake of law was held refundable because the revenue could not retain an unauthorised levy by relying on limitation in writ proceedings under Article 226. The objection of unjust enrichment also failed, as the department had to plead and prove that the duty burden was passed on to customers, and it did not discharge that burden. The rejection of refund was therefore unsustainable, and the claimants were held entitled to refund of the duty wrongly paid, subject to quantification and payment of the refundable amount.

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Issues: (i) Whether the claim for refund of excise duty paid under mistake of law was barred by limitation under the Central Excise Rules; and (ii) whether refund could be refused on the ground of unjust enrichment.

Issue (i): Whether the claim for refund of excise duty paid under mistake of law was barred by limitation under the Central Excise Rules.

Analysis: The duty had been found to have been paid under mistake of law. Once the levy itself was collected without authority of law, the department could not defeat restitution merely by invoking the rule of limitation in writ proceedings under Article 226 of the Constitution of India.

Conclusion: The limitation defence was not available to the department against the refund claim.

Issue (ii): Whether refund could be refused on the ground of unjust enrichment.

Analysis: The doctrine of unjust enrichment required the revenue to raise the plea and establish that the tax burden had been passed on to customers. On the record, that burden had not been discharged by the department, and the refund could not be denied on that basis.

Conclusion: The objection based on unjust enrichment was rejected.

Final Conclusion: The impugned rejection of refund was unsustainable, and the petitioners were held entitled to refund of the duty wrongly paid, with the matter sent back for quantification and payment of the refundable amount.

Ratio Decidendi: Duty collected under mistake of law cannot be retained by the revenue by invoking limitation or unjust enrichment unless the department establishes that the burden was passed on to others.

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