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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: (i) whether the refund claims could be rejected on the ground of unjust enrichment when no show-cause notice on that issue was issued; (ii) whether interest was payable on the delayed refund and, if so, from when.
Issue (i): whether the refund claims could be rejected on the ground of unjust enrichment when no show-cause notice on that issue was issued.
Analysis: The refund claims had earlier been found not time-barred and were remanded for fresh decision. In the remand proceedings, the rejection was based on unjust enrichment, although no show-cause notice on that ground had been issued. The applicable departmental circular required the issue of unjust enrichment to be raised in the show-cause notice itself. On the facts, the duty burden was found to have been borne by the appellants, supported by invoices and certificates from the recipient, and the clearances were made under a project structure where the appellants were not shown to have passed on the duty.
Conclusion: The rejection on the ground of unjust enrichment was not sustainable and the refund was held admissible in favour of the assessee.
Issue (ii): whether interest was payable on the delayed refund and, if so, from when.
Analysis: Interest on refund was governed by the principle that liability to pay interest begins after expiry of three months from receipt of the refund application. The order also adopted the view that a reasonable rate of interest was 12% per annum for the delayed period.
Conclusion: Interest was held payable from three months after filing of the refund claim until realization, at 12% per annum.
Final Conclusion: The refund rejection was set aside and the appellants were held entitled to refund with consequential interest relief.
Ratio Decidendi: A refund claim cannot be rejected on unjust enrichment without putting that issue in the show-cause notice, and interest on delayed refund accrues after expiry of three months from receipt of the refund application.
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