Unjust enrichment does not bar refund under compounded excise levy when duty is fixed by annual capacity of production.

Where excise duty is paid under a mandatory compounded levy scheme on annual capacity of production, the liability is fixed in advance and is not linked to actual clearance, sale price, or recovery from buyers. On those facts, the doctrine of unjust enrichment does not apply merely because the refund amount appears in the balance sheet; such disclosure does not by itself prove passing on of duty incidence. The excess duty paid under Section 3A was therefore refundable to the assessee and could not be retained in the Consumer Welfare Fund.

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Issues: Whether refund of duty paid under the compounded levy scheme was hit by unjust enrichment and could therefore be credited to the Consumer Welfare Fund instead of being paid to the assessee.

Analysis: The duty in question was paid under Section 3A of the Central Excise Act, 1944, on the basis of annual capacity of production and not on the basis of actual clearance or sale of goods. In such a scheme, the duty liability is fixed in advance and is not correlated with the transaction value of goods or the price charged from buyers. On the facts found, the amount claimed as refund was excess duty paid under the compounded levy mechanism, and the method of disclosure in the balance sheet could not by itself establish passing on of duty incidence. The reasoning of unjust enrichment, which ordinarily applies where duty can be recovered from buyers, was therefore held inapplicable to the present facts.

Conclusion: The refund was not barred by unjust enrichment and the amount credited to the Consumer Welfare Fund was required to be transferred to the assessee.

Final Conclusion: The appeal succeeded and the assessee was held entitled to receive the refunded amount instead of its retention in the Consumer Welfare Fund.

Ratio Decidendi: Where excise duty is paid under a mandatory compounded levy scheme on annual capacity of production, the duty is not recoverable from buyers in the ordinary course and the doctrine of unjust enrichment does not bar refund of excess duty paid.

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