Manufacturer wins refund claim as tribunal rejects unjust enrichment presumption without positive evidence

The CESTAT New Delhi allowed the appeal in a refund claim case involving unjust enrichment principles. The manufacturer had not paid duty during goods clearance due to SSI exemption benefits but was later required to pay pending investigation. The tribunal held that merely showing the refund amount as expenses in the Profit and Loss Account cannot presume the incidence was passed to consumers without positive evidence from Revenue. The Commissioner (Appeals) should have relied on the Chartered Accountant Certificate. The challenged order was set aside and refund allowed.

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Issues Involved:
1. Applicability of the doctrine of unjust enrichment.
2. Validity of the Chartered Accountant's Certificate.
3. Consideration of the verification report by the Range Officer.

Summary:

1. Applicability of the doctrine of unjust enrichment:

The primary issue to be adjudicated is whether the doctrine of unjust enrichment applies when the manufacturer had not paid the duty at the time of clearance of goods due to availing the benefit of SSI exemption but was asked to pay that amount pending the investigation of the case. The Tribunal observed that Section 12B of the Central Excise Act, 1944, presumes that the incidence of duty has been passed on to the buyer unless proven otherwise. However, the Supreme Court in Mafatlal Industries Ltd. Vs. Union of India clarified that the refund of duty can be granted only when it is established that the burden of duty has not been passed on to others. In this case, the amount was deposited during the investigation, and the goods were already cleared prior to the payment, rebutting the presumption of Section 12B. The Tribunal held that the question of passing the burden to the buyers does not arise as the payment was made after the clearance of goods.

2. Validity of the Chartered Accountant's Certificate:

The Chartered Accountant's Certificate dated 28.11.2019 certified that the impugned amount was deposited against the excise demand and was not collected from the customers but borne by the appellant's proprietorship concern. The Tribunal found no reason to ignore this certificate, stating that it proves there is no unjust enrichment to the appellant, contrary to the Commissioner (Appeals)'s conclusion.

3. Consideration of the verification report by the Range Officer:

The Range Officer, Central GST, Range-11, Jaipur, verified the refund claim and concluded that the refund claim was within the time limit and not hit by the doctrine of unjust enrichment. The Tribunal noted that the Commissioner (Appeals) erred in ignoring this verification report, especially in the absence of any evidence by the department to support the presumption of Section 12B of the Central Excise Act.

The Tribunal also referenced various precedents, including Sandvik Asia Ltd., Pricol Ltd., and Advance Steel Tubes Ltd., which support the view that the principle of unjust enrichment does not apply to amounts deposited during investigation. The Tribunal distinguished the department's reliance on Mahindra Engg., stating it was a presumptive outcome not applicable to the present case.

Conclusion:

The Tribunal held that the amount shown as expenses in the Profit and Loss Account does not automatically imply that the incidence of duty was passed on to the consumers. The Chartered Accountant Certificate should have been relied upon by the Commissioner (Appeals). Consequently, the order under challenge was set aside, and the appeal was allowed.

[Order pronounced in the open court on 04.01.2024]

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