2005 (5) TMI 91 - AT - Customs

Tribunal Confirms Unjust Enrichment Doctrine; Dismisses Refund Due to Lack of Evidence on Duty Burden Transfer.

The Tribunal upheld the application of the doctrine of unjust enrichment under Section 27 of the Customs Act to imported capital goods used captively for ... Refund - Unjust enrichment - Imported capital goods - Whether the doctrine of unjust enrichment is applicable to the imported capital goods used captively for the manufacture of excisable goods - HELD THAT:- The Hon'ble Supreme Court in the case of Mafatlal Industries v. Union of India [1996 (12) TMI 50 - SUPREME COURT] held that principle of unjust enrichment is applicable in case of captively consumed goods. Further, we find that the Hon'ble Supreme Court in the case of Sahakari Khand Udyog Mandal Ltd. v. CCE [2005 (3) TMI 116 - SUPREME COURT] held that doctrine of unjust enrichment based on equity, has been accepted and applied in several cases. The Hon'ble Supreme Court held that irrespective of applicability of Section 11B of Central Excise Act, the doctrine can be invoked to deny the benefit to which a person is not otherwise entitled. Section 11B of the Act was similar provision merely gives legislative recognition to this doctrine. That, however, does not mean that in absence of statutory provision, a person can claim or retain undue benefit. Before claiming a relief of refund it is necessary for the petitioner/appellant to show that he has paid the amount for which relief is sought, he has not passed on the burden on consumers and if such relief is not granted, he would suffer loss. In view of the above decisions of the Hon'ble Supreme Court we answer the question of law referred of the Larger Bench in favour of the Revenue by holding that the doctrine of unjust enrichment is applicable to the imported capital goods used captively consumed for the manufacture of excisable goods. No other evidence is produced in the appeal in support of the claim by the appellant. In these circumstances and in view of the above decisions of Hon'ble Supreme Court we find no infirmity in the impugned order the appeal is dismissed. Issues:1. Applicability of the doctrine of unjust enrichment under Section 27 of Customs Act to imported capital goods used captively for manufacturing excisable goods.Analysis:The judgment involved a reference to the Larger Bench to determine whether the doctrine of unjust enrichment applies to imported capital goods used captively for manufacturing excisable goods. The appellant's refund claim was rejected by the adjudicating authority and the Commissioner (Appeals) as they failed to demonstrate that the burden of duty had not been passed on to customers. The appellant contended that the price of the final product remained the same before and after the payment of duty, indicating that the duty burden was not transferred to buyers. The Tribunal considered various decisions, including those of the Hon'ble Supreme Court, to address the issue at hand.The Tribunal examined the decisions of the Hon'ble Madras High Court and the Bombay High Court, which led to conflicting views on the application of the doctrine of unjust enrichment to captively consumed imported goods. The Hon'ble Supreme Court's ruling in Union of India v. Solar Pesticide Pvt. Ltd. clarified that the principle of unjust enrichment is applicable to captively consumed goods. It emphasized the need for the claimant to establish payment of duty, non-transfer of burden to consumers, and potential loss if relief is not granted. The Tribunal upheld the applicability of the doctrine to imported capital goods used captively for manufacturing excisable goods, overturning the previous decision in Grasim Industries.Regarding the specific case before the Tribunal, the appellant argued that they had not passed on the duty burden to customers, supported by sales invoices showing consistent prices before and after import. However, the Revenue contended that duty paid on plant and machinery forms part of production costs, as per industry guidelines. The Tribunal cited the Hon'ble Supreme Court's decision in CCE v. Allied Photographics India Ltd., which highlighted that price uniformity alone does not prove non-passing of duty burden. The Tribunal dismissed the appeal, noting the lack of additional evidence supporting the appellant's claim and aligning with previous Supreme Court decisions on the matter.In conclusion, the Tribunal ruled in favor of applying the doctrine of unjust enrichment to imported capital goods used captively for manufacturing excisable goods, emphasizing the need for claimants to meet specific criteria to qualify for duty refunds and rejecting the appellant's appeal based on insufficient evidence and established legal principles.