Successful appeal grants Modvat credit refund despite time bar and unjust enrichment rejection

STI SANOH INDIA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE

STI SANOH INDIA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE - 2001 (127) E.L.T. 572 (Tri. - Del.) Issues:
1. Disallowance of Modvat credit on rubber plugs
2. Rejection of refund claim as time-barred and on the ground of unjust enrichment

Analysis:
1. The appellants manufactured Copper Brazed Steel Tubes with duty paid rubber seals and took Modvat credit on these rubber plugs. The Asstt. Commissioner disallowed the credit on these plugs, leading to appeals and subsequent success at CEGAT. A refund claim was filed but rejected by the Asstt. Commissioner and upheld by the Commissioner (Appeals) citing it as time-barred and on the grounds of unjust enrichment. The issue of payment under protest was raised, and it was argued that the payment made during the pendency of proceedings should be deemed to be made under protest, as per established legal principles. The Tribunal referred to the Supreme Court's decision in Mafatlal Industries Ltd. v. Union of India, emphasizing that a manufacturer would naturally pay the duty under protest when contesting the levy of duty. The Tribunal held that the refund claim was valid as the payment was made under protest during the appeal process, as settled in their favor by the Tribunal's order.

2. The Tribunal also addressed the doctrine of unjust enrichment concerning the Modvat credit taken on certain inputs. The appellants had paid back the Modvat credit on the inputs and succeeded in their appeal. It was clarified that the refund claimed was not related to the duty paid on the goods cleared but on the credit of duty admissible on the inputs. Therefore, the doctrine of unjust enrichment was deemed inapplicable to the refund claim. The Tribunal concluded that the refund claim was admissible to the appellants, and the appeal was allowed based on the findings that the payment was made under protest during the appeal process and the doctrine of unjust enrichment did not apply in this scenario.