Refund under protest requires strict protest procedure and remains subject to unjust enrichment if duty passed on

Refund of excise duty claimed as paid under protest was held time-barred because an invoice endorsement alone did not satisfy Rule 233B; a valid protest required delivery of a protest letter to the proper officer and acknowledgment. The ruling treated mere declarations in invoices or under Rule 173B as insufficient to establish payment under protest. The claim also failed on unjust enrichment because Mafatlal Industries did not exclude that bar merely due to protest, and refund remained available only where the claimant proved the duty burden was not passed on. As the duty had been recovered from customers, the refund was held not maintainable.

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Issues: (i) Whether the refund claim of duty paid under protest was barred by limitation under Section 11B; (ii) Whether refund of duty paid under protest was exempt from the bar of unjust enrichment under Section 11B.

Issue (i): Whether the refund claim of duty paid under protest was barred by limitation under Section 11B.

Analysis: The endorsement made on invoices stating that duty was paid under protest did not satisfy the procedure prescribed by Rule 233B of the Central Excise Rules, 1944. The rule required a protest letter to be delivered to the proper officer and acknowledged. The Court read the relevant part of the Constitution Bench ruling to mean that a payment is treated as under protest only when the prescribed procedure is followed, and mere declaration in the invoices or a declaration under Rule 173B was insufficient.

Conclusion: The refund claim was not a valid claim of duty paid under protest and was therefore time-barred under Section 11B.

Issue (ii): Whether refund of duty paid under protest was exempt from the bar of unjust enrichment under Section 11B.

Analysis: The Court held that the Constitution Bench decision in Mafatlal Industries did not lay down that the rule of unjust enrichment was inapplicable merely because duty was paid under protest. On the contrary, the governing principle was that refund is not available unless the claimant establishes that the incidence of duty had not been passed on to the buyer. As the appellants had admittedly recovered the duty from customers during the relevant period, the statutory bar operated against them.

Conclusion: The refund claims were hit by unjust enrichment and were not maintainable.

Final Conclusion: The appeals failed on both limitation and unjust enrichment, and the orders rejecting the refund claims were sustained.

Ratio Decidendi: A duty payment is treated as under protest only if the prescribed protest procedure is followed, and even in such cases refund remains subject to the statutory bar of unjust enrichment unless the claimant proves that the duty burden was not passed on.

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