2004 (2) TMI 189 - AT - Central Excise

Tribunal rules in favor of appellant, directs refund of excess duty under Central Excise Tariff Act

The Tribunal held that the appellant's goods should be classified under sub-heading 5703.20, exempt under the Central Excise Tariff Act, 1985. The ... Refund - Unjust Enrichment Issues: Classification of goods under Central Excise Tariff Act, 1985; Consequential refund claim based on unjust enrichment.Classification of Goods:The appellant, a manufacturer of floor coverings, claimed classification of their goods under sub-heading 5703.20 of the Central Excise Tariff Act, 1985, which was exempt. However, the Commissioner of Central Excise classified the goods under sub-heading 5303.90, making them dutiable. The appellant challenged this classification order and succeeded in their appeal before the Tribunal. The Tribunal held that the appellant's goods should indeed be classified under sub-heading 5703.20, as per Final Order No. 44-47/2000, dated 11-2-2001.Consequential Refund Claim and Unjust Enrichment:The appellant claimed a consequential refund of approximately Rs. 27 lakh for the period January 1998 to November 1998. This claim was rejected by lower authorities citing unjust enrichment. The appellant argued that unjust enrichment did not apply to their case since they had not passed on the higher liability to the buyers. The appellant maintained that they sold the goods at the same price as before, even after the duty was levied as per the Commissioner's order. The appellant's counsel referred to established legal principles where unjust enrichment does not arise when the sale price remains unchanged post reclassification or revaluation. The appellant had informed the Department that they would be paying excise duty themselves and not passing on the burden to consumers. The appellant's letters clearly stated their intention not to increase prices and to bear the full incidence of excise duty paid, indicating their plan to file a refund claim if the classification issue was resolved in their favor.Decision:The Tribunal analyzed the appellant's letters and found that the disputed duty amount was not passed on to the buyers of the floor coverings. As unjust enrichment applies only when duty amounts are passed on to buyers, and that did not occur in this case, the bar of unjust enrichment did not apply to the appellant's claim. The Tribunal concluded that the lower authorities' finding on unjust enrichment was contrary to facts and unsustainable. Therefore, the impugned order was set aside, and the appeal was allowed. The lower authorities were directed to refund the excess paid duty to the appellant without delay.