2004 (7) TMI 246 - AT - Central Excise

Tribunal Allows Refund Claim in Duty Dispute

COMMR. OF C. EX., PONDICHERRY Versus SOUTHERN AGRIFURANE INDUS. LTD.

The case involved the withdrawal of duty exemption for 'furfuraldehyde' leading to a demand for duty payment. The Tribunal upheld the duty demand but ... Refund - Unjust enrichment Issues:1. Duty exemption withdrawal and demand for payment2. Rectification of mistake in order3. Justification for denying cash refund4. Time-bar challenge for refund claim5. Doctrine of unjust enrichmentIssue 1: Duty exemption withdrawal and demand for paymentThe case involved manufacturers of 'furfuraldehyde' (furfural), an excise duty-exempt input for bulk drugs. The duty exemption under Notification No. 147/84-C.E. was withdrawn, leading to a demand for duty payment from 1-9-91 to 29-12-92. The original authority confirmed the demand and imposed a penalty. The Tribunal upheld the duty demand but reduced the penalty. A rectification application partially restricted the duty demand to the normal limitation period, allowing a refund claim.Issue 2: Rectification of mistake in orderThe respondents filed a rectification application seeking to correct the duty demand period, which was partly allowed. This rectification enabled the respondents to apply for a refund of duty, leading to a subsequent show cause notice questioning cash refund eligibility based on unjust enrichment.Issue 3: Justification for denying cash refundThe Assistant Commissioner sanctioned a refund, but the Department appealed to the Commissioner (Appeals), who remanded the case for further verification on whether duty incidence was passed on to customers. The Assistant Commissioner found the refund claim hit by unjust enrichment and credited the amount to the Consumer Welfare Fund. However, the Commissioner (Appeals) allowed the appeal, stating that unjust enrichment did not apply in this case.Issue 4: Time-bar challenge for refund claimThe Department attempted to introduce a time-bar challenge for the refund claim, but the Assistant Commissioner's final finding rendered the claim immune to such challenges. The application seeking to incorporate the time-bar challenge was rejected.Issue 5: Doctrine of unjust enrichmentThe main argument revolved around the doctrine of unjust enrichment. The Tribunal examined the evidence and case law, emphasizing that duty paid after goods clearance was not subject to the presumption under Section 12B. The Department failed to prove that duty was passed on to customers, leading to the rejection of the Revenue's appeal and affirming the cash refund for the respondents. The dispute was concluded, highlighting the inapplicability of the presumption of duty passing on to the buyer in this case.