2025 (3) TMI 1397 - AT - Central Excise

Excise duty refund claims fail without proof burden wasn't passed to ultimate consumers under unjust enrichment doctrine

M/s. TVS Motor Company Ltd. Versus Commissioner of GST and Central Excise, Salem

M/s. TVS Motor Company Ltd. Versus Commissioner of GST and Central Excise, Salem - TMI 1. ISSUES PRESENTED and CONSIDEREDThe primary issues considered in this judgment are:Whether the appellant is required to conclusively prove that the incidence of duty burden has not been passed on to the ultimate buyer to be eligible for a refund.Whether the refunds allowed to the appellant consequent to the finalization of provisional assessments are affected by the doctrine of unjust enrichment, particularly in light of the Supreme Court's ruling in the case of Commissioner of Central Excise Vs. Addison & Co. Ltd.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Requirement of Conclusive Proof of Duty Burden Not Passed to Ultimate BuyerRelevant Legal Framework and Precedents: The legal framework is centered around Section 12B of the Central Excise Act, 1944, which presumes that the incidence of duty is passed on to the buyer unless proven otherwise. The Supreme Court's decision in Addison & Co. Ltd. clarifies that the claimant must establish that the duty burden has not been passed on to any other person, including the ultimate consumer.Court's Interpretation and Reasoning: The court emphasized that the burden of proof lies with the appellant to demonstrate that the duty burden was not passed on to the ultimate buyer. The presumption under Section 12B is rebuttable, but the appellant must provide conclusive evidence to rebut it.Key Evidence and Findings: The appellant provided credit notes and Chartered Accountant's certificates to argue that the duty burden was not passed on. However, the court found that these documents only proved that the burden was not passed to the dealers, not to the ultimate consumers.Application of Law to Facts: The court applied the presumption under Section 12B and the precedent set by Addison & Co. Ltd., concluding that the appellant failed to prove that the duty burden was not passed on to the ultimate consumers.Treatment of Competing Arguments: The appellant argued that the dealers did not avail of CENVAT credit and that the burden was not passed on. The court, however, found that the appellant's evidence was insufficient to prove that the ultimate consumers did not bear the duty burden.Conclusions: The court concluded that the appellant must provide evidence that the duty burden was not passed on to the ultimate consumers to be eligible for a refund.Issue 2: Application of the Doctrine of Unjust EnrichmentRelevant Legal Framework and Precedents: The doctrine of unjust enrichment is central to this issue, as outlined in Section 11B of the Central Excise Act and reinforced by the Supreme Court's ruling in Addison & Co. Ltd.Court's Interpretation and Reasoning: The court interpreted the doctrine to mean that a refund can only be granted if the duty burden has not been passed on to any other person, including the ultimate consumer. The court emphasized the need for verification to determine who ultimately bore the duty burden.Key Evidence and Findings: The court found that the original adjudicating authority did not conduct a thorough verification to determine whether the burden was passed to the ultimate consumers. The evidence provided by the appellant was deemed insufficient to meet the requirements of the doctrine.Application of Law to Facts: Applying the doctrine, the court held that the appellant's refunds were subject to unjust enrichment as the necessary verification was not conducted.Treatment of Competing Arguments: The appellant argued that the doctrine of unjust enrichment should not apply to provisional assessments and that the refunds were already sanctioned. The court disagreed, stating that the doctrine applies regardless of the assessment stage.Conclusions: The court concluded that the refunds were affected by the doctrine of unjust enrichment, and a remand was necessary to conduct the required verification.3. SIGNIFICANT HOLDINGSCore Principles Established: The judgment reinforces the principle that the burden of proof lies with the claimant to establish that the duty burden was not passed on to the ultimate consumer. It also emphasizes the necessity of verification in refund claims to ensure compliance with the doctrine of unjust enrichment.Final Determinations on Each Issue: The court determined that the appellant failed to conclusively prove that the duty burden was not passed on to the ultimate consumers, thus affecting their eligibility for refunds. The court ordered a remand for further verification to ensure compliance with the doctrine of unjust enrichment.Verbatim Quotes of Crucial Legal Reasoning: 'The sine qua non for a claim for refund as contemplated in Section 11B of the Act is that the claimant has to establish that the amount of duty of excise in relation to which such refund is claimed was paid by him and that the incidence of such duty has not been passed on by him to any other person.'