In-situ anti-static carpet materials qualified for exemption, and refund was not barred by unjust enrichment.

Materials used to construct an anti-static carpet in situ for a 100% EOU were held to fall within Notification No. 1/95, because the notification covered the carpet and its parts and consumables and the fact that it was not purchased as a finished item did not alter its essential character. The refund claim was also found not to be barred by unjust enrichment, as the Chartered Accountant's certificate and balance sheet entries showed the duty incidence had not been passed on. The departmental challenge to the refund therefore failed and the lower appellate authority's refund order was sustained.

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Issues: (i) Whether goods used to build an anti-static carpet in-situ for a 100% EOU were eligible for exemption under Notification No. 1/95 as parts and consumables of anti-static carpet; (ii) Whether the refund claim was hit by unjust enrichment.

Issue (i): Whether goods used to build an anti-static carpet in-situ for a 100% EOU were eligible for exemption under Notification No. 1/95 as parts and consumables of anti-static carpet.

Analysis: The materials procured duty-free were used to construct an anti-static carpet in the assessee's premises, which was required for a dust-free environment in the manufacture of optical goods. The notification covered anti-static carpet and its parts and consumables. The fact that the carpet was not bought ready-made but created in-situ did not change the essential character of the goods used for that purpose.

Conclusion: The exemption under Notification No. 1/95 was correctly extended to the goods used for constructing the anti-static carpet in-situ, in favour of the assessee.

Issue (ii): Whether the refund claim was hit by unjust enrichment.

Analysis: The refund authority relied on the Chartered Accountant's certificate and the balance sheet showing the amount paid under TR-6 challan as advances, which supported the view that the incidence of duty had not been passed on.

Conclusion: The refund was not barred by unjust enrichment, in favour of the assessee.

Final Conclusion: The departmental challenge to the refund failed, and the refund allowed by the lower appellate authority was sustained.

Ratio Decidendi: Where imported or procured materials are used to create an anti-static carpet in-situ for the eligible industrial use contemplated by the exemption notification, the benefit cannot be denied merely because the carpet was not purchased as a finished product; refund is also permissible where the record shows that the duty burden was not passed on.

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