Refund of amount paid under mistake of law is not barred by excise limitation or unjust enrichment

Amounts paid under mistake of law, where no excise duty was legally leviable, were treated as recoveries without authority of law rather than valid duty payments, so the refund claim was held outside the limitation regime in Section 11B of the Central Excise Act. The dispute goods were regarded as outside the Central Excise net under Chapter Note 5 of Chapter 30, and the limitation objection therefore failed. The refund was also found not barred by unjust enrichment because the assessee showed, through ledger entries, invoices and a Chartered Accountant certificate, that the incidence had not been passed on to buyers. The refund claim was accordingly maintainable with interest.

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Issues: (i) Whether the limitation prescribed under Section 11B of the Central Excise Act, 1944 applies to a refund claim where the amount was paid under mistake of law and was not legally payable as excise duty. (ii) Whether the refund claim was barred by unjust enrichment.

Issue (i): Whether the limitation prescribed under Section 11B of the Central Excise Act, 1944 applies to a refund claim where the amount was paid under mistake of law and was not legally payable as excise duty.

Analysis: The products in question were treated as outside the Central Excise net in view of Chapter Note 5 of Chapter 30 of the Central Excise Tariff Act, 1985, and the amount deposited by the appellant was found to be a payment made under mistake of law rather than duty legally leviable. On that basis, the statutory limitation under Section 11B was held inapplicable because the claim was not for refund of a validly levied tax but for recovery of an amount collected without authority of law. The conclusion was supported by the principle that a payment which was never lawfully recoverable does not acquire the character of excise duty merely because it was paid.

Conclusion: Section 11B did not bar the refund claim, and the limitation objection failed against the assessee.

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

Analysis: The ledger and supporting material showed that the amount had been borne by the appellant and was not passed on to buyers. The entries reflected that the disputed sums were retained pending litigation, and the Chartered Accountant certificate and invoices supported the position that the incidence of duty had not been transferred. Accordingly, the claim satisfied the test against unjust enrichment.

Conclusion: The refund was not hit by unjust enrichment and was admissible to the assessee.

Final Conclusion: The refund claim was maintainable, the statutory limitation defence failed, and the appellant was entitled to refund with interest.

Ratio Decidendi: An amount paid under mistake of law, where no duty was lawfully leviable, does not attract the limitation regime governing refund of excise duty, and refund cannot be denied if the incidence has not been passed on.

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