2025 (7) TMI 1766 - AT - Customs

Recovery order quashed as unjust enrichment doctrine doesn't apply under Section 18(5) of Customs Act 1962

Neha Shipping and Allied Services Pvt Limited Versus Commissioner Customs, Jamnagar (Prev.), Jamnagar, Gujarat

The CESTAT AHMEDABAD allowed the appeal, setting aside the recovery order of Rs. 11,05,908/- with interest. The tribunal held that the adjudicating ... Recovery of Refund issued earlier - Refund of excess customs duty paid - adjudicating authority failed to properly examine the provisions of Section 18(5) of the Customs Act, 1962 which came into effect from 13.07.2006 - incidence of duty has been passed on to other person or not - principles of unjust enrichment - HELD THAT:- It is settled legal position that initial deposit of duty during provisional assessment was on estimation basis and is in the nature of deposit and it is notional duty deposit. Hence, doctrine of unjust-enrichment is not applicable in the refund of excess duty paid in respect of unutilized stores. The appellant has successfully explained that the refund claim of excess duty paid at the time of provisional assessment was recorded in the books of accounts and was transferred to Ambuja Cement, who paid Customs duty at the time of provisional assessment and the said amount was not passed on to buyers on the sale of the goods. Therefore, the impugned order for recovery of amount of Rs. 11,05,908/- alongwith applicable interest is not sustainable and liable to be set-aside whereas the appeal is liable to be allowed. The impugned order of recovery of an amount of Rs. 11,05,908/- alongwith applicable interest from the appellant is set-aside - Appeal allowed. ISSUES: Whether the doctrine of unjust enrichment is applicable to refund claims of excess customs duty paid on provisional assessment in the context of vessel conversion from 'foreign run' to 'coastal run'.Whether the appellant discharged the onus under Section 18(5) of the Customs Act, 1962 to prove that the burden of excess duty was not passed on to any other person.Whether the refund of excess duty paid on provisional basis can be treated as a notional deposit and thus exempt from the application of unjust enrichment principles.Whether recovery of refund amount along with interest is justified when documentary evidence is produced to show that the duty burden was borne by the appellant and not passed on. RULINGS / HOLDINGS: The doctrine of unjust enrichment is not applicable in the refund of excess customs duty paid on provisional assessment in respect of vessel conversion from 'foreign run' to 'coastal run', as the initial deposit is 'in the nature of deposit' and a 'notional amount'.The appellant successfully discharged the onus under Section 18(5) of the Customs Act, 1962 by producing a Chartered Accountant's certificate and accounting evidence demonstrating that the excess duty was borne by the appellant and not passed on to buyers or any other person.The refund claim of Rs. 11,05,908/- recorded in the appellant's books of account and transferred to the party who paid the customs duty at provisional assessment confirms that the burden was not shifted, negating the applicability of unjust enrichment.The impugned order directing recovery of the refund amount along with interest is not sustainable and is set aside, allowing the appeal. RATIONALE: The Court applied the legal framework under Section 18(5) of the Customs Act, 1962, which requires that refund of customs duty shall not be allowed if the claimant has passed on the incidence of such duty to any other person, thereby invoking the doctrine of unjust enrichment.Precedents were relied upon, including rulings that held the doctrine of unjust enrichment does not apply to refunds of excess duty paid on provisional assessments where the duty was estimated and not fully consumed, specifically in cases involving unutilized stores and provisional deposits for ship bunkers and stores.The Court recognized that the initial duty payment was provisional and estimated, thus constituting a deposit rather than a final liability, which distinguishes it from cases where unjust enrichment principles typically apply.The appellant's production of documentary and accounting evidence, including a Chartered Accountant's certificate, was deemed sufficient to meet the statutory burden, demonstrating no passing on of duty incidence.No dissent or doctrinal shift was noted; the decision aligns with established jurisprudence confirming that unjust enrichment is not attracted in provisional assessment refund scenarios where the duty burden is borne by the claimant.