1994 (2) TMI 145 - AT - Central Excise

Manufacturer denied refund claims under Central Excise Rules; doctrine of unjust enrichment applied

The court held that M/s. Gavs Laboratories, as a supporting manufacturer, was not entitled to refund claims under Rule 57F(3) of the Central Excise Rules ... Jurisdiction Issues Involved:1. Eligibility of refund claims under Rule 57F(3) of the Central Excise Rules.2. Jurisdiction of the Assistant Collector to reconsider the refund claim after the appellate authority's order.3. Applicability of the doctrine of unjust enrichment.Detailed Analysis:1. Eligibility of Refund Claims under Rule 57F(3) of the Central Excise Rules:The primary issue revolves around whether M/s. Gavs Laboratories, a supporting manufacturer, is entitled to a refund of Modvat credit under Rule 57F(3) when exporting goods through a merchant exporter under the Duty Exemption Entitlement Certificate (DEEC) Scheme. The Assistant Collector initially rejected the refund claim, arguing that Rule 57F(3) does not apply to supporting manufacturers working under the DEEC Scheme. The Collector (Appeals) overturned this decision, stating that there is nothing in Rule 57F(3) compelling a manufacturer to avail of drawback or claim a rebate of duty, nor is the rule restricted to situations where the manufacturer does not export their entire products.However, upon further review, it was determined that M/s. Gavs Laboratories was not the actual exporter but merely the manufacturer. The goods were exported by M/s. Usha Intercontinental, and the transaction was essentially a domestic sale to the merchant exporter. Therefore, Rule 57F(3) does not apply to M/s. Gavs Laboratories, and the Assistant Collector's rejection of the refund claims was deemed correct.2. Jurisdiction of the Assistant Collector to Reconsider the Refund Claim:The appellate authority's order dated 27-12-1990 annulled the Assistant Collector's initial rejection of the refund claim and directed that the refund be allowed if otherwise in order. M/s. Gavs Laboratories argued that this order was final and that the Assistant Collector lacked jurisdiction to reopen the issue. However, it was clarified that the appellate authority's order was in the nature of a remand, allowing the Assistant Collector to reassess the eligibility for the refund. Therefore, the Assistant Collector's subsequent order dated 15-2-1991 was within jurisdiction.3. Applicability of the Doctrine of Unjust Enrichment:The doctrine of unjust enrichment was also considered. The argument was that granting a cash refund to M/s. Gavs Laboratories would result in undue benefit and unjust enrichment, as they had already availed of duty-free imported materials under the DEEC Scheme. Since M/s. Usha Intercontinental was the actual exporter, any benefits arising from the export, including duty drawbacks, should accrue to them. The Collector (Appeals) was directed to ensure that the duty incidence had not been passed on to the merchant exporter before sanctioning any refund. Ultimately, it was concluded that M/s. Gavs Laboratories were not entitled to the refund claims, as the benefits should be claimed by M/s. Usha Intercontinental.Conclusion:The judgment concluded that M/s. Gavs Laboratories, being only the manufacturer and not the exporter, were not entitled to the refund claims under Rule 57F(3) of the Central Excise Rules. The Assistant Collector's rejection of the refund claims was upheld, and the order of the Collector (Appeals) was set aside. The appeal of the Department was allowed, and the appeal of M/s. Gavs Laboratories was rejected.