Pharma Manufacturers Win Appeal on Refund Claim for Excess Duty; Unjust Enrichment Rule Not Applicable

The Tribunal allowed the appeal of pharmaceutical manufacturers regarding the rejection of their refund claim for excess duty paid on Nufenac tablets and injections due to duty rate changes. It was held that unjust enrichment did not apply as the duty incidence was not passed on to consumers, given the fixed retail price set by the Drug Controller. The Tribunal set aside the rejection based on unjust enrichment under section 11B of the Central Excises & Salt Act, 1944.

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Issues involved:
Appeal against rejection of refund claim based on unjust enrichment u/s 11B of Central Excises & Salt Act, 1944 due to variation in duty rates for pharmaceutical products.

Summary:

Issue 1: Unjust Enrichment and Variation in Duty Rates
The appellants, pharmaceutical manufacturers, filed a refund claim for excess duty paid on Nufenac tablets and injections due to duty rate change from 15% to 10%. The claim was rejected citing unjust enrichment u/s 11B. The consultant argued that despite duty variation, the maximum retail price fixed by Drug Controller remained constant, thus no unjust enrichment occurred as the duty incidence was not passed on to consumers. The Tribunal agreed, stating that as per general law and u/s 11B, unjust enrichment applies when duty is passed on to consumers, which did not happen in this case due to fixed retail price. Therefore, the impugned order was set aside, and the appeal was allowed.

Issue 2: Statutorily Fixed Retail Price and Excess Duty
Another Member observed that the statutory maximum retail price was fixed under Notification No. 245/83 at a 10% duty rate, while the appellants paid 15% duty. The excess duty claimed was not recovered from consumers as the price was based on the 10% duty rate. The excess duty paid did not come from consumer recovery, and thus, the refund claim did not fall under unjust enrichment provisions. Therefore, it was concluded that the refund did not involve unjust enrichment.

In conclusion, the Tribunal ruled in favor of the appellants, holding that the refund claim was not unjustly enriching and set aside the rejection based on unjust enrichment u/s 11B.

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