Refund limitation and unjust enrichment do not bar duty paid pending appeal when inputs are captively consumed in manufacture.

Where duty is paid pending appeal under the statutory pre-deposit scheme, the ordinary limitation period for refund claims under the refund rule does not apply, so the claim was not time-barred. Where the duty-paid ammonia was captively consumed in further manufacture and not cleared as such, the doctrine of unjust enrichment was held inapplicable, so the refund was not defeated on that ground. On both issues, the assessee succeeded and the refund rejection was found unsustainable.

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Issues: (i) whether the refund claim was barred by limitation under the refund rule when the duty had been paid pending appeal; and (ii) whether the refund was defeated by unjust enrichment where the duty-paid input was captively consumed.

Issue (i): whether the refund claim was barred by limitation under the refund rule when the duty had been paid pending appeal.

Analysis: Duty had been paid pending appeal under the statutory scheme governing pre-deposit. In such a situation, the limitation prescribed for refund claims under the refund rule was held not to apply.

Conclusion: The claim was not barred by limitation and the assessee succeeded on this issue.

Issue (ii): whether the refund was defeated by unjust enrichment where the duty-paid input was captively consumed.

Analysis: The duty-paid ammonia was not cleared as such but was used in the manufacture of molten urea, which was further used in the manufacture of another product. On that footing, the principle of unjust enrichment was held inapplicable, on the basis that the refund provisions analogous to customs refund law did not operate against such captive consumption.

Conclusion: The refund was not hit by unjust enrichment and the assessee succeeded on this issue.

Final Conclusion: The refund rejection was unsustainable, and the assessee was entitled to succeed in the appeal.

Ratio Decidendi: Where duty is paid pending appeal and the goods are captively consumed rather than cleared as such, the ordinary refund limitation and unjust enrichment bar do not apply in the same manner as in an outright sale transaction.

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