Unjust enrichment bars refund of duty on captively consumed inputs when duty cost is embedded in the final product

Refund of duty on captively consumed intermediate goods is subject to the bar of unjust enrichment where the duty forms part of the cost of the final product sold in the market. If it cannot be shown with certainty that the incidence of duty was borne by the claimant and not passed on to buyers, clause (e) of the proviso to Section 11B(2) of the Central Excise Act applies. The principle in Solar Pesticides governs this situation, and refund is not admissible on that basis.

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Issues: Whether the doctrine of unjust enrichment applies to refund of duty paid on goods captively consumed.

Analysis: The refund claimed related to duty paid on an intermediate product used captively in the manufacture of the final product. The Tribunal held that where the captively consumed goods form part of the cost of the final goods sold in the market, it is not possible to ascertain with certainty how much of the duty on the intermediate goods has been passed on to the buyer. In such circumstances, the bar of unjust enrichment under clause (e) of the proviso to Section 11B(2) of the Central Excise Act applies, and the ratio of Solar Pesticides governed the case.

Conclusion: The doctrine of unjust enrichment applied and the refund was not admissible; the Revenue's appeals failed.

Final Conclusion: Refund of duty on captively consumed goods was held to be barred by unjust enrichment, and the impugned order rejecting the Revenue's challenge was sustained.

Ratio Decidendi: Where duty-paid goods are captively consumed and their duty forms part of the cost of the final product sold in the market, refund is barred if the incidence of duty cannot be shown with certainty to have been borne by the claimant and not passed on to buyers.

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