Captive consumption refund under exemption survives protest payment and limitation, but unjust enrichment still requires fresh scrutiny.

Duty paid on HDPE tapes/strips captively consumed in making HDPE sacks was held refundable under Notification No. 217/86 because the intermediate goods were used within the factory and the final sacks were cleared on payment of duty; the prior classification and exemption position had attained finality. The refund was also not barred by limitation because the duty had been paid under protest, as reflected in the gate passes. The refund claim, however, required fresh examination on unjust enrichment in light of the Supreme Court ruling, and was remanded to the original authority for that limited issue.

---

---

Issues: (i) whether duty paid on HDPE tapes/strips captively consumed in the manufacture of HDPE sacks was refundable under Notification No. 217/86; (ii) whether the refund claim was barred by limitation when duty had been paid under protest; and (iii) whether the refund claim was hit by unjust enrichment.

Issue (i): whether duty paid on HDPE tapes/strips captively consumed in the manufacture of HDPE sacks was refundable under Notification No. 217/86.

Analysis: The exemption under Notification No. 217/86 applied to goods manufactured in the factory and used within the factory in or in relation to the manufacture of final products cleared on payment of duty. Since the final product, HDPE sacks, had been cleared on payment of duty and the intermediate tapes/strips were captively consumed in their manufacture, the exemption was admissible. The prior classification and exemption order had also attained finality and could not be disturbed in the present proceedings.

Conclusion: In favour of the assessee.

Issue (ii): whether the refund claim was barred by limitation when duty had been paid under protest.

Analysis: The duty on the intermediate product had been paid under protest and the protest was reflected in the relevant gate passes. In such circumstances, the claim could not be rejected as time-barred.

Conclusion: In favour of the assessee.

Issue (iii): whether the refund claim was hit by unjust enrichment.

Analysis: The record required reconsideration in the light of the Supreme Court's ruling on unjust enrichment in captive-consumption refunds. The question was not finally determined on the existing material and had to be examined afresh by the original authority.

Conclusion: The issue was remanded for fresh adjudication.

Final Conclusion: The assessee succeeded on the exemption and limitation issues, while the refund claim was sent back for fresh examination only on unjust enrichment.

Ratio Decidendi: Where intermediate goods are captively consumed in the manufacture of final products cleared on duty payment, exemption and refund cannot be denied merely on the basis of limitation if the duty was paid under protest, but the refund remains subject to examination of unjust enrichment.

---