Protest duty refund: provisional payment escapes limitation and unjust enrichment bars when notice and evidence are lacking

Duty paid under protest pending finalisation of classification was treated as provisional, so the six-month limitation under Section 11B of the Central Excise Act, 1944 did not bar the refund claim. The rejection on limitation was therefore unsustainable. The refund also could not be refused on unjust enrichment where that ground was not proposed in the show cause notice and the assumption of duty being passed on was unsupported by evidence. The buyer's entitlement under Section 11D(4) had to be examined independently, and the unjust enrichment bar under Section 11B did not operate in the same manner. The lower orders were set aside and consequential refund relief followed.

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Issues: (i) Whether refund of duty paid under protest pending finalisation of classification could be denied as time barred under the limitation applicable to refund claims. (ii) Whether the refund could be rejected on the ground of unjust enrichment when that ground was not proposed in the show cause notice and when the claim arose out of a buyer's entitlement under the excise provisions.

Issue (i): Whether refund of duty paid under protest pending finalisation of classification could be denied as time barred under the limitation applicable to refund claims.

Analysis: The duty had been paid under protest and was connected with finalisation of the classification list, so the payment was to be treated as provisional in character. On that footing, the limitation bar under Section 11B of the Central Excise Act, 1944 did not apply. The rejection of the claim on the basis of six months from the date of payment of duty was therefore contrary to the governing legal position.

Conclusion: The claim was not hit by limitation and the objection of time bar was unsustainable.

Issue (ii): Whether the refund could be rejected on the ground of unjust enrichment when that ground was not proposed in the show cause notice and when the claim arose out of a buyer's entitlement under the excise provisions.

Analysis: The notice did not propose rejection on the specific footing of unjust enrichment, and the authorities relied on an assumption that the duty burden had been passed on without supporting evidence. The claim was also examined in the context of Section 11D(4) of the Central Excise Act, 1944, under which the buyer's claim had to be considered independently, and the unjust enrichment bar under Section 11B was not attracted in the same manner. The rejection on this ground was therefore both unsupported by evidence and beyond the scope of the notice.

Conclusion: The ground of unjust enrichment could not validly sustain rejection of the refund claim.

Final Conclusion: The orders of the lower authorities were set aside and the appellants were held entitled to consequential refund relief for the duty borne on the specified clearances.

Ratio Decidendi: Duty paid under protest and pending finalisation of assessment is to be treated as provisional, so the limitation and unjust enrichment restrictions of Section 11B of the Central Excise Act, 1944 do not govern such a claim, and a buyer's claim under Section 11D(4) must be separately considered on its own footing.

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