Procedural lapse under exemption notification and unjust enrichment do not defeat refund without proof of duty recovery.

Non-compliance with Chapter X procedure was treated as a procedural lapse and did not defeat substantive entitlement to exemption under Notification No. 217/85-C.E. where the assessee otherwise qualified for the benefit. The refund claim was also held not barred by unjust enrichment because a debit note or demand entry, by itself, does not prove that duty incidence was passed on. On the facts noted, the units were regarded as part of the same company with a common balance sheet, and there was no showing that duty had been recovered from an independent customer. Refund with consequential relief followed.

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Issues: (i) Whether non-compliance with Chapter X procedure could deprive the assessee of the benefit of Notification No. 217/85-C.E. dated 08-10-1985; (ii) Whether the refund claim was barred by unjust enrichment.

Issue (i): Non-observance of the prescribed procedure was treated as a procedural lapse. The substantive exemption available under the notification was not to be denied merely because the Chapter X procedure had not been followed, where the assessee was otherwise entitled to the notification benefit.

Conclusion: The issue was decided in favour of the assessee.

Issue (ii): The finding of unjust enrichment was rejected. Mere raising of a debit note or demand did not by itself establish that the duty incidence had been passed on. On the facts, the units were treated as part of the same company with a common balance sheet, and the duty had not been shown to have been recovered from an independent customer.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: The assessee was held entitled to refund with consequential relief because the procedural defect did not defeat the substantive notification benefit and the refund claim was not hit by unjust enrichment.

Ratio Decidendi: A procedural requirement under an exemption notification cannot defeat substantive entitlement where the duty incidence is not shown to have been passed on, and unjust enrichment cannot be presumed merely from a debit note or demand entry without proof of actual recovery.

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