Principle of unjust enrichment do not apply to fine and penalty but only to duty.

PJ/Case Laws/2012-13/1536

Case:- VEEKAY PRODUCTS PVT LTD Vs COMMISSSIONER OF CUSTOMS (EXPORT), MUMBAI

Citation:- 2013-TIOL-622-CESTAT-MUM

Brief Facts:-The appeal is directed against Order- in- Appeal No.936/MCH/AC/GR.VIIB/2012 dated 23-11-2012 passed by the Commissioner of Customs(Appeals), new custom house Mumbai. In case of relating to import under DEEC scheme, appellant M/s. Veekay product Ltd. has been made a pre-deposit of Rs.7.5 lakhs in cash and Rs.40 lakhs as bank guarantee, as a transferee of DEEC licence by M/s. Betul oil & Flours Ltd. The said amount appropriated by the department against redemption fine and penalty vide order No.CAO/45/2003/CAC/JC/SK dated 30-6-2003 The said decision was appealed against before this Tribunal and t his Tribunal vide order No. A/166- 82/07/CII/CSTB dated 12- 3- 2007 set aside the said order and allowed the appeal. The department did not prefer any appeal against the order of the Tribunal which became final. Consequently, the appellant became eligible for refund of Rs. 47.5 lakhs which was allowed by the adjudicating authority but credited to the Consumer Welfare Fund on the ground that the appellant allegedly did not fulfill the condition of unjust enrichment. The appellant preferred and appeal which was rejected vide the impugned order and hence the appellant is before Tribunal.

Appellant Contentions:- The Appellant made the following submissions. The amount of Rs. 7.5 lakhs in cash and bank guarantee for Rs.40 lakhs was only a pre- deposit and the same was appropriated towards fine and penalty. The principle of unjust enrichment applies only to duty and interest paid and not to fine and penalty. Secondly, the amount was remitted as pre-deposit. Therefore, the principle of unjust enrichment will not apply. He relies on the following decisions in support of his content ion – 1) Offshore Hook-up & Cons. Services (I) Lt d. [2009(244) ELT 135 (tri.)]; 2)Umax Enterprises [2009 (95) ELT 833 (Tri.)] 2009-TIOL-1799-CESTAT-MUM and United Spirit s Lt d. CC, Mumbai [2009 (240) ELT 513 (Bom)] [2009-TIOL-316-HC-MUM-CUS].He also submits that the transferor of the licence BOFL has been allowed to withdraw the pre-deposit of Rs. One Crore made by them as per the directions of the hon'ble high court of Bombay. Therefore, the transferee should be entitled for similar relief.

Respondent Contentions:- The ld. Asst. Commissioner (AR) appearing for the Revenue submits that as per the decision of the hon'ble apex court in the case of Sahakari Khand Udyog Mandal Ltd. [2004 (181) ELT 328 (SC)] [2005-TIOL-48-SC-CX-LB],the principle of unjust enrichment would apply to all kinds of refund and in the present case the appellant has not submitted evidence to the effect that they have not passed on t he burden of fine and penalty to their customers and therefore, they are not eligible for t he refund. Accordingly he pleads for upholding the impugned order.

Reasoning of Judgment:-We have considered submission from both party and we have perused the record. We find that Section 28D of the Customs Act deals with the presumption that incidence of duty has been passed on to the buyer and reads as follows;

“28D. Every person who has paid the duty on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of the goods.”

Thus the section talks of refund of duty. In the present case what we are concerned with are refund of pre- deposit made by the appellant which was appropriated towards fine and penalty. Thus the provisions of the said section has no application.

As regards the decision in the Sahakari Khand Udyog Mandal relied upon by the Revenue, the facts obtaining in the said are completely different, M/s. Sahakari Khand Udyog Mandal was engaged in manufacturing sugar falling item no.1 of the First schedule to Central Excise and Salt Act, 1944. The appellant-Mandal claimed rebates of Rs.6,92,779.59 on the basis of notification no.257/76 dated 30, 1976. The said notification, inter alia, provided for exemption from the payment of Excise Duty leviable thereon in excess of average production of sugar of corresponding period of preceding three year. The notification also provided that such exemption would be on sale of sugar as specified in columns 3 and 4 as levy sugar and free sale sugar. The rebate was claimed for the year 1976-77 during which the production was 2,09,982 quintals based on the average production for the preceding 3 years, namely, 1973-74, 74-75 and 75-76, which worked out 1,54,846.33 quintals. The Mandal was entitled to benefit of exemption from excise duty for excess production of 55,135.67 quintals. The appellant, therefore, submitted its claim for Rs. 6,92,779.59. It was in the facts of that case, the hon'ble apex court passed the judgment. In that case at the time of clearance of the goods, exceed duty liability was paid at the normal rates and later on rebate claim was filed for lower rate. In the case before us, the facts are quite distinct and distinguishable. In the present case the appellant made a pre-deposit which was later on appropriated towards fine and penalty. Later on when the fine and penalty were set aside, the appellant became eligible for refund, Therefore, we are of the considered view that the ratio of the decision of the hon'ble apex court has no relevance to the facts in the present case.

The hon’ble High Court Bombay in case of United Spirit Ltd. held as follow:

“28. In the instant case on the Appellants partly succeeding in their appeal, on paying the fine as reduced, would have been entitled to release of the goods. The question, therefore, of adjusting the balance amount of the original fine from the amount deposited would not have arisen. The principles of ‘unjust enrichment ', therefore, would not arise in a case of redemption fine. No authority has been brought to our attention by either side where the principles of ‘unjust enrichment ' have been applied insofar as the fine or penalty is concerned. In our opinion both on general principles and considering that the Act itself imposes restriction only on refund of duty under Section 28, it would not be possible to attract the principles of ‘unjust enrichment ' insofar as the redemption fine is concerned.”

In our considered view the ratio of the above decision applies to the facts of the present case. Accordingly we hold that the appellant is entitled for refund of Rs. 47.5 lakhs (adjusted towards fine and penalty which were subsequently set aside) along with interest thereon in accordance with law. Thus we allow the appeal with consequential relief.

Decision:-The appeal was allowed.

Comment:-The crux of this case is that the principle of unjust enrichment cannot be said to apply with respect to refund of redemption fine and penalty paid as pre-deposit and it applies only in case of duty.

Comments

PJ/Case Laws/2012-13/1536

Post a Comment

Query