Refund - applicability of principle of Unjust Enrichment

PJ/Case Laws/2011-12/1223

Case: Surya Coats Pvt. Ltd. v/s Commissioner of C. Ex., Ahmedabad

Citation: 2010 (261) E.L.T. 379 (Tri.-Ahmd.)

Issue:- Whether provision made during financial year in which refund claim arose (on duty collected on issue of invoices), will not be eligible for refund? Merely making a provision in balance sheet can be considered as only factor for unjust enrichment?

Brief Facts:- Appellants are engaged in the manufacture of paper roll and during the process of manufacturing paper and paper rolls, waste and scrap in the form of trimming and cuttings of paper arises for which there was no specific entry under the Schedule to the Central Excise Tariff Act, 1985. Appellants contended that such waste and scrap was non-excisable and they were clearing the same without payment of duty during the period April, 1995 to Mar., 2001. The Department was issuing periodical show cause notices during the whole period. Ultimately the matter reached the Tribunal and the Tribunal vide order dated 18-12-2006 [2007(210) E.L.T. 684 (Tri.-Ahmd.)] decided the issue in favour of the appellants. Thereafter, appellants filed refund claim for an amount of Rs. 18,46,852/- which was duly sanctioned by the Original Adjudicating Authority. On an appeal filed by the Department, Commissioner (Appeals) held that appellants are not eligible for refund of Rs. 6,96,292/- pertaining to the period 2000-2001 and directed that the same be credited with Consumer Welfare Fund.

Appellant’s Contention:- Learned advocate on behalf of the appellants submitted that Commissioner (Appeals) has allowed the appeal of the Department on the ground that appellant had made provision in their books of account for the amount demanded in the show cause notices for the financial year 2000-2001 and had charged the amount to the profit and loss account, he also observed that in respect of the demands prior to the year 2000-2001, the provision was made only in the 2000-2001, he relied on the decision of the Tribunal in the case of Shilp Gravures Limited - 2006 (206) E.L.T. 203 (Tri.-Del.) in support of his decision. Learned advocate submitted that appellant had given Chartered Accountant certificate in support of their contention that duty amount had not been collected and was submited that in the invoices duty amount was not collected separately. Further, it was submited that conclusion of the Commissioner in the impugned order that provision was made during the financial year in which the refund claim arose and therefore appellants are not eligible for refund is not correct.

Respondent’s Contention:- Learned SDR on the other hand relies on the decision in the case of Shilp Gravures Limited cited above and decision of the Tribunal in the case of United Spirits Limited - 2008 (228) E.L.T. 360 (Tri.-Mum.) in support of his contention that unjust enrichment is applicable even when the duty is deposited after issue of show cause notice or after issue of adjudication order.

Reasoning of Judgement:- Regarding the decisions of the Tribunal relied upon by the Commissioner (Appeals) and learned SDR, the Hon’ble Court find that both the decisions are not applicable to the facts of the case. In Shilp Gravures Limited case the appellants had paid excess amount of duty because of calculation error at the time of filing bill of entry. In that case reliance was placed on Solar Pesticides case [2000 (116) E.L.T. 401 (S.C.)] for sanctioning refund and subsequently the Hon’ble Supreme Court had held that even in the case of goods captively used, the unjust-enrichment aspect is required to be examined. Therefore, in Shilp Gravures Limited case the duty had been paid at the time of clearance of goods and liability had already been incurred. As regards the second case, United Spirit Limited, in this case also as seen from the facts of the case, seized goods were released on the basis of orders of Hon’ble Bombay High Court on payment of amount which was considered as security deposit for ensuring recovery of duty, fine and penalty which was likely to be imposed on the appellant as a consequence of adjudication. In this case also, the liability had already been incurred at the time of release of goods that too after taking the matter before the Hon’ble High Court. Further, it was found that merely making a provision in the balance sheet cannot be considered as only factor for unjust enrichment and it should be examined in the light of facts and circumstances of the case, which the Hon’ble court found in this case are in favour of the appellant.

Decision: - Appeal allowed.

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PJ/Case Laws/2011-12/1223

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