Refund of duty in case of Unjust Enrichment

PJ/Case Law /2016-17/3438

Case-MICHIGAN ENGINEERS PVT. LTD. Versus COMMISSIONER OF C. E., CUS. & S.T., DAMAN

Citation- 2017 (345) E.L.T. 271 (Tri. - Ahmd.)

Brief Facts- The facts of the case, in brief, are that the appellants have sent duty paid Steel Bars and sent the same to M/s. PSL Corrosion Controls Ltd. (M/s. PSL) to get it epoxy coated on job work basis. After necessary coating, M/s. PSL returned the said coated bars on payment of Excise duty on the value, which included cost of the bar and conversion charges (coating charge) under protest. The matter was litigated before the Tribunal about the classification and dutiability of the said coated bars. The issue was decided in favour of the assessee holding that the process of coating undertaken by M/s. PSL (job worker) does not result into manufacture of excisable goods. Consequently, all these appellants who had sent the materials for job work, filed refund claims of the duty ultimately paid by them, which initially M/s. PSL Ltd. discharged at the time of clearance of the same. Show cause notice was issued to the respective appellants directing them to produce documents/evidences in establishing the fact that the amount of duty has not been passed on to their customers as required under the provisions of Section 11B(2)(e) of Central Excise Act, 1944 to be eligible to the refund. On adjudication, the demands were rejected on the ground of time-bar without adjudicating the issue of unjust enrichment. Aggrieved by the said order, the appellants preferred appeals before the ld. Commissioner (Appeals), who in turn, observed that though the refunds are filed within time limit but the appellants had failed to establish that the incidence of duty has not been passed to their customers and accordingly rejected the appeals. Hence, the present appeals.

Appellant’s Contention- The ld. Advocate, Shri Prakash Shah, for the appellant submits that all necessary evidences were placed before the authorities below in establishing the fact that the amount claimed as refund has not been passed on to their customers or any other person. It is his grievance that the documents were not analyzed in detail by the ld. Commissioner (Appeals) but erroneously observed that the documents produced were not sufficient in establishing the fact of non-passing of incidence of duty to the customers.

Respondent’s Contention- Per contra,the ld. AR for the Revenue reiterated the findings of the ld. Commissioner (Appeals). He submits that the documents which the appellants enclosed along with the appeal were not before the ld. Commissioner (Appeals). However, he has no objection in remanding the matter for verification of the documents.

Reasoning of Judgement- The Hon’ble authority find that the show cause notice was issued to the respective appellants directing them to produce evidences to show that the incidence of duty has not been passed on to the customers or any other person as required under Sec. 11B(2)(e) of CEA, 1944. Even though the ld. Advocate for the appellant claims that all evidences necessary to show that incidence of duty paid has not been passed on were presented before the authorities below, however, findings against the documents/evidences had not been recorded by either of them. I find that the ld. Commissioner (Appeals) in his order observed that the documents filed by them were not sufficient to establish the claim. Also, the Adjudicating Authority nowhere discussed in his order after analysis of evidences about the fact of passing of the incidence of duty to the customers or otherwise. In nut shell, both the authorities had not addressed the issue after examining the evidences/documents produced by the appellant’s along with their refund claim, so as to establish the fact that the incidence of duty has not been passed on to the customers. Therefore, in the interest of justice, it is prudent to remand the matter to the Adjudicating Authority to analyse all evidences on record and the evidences/documents that would be placed so as to establish their case and to record detailed findings on the said evidence as to whether the appellants had passed the incidence of duty to any other persons including their customers or otherwise. The above appeals are remanded for the limited purpose of examining the issue of unjust enrichment. Appeals are allowed by way of remand.

Decision- Matter Remanded.
Comment- The gist of the case is that the appellant who paid duty on non manufacturing activity is eligible for refund under section 11B of Central Excise act, 1944 only when the burden of duty has not been passed to customers. Unjust enrichment means when one person is enriched at the expense of another. Hence the matter is remanded by the authority for examining the issue of unjust enrichment.

Prepared by- Akshit Bhandari

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PJ/Case Law /2016-17/3438

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