Refund of duty paid under protest and bar of unjust enrichment.

PJ/CASE LAW/2014-15/2312

Case:- M/s THE PHOENIX MILLS LTD Vs CCE, MUMBAI

Citation:- 2014-TIOL-1692-CESTAT-MUM

Brief facts:-Brief facts of the case are that the appellant is a job worker and was undertaking the processing of the fabrics and clearing the same to the principal manufacturer of unprocessed fabrics on job charges. Proceedings were initiated against the appellant alleging that the activity undertaken by the appellant amounts to manufacture therefore they are liable to pay duty on the printing paste used in the job work. On persuasion, the appellant paid duty under protest and challenged the order of levying duty on the manufacture of printing paste used in the job work. Following the judgement of the Hon'ble High Court Bombay in appellant's own case in WP No. 1082/1994 dated 24.02.2004, wherein it was held that the activity of manufacture of printing paste does not amounts to manufacture, the appellant filed a refund claim of duty paid under protest. The adjudicating authority sanctioned the refund claim holding that as duty has been paid on persuasion of the department and as held by the Hon'ble High Court in the appellant's own case that the activity of manufacture of printing paste does not amounts to manufacture, duty is not leviable. The Revenue preferred an appeal against the said order before the learned Commissioner (Appeals) who in turn held that as the appellant has failed to pass the bar of unjust enrichment therefore, although sanctioned, the refund claim had to be transferred to the consumer welfare fund. Aggrieved by the said order the appellant is before tribunal.

Appellant’s contentions:-The learned Counsel for the appellant submits that as the activity dos not amount to manufacture therefore, the provisions of Central Excise Act, 1944 are not applicable to them and consequently the bar of unjust enrichment is not applicable. To support his contention he relied on the decision in the case of Biochem Pharmaceuticals (supra) = 2006-TIOL-225-CESTAT-MUM and CC vs. Ecomaster (India) Pt. Ltd. - 2007 (213) ELT 281 (Tri. Bang) = 2007-TIOL-843-CESTAT-BANG. He further submits that the activity of manufacturing of printing paste was held by the Revenue as a manufacturing activity and they paid duty under protest on cost construction method and the same has not been recovered from the principal manufacturer as job charges before and after levy of duty remained same. In these circumstances, he prays that although they have proved the duty incidence has not been passed on the buyers, bar of unjust enrichment is not applicable to the facts of the case. Therefore, the impugned order is required to be set aside.

Respondent’s contentions:- On the other hand, the learned A.R. submits that in this case duty has been paid although under protest but as per the judgement of the Hon'ble Supreme Court in the case of CCE vs. Allied Photographics India Ltd. - 2004 (166) ELT 3 (SC) = 2004-TIOL-27-SC-CX, the bar of unjust enrichment is applicable to the facts of the case.

Reasoning of judgment:- In this case, the appellant is a job worker who is engaged in the activity of processing of unprocessed fabrics. For processing, the appellant is manufacturing printing paste on which he is not paying duty on their job charges. Only on persuasion of the department, the appellant paid duty on the activity of manufacturing of printing paste which used in their job work activity, under protest. Later-on it was held that the activity of manufacturing of printing paste does not amount to manufacture therefore, duty is not payable at all. In the circumstance, when the goods are duty-free therefore, the provisions of Central Excise Act, 1944 are not applicable as held by the Hon'ble High Court of Bombay in the case of Biochem Pharmaceuticals (supra). When the provisions of Central Excise are not applicable in that case bar of unjust enrichment is also not applicable. Therefore, relying on the decision of Biochem Pharmaceuticals (supra), the Hon’ble Court hold that in this case bar of unjust enrichment is not applicable. With these observations the impugned order is set aside and the appeal is allowed with consequential relief, if any.

Decision:- Appeal allowed.

Comment:-The analogy of the case is that activity of manufacturing of printing paste does not amount to manufacture, therefore, duty is not payable at all. In the circumstance, when the goods are duty-free therefore, the provisions of Central Excise Act, 1944 are not applicable. Hence, duty is not payable by the appellant. The appellant is liable to receive refund claim which is paid under protest. Moreover, as the job charges remained the same before and after levy of excise duty, and the burden of duty was borne by the job worker, the bar of unjust enrichment was held to be inapplicable.

Prepared by:- Monika Tak

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PJ/CASE LAW/2014-15/2312

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