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PJ/Case Laws/2011-12/1399

Refund of excess duty paid by mistake - applicability of unjust enrichment

Case: Commissioner of C. Ex–Bangalore-II v/s Mysore Electricals Industries Ltd.
 
Citation: 2011 (267) E.L.T. 607 (Kar.)
 
Issue:- Whether unjust enrichment applicable to the refund of excise duty paid due to arithmetical mistake and not passed on to customer?
 
Brief Facts:- Respondent-assessee by arithmetical mistake had taken extra credit of Rs. 83057, however the customer of respondent refused to bear additional amount of duty and therefore, Respondent claimed the same as refund, which was denied by Revenue on the basis of unjust enrichment.
 
In appeal before the Tribunal, appeal was allowed by relying on the judgment of the CC, Cochin v/s Rajesh Chemicals [2006 (196) ELT 64 (Tribunal)] in which it was held that excess payment of duty made due to arithmetical error cannot be considered as duty and same is also not hit by provisions of unjust enrichment. Reliance was also placed on CCE, Bhopal v Tesla Transformers [2001 (133) ELT–484 (Tribunal)] granted the refund to Respondent.
 
Revenue is in appeal before the High Court against the same decision claiming the same to be unjust enrichment.
 
Reasoning of Judgment:- The High Court held that the doctrine of unjust enrichment applies only when duty is recovered from a customer and later if it is found that such a duty was not leviable, such a duty was not leviable, the respondent who has recovered it from the customer is not entitled to refund of the same. In case of respondent, factually it is demonstrated that by an arithmetical mistake the excess duty was paid and a credit note was raised. The customer refused to pay the excess duty claimed pointing out that it is a clerical mistake. It is in that context, it was held that the burden of excess duty has not been passed on to the customer and it is paid from the pocket of the respondent and hence the respondent is entitled to refund of the same. The view taken by the Tribunal is in accordance with the law and therefore there is no error in the judgment of Tribunal.
 
Decision:- Accordingly, appeal rejected.

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