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PJ/Case Law/2013-14/2004

Unjust enrichment cannot apply on goods that are captively consumed.

Case:-MAHARASHTRA STATE POWER GENERATION CO. LTD. VERSUS C.C.(IMPORT), MUMBAI

Citation:-2013(298) E.L.T. 479 (Tri.-Mumbai)

Brief Facts:-The appellant filed this appeal against Order-in-Appeal No. 235/2009/MCH/CRARS/09, dated 7-9-2009 whereby Commissioner (Appeals) has upheld the lower adjudicating authorities order rejecting the refund claim of the appellant.
Briefly stated facts of the case are that the appellant filed Bill of Entry for import of Wheel Loader and classified the same under Chapter 87; subsequently the Bill of Entry was reassessed and the goods were classified under Chapter 84. Thereby the appellant filed refund claim for Rs. 1,90,585/- for excess duty paid. The lower adjudicating authority rejected the refund claim on the ground that the appellant failed to prove that they have not passed on the inci­dence of the duty.The appellant challenged the said order. The Ld. Commission­er (Appeals) upheld the lower authority's order and dismissed the appeal of the appellant. Hence the present appeal.

Appellant Contentions:-The contention of the appellant is that they are Government of Ma­harashtra State undertaking and they have not sold the capital goods to any of their customer. They will be utilizing the capital goods for power generation and the said electricity generator sold to another Government company i.e. M/s. Ma­harashtra State Power Distribution Co. Ltd. through Government's service Com­pany i.e. M/s. Maharashtra State Power Transmission Co. Ltd. and the electricity sold is not dutiable under Central Excise Tariff Act. Therefore, question that inci­dence of duty has been passed on does not arise. In support of their contention, they have cited the decision of Hon'ble High Court of Karnataka in the case of C.C.E., Bangalore-II v. Karnataka State Agro Corn Products Ltd.reported in2006 (202) E.L.T. 47 (Kar) and Hon'ble High Court of Karnataka decision in the case of Union of India v. Pharmacia India (P) Ltd.reported in2010 (256) E.L.T. 685 (Kar.)and this Tribunal decision in the case of Golden Iron & Steel Forgings v. Commr. of Cus., Mumbai reported in 2003 (157) E.L.T. 650 (Tri.-Del.).
 
Respondent Contentions:-The ld. JDR reiterated the findings of the ld. Commissioner.
 
Reasoning of Judgment:-We have carefully gone through the submissions and perused the rec­ords. Undisputedly the appellants are entitled for refund claim on merits. The refund has been denied on the question of unjust enrichment alone. The appel­lant is a State Government Undertaking and the goods imported are capital goods required for power generation. The Tribunal in the case of Golden Iron & Steel Forgings(supra) held that excess Customs duty paid on imported capital goods ultimately consumed by the importer, bar of unjust enrichment will not be applicable. The Hon'ble High Court in the case of Karnataka State Agro Corn Prod­ucts Ltd. (supra) while deciding the issue whether question of unjust enrichment is applicable to State undertakings held that unless the Department is able to show that the Government undertakings are totally different from all angles, it is not possible to accept the argument of 'unjust enrichment' on the part of the State undertakings. State and the State Government undertakings represent the people of the country. The Hon'ble High Court of Karnataka in the case of Pharmacia India (P) Ltd. (supra) the machinery which was imported by the assessee was for installation at its factory premises to be used for purpose of manufacture as captive consumption and not for further sale of the same, in which event, there would have been no occasion to collect the duty from its customer such being the case, the Tribunal was right in holding that refund claim was not hit by the rule of unjust enrichment. The above case laws apply to the facts of the case.

In view of the above, the ld. Commissioner (Appeals)'s order is not sustainable in law, hence set aside. Appeal allowed with consequential relief.
 
Decision:-Appeal allowed.

Comment:-The crux of this case is that as the imported goods were being transferred to another unit of the assessee for generation of electricity, being non excisable goods, it can be safely concluded that the imported goods have been captively consumed. Further, the unjust enrichment requires proving that the burden/incidence of duty is not passed on to third party. When the imported goods on which excess duty was paid have been captively consumed, the question of unjust enrichment does not arise and the refund is rightly admissible.
 

Comments

  • abhimanyu on 15 February, 2014 wrote:

    It is very good decision. I think that the officer of government use their authority to punish the public by cost. This is favorable decision for developement of industries who is producing electricity, which is very very accential for the public. Thank a lot for writing in your news letter such type of cases.

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