Unjust enrichment is not applicable on undepreciated amount of fixed assets.

PJ/CASE LAW/2015-16/2626

Case:- AIR INDIA LTD. VERSUS COMMISSIONER OF CUSTOMS (EXPORT), MUMBAI

Citation:- 2015(315) E.L.T. 457 (Tri.- Mumbai)

Brief Facts:- The appellant M/s. Air India Ltd. filed a refund application for refund of amount of Rs. 1,16,16,072/-, wherein Rs. 99,69,119/- is towards custom duty and interest of Rs. 16,46,953/- paid for the import of goods vide bill of entry No. 729442, dated 11-12-2006. The Dy. Commissioner of Custom, Refund Section (EP) NCH, Mumbai though sanctioned refund of Rs. 1,16,16,072/- but directed to credit the same to consumer welfare fund. Aggrieved, the appellant filed an appeal before the Commissioner of Customs (Appeals). The ld. Commissioner (Appeals) upheld the order of the adjudicating authority. Aggrieved with the said order, the appellant filed appeal before Tribunal.

Appellant’s Contention:- The appellant submits that the amount of duty and interest thereon, for which the refund was sought for, was paid under protest during the investigation of the case, therefore provision of unjust enrichment as provided under Section 27 of the Customs Act, 1962 is not applicable in the present case. The appellant alternately submits that the amount of refund was accounted for under head of fixed assets in the appellant’s books of account on which depreciation has been claimed. It is his submission, at the most the amount which was claimed as depreciation out of the total amount of refund can only be reduced and remaining amount should be given as refund for the reason that undepreciated amount has not been passed on to any other person, therefore undepreciated amount will not be hit by mischief of unjust enrichment. Hence, the said amount is legally refundable to them.

Respondent’s Contention:- The Revenue reiterates the impugned order and submits that the amount of duty and interest was paid by the appellant on issuance of ‘Less Charge Demand Notice’. Hence, the same is not a deposit but payment of duty, refund of which is legally governed by the provision of unjust enrichment as provided under Section 27 of Customs Act, 1962. In support of this submission the Revenue placed reliance on Apex Court judgment in the Sahakari Khand Udyog Ltd. v. Commissioner of C. Ex. & Cus. [2005 (181)E.L.T.328 (S.C.)]. The Revenue further submits that the appellant has capitalized the said amount of refund under account head of fixed assets in their books of accounts on which, they admittedly claimed the depreciation, therefore, it is proved that burden of duty has been passed on. It is his submission that both the ld. lower authority has rightly held that refund is hit by unjust enrichment and liable to be credited in consumer welfare fund.

Reasoning of judgment:- The Tribunal heard both the party and observed that the custom duty and interest thereon total Rs. 1,16,16,072/- has been paid in pursuance to the ‘Less Charge Demand Notice’ and appellant has succeeded in the adjudication and as consequential relief they became entitled for the refund. On this fact, we agree with the Revenue that the amount so deposited is not a deposit but custom duty and interest thereon. The refund of said duty is governed by Section 27 of the Customs Act, 1962. As per proviso to sub-section (2) of Section 27, it is provided as under :-
(2) If, on receipt of any such application, the Assistant Commissioner of Customs or Dy. Commissioner of Customs is satisfied that the whole or any part of the duty and interest, if any, paid on such duty paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund :
Provided that amount of duty and interest, if any, paid on such duty as determined by the assistant Commissioner of Customs or Deputy Commissioner of Customs under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to -
(a) the duty and interest, if any, paid on such duty paid by the importer or the exporter, as the case may be, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;
                        (b) ……………………
                        (c) ……………………
                        (d) ……………………
                        (e) ……………………
                        (f) ……………………

The Tribunal further observed from the above provision and found that, it is clear that the provision of unjust enrichment is undoubtedly applicable on the refund of the appellant. This position has been settled in Apex Court judgment in the case of Sahakari Khand Udyog(supra). As regard the submission of the counsel that even if the provision of unjust enrichment is applicable, the undepreciated amount of duty and corresponding interest should be refunded to the appellant on the ground that atleast said amount has not been passed on to any other person. We are in agreement with the submission of the counsel inasmuch as the appellant is entitled for the refund of undepreciated amount of duty and corresponding interest, as the same is neither booked as expenditure nor the same has been passed on otherwise to any other person. On plain reading of the above mentioned proviso to sub-section (2) of Section 27 of the Customs Act, 1962 only such amount can be refunded, incidence of which had not been passed on to any other person. In the present case it is observed that out of total amount of refund of Rs. 1,16,16,072/- the appellant has been reducing the depreciation. It is obvious that the depreciated amount is booked as expenditure in the profit and loss account and the same is deemed to be passed on to any other person, therefore the undepreciated amount of duty and interest lying in the books of account is admissible for refund to the appellant as incidence of which has not been passed on to any other person.

We therefore hold that the appellant is entitled for refund of undepreciated amount of duty and interest. However, the appellant is directed to produce the documentary evidence with regard to the depreciated amount of duty and interest, as at the time of release of the refund the amount. Needless to say that the release of the refund shall be subject to the condition that the appellant shall make suitable accounting of undepreciated duty and interest by deducting the same from account head of fixed assets and documentary evidence to this effect shall be submitted to the sanctioning authority.
The appeal is partly allowed in the above terms

Decision:- Appeal partly allowed.

Comment:- The essence of this case is that the depreciated amount is booked as expenditure in the profit and loss account and the same is deemed to be passed on to any other person, therefore the undepreciated amount of duty and interest lying in the books of account is admissible for refund to the appellant as incidence of which has not been passed on to any other person.

Prepared by: Bharat Rathore

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PJ/CASE LAW/2015-16/2626

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