Whether bar of unjust enrichment applicable for amount deposited during investigation?

Case:-UNIVERSAL SPECIALITY CHEMICALS PVT. LTD. VERSUSCOMMR. OF C. EX., RAIGAD

Citation:-2015 (315) E.L.T. 106 (Tri. - Mumbai)

Brief Facts:- This appeal is preferred against Order-in-Appeal No. US/852/RGD/2012, dated 29-11-2012 passed by the Commissioner of Central Excise (Appeals), Mumbai-II.
The brief facts of the case are that the appellant, earlier a partnership firm, has been incorporated as M/s. Universal Speciality Chemicals Pvt. Ltd., are engaged in manufacture and export of organic compounds viz. Softening Agents and registered with the Central Excise department. That in pursuance of search and seizure proceedings in its premises on 17-10-1996, during the investigation related to the period April, 1994 to 14-10-1996, the appellant deposited a sum of Rs. 6 lakhs (Rs. 3 lakhs on 24-10-1996 + Rs. 3 lakhs on 4-11-1996) on the direction of the investigating authority. The allegation on the appellant was undervaluation of its finished goods and semi-finished goods were found as not recorded in the RG-1 register. It being a preventive case involving seizure and confiscation of goods, protective demand was issued to the assessee and the matter went into further litigation. Vide final order, dated 13-4-2011, this Tribunal held that there is no case of undervaluation made out against the appellant and held that the demand confirmed on the ground of undervaluation cannot be sustained. Further, the Tribunal was pleased uphold the confiscation of the goods and remanded the matter with regard to confiscation of goods to the original adjudicating authority to decide the quantum of redemption fine and quantum of penalty on the appellant. Pursuant to remand, vide order, dated 23-11-2012, the Commissioner (Appeals) imposed the redemption fine of Rs. 10,000/- along with a penalty of Rs. 10,000/- on the appellant firm/company under Rule 173Q(1)(bb) and a penalty of Rs. 10,000/- on the partner of the appellant Shri S.K. Nikorawalla. It is further stated by the appellant that the said fine and penalty was deposited and duly informed to the Revenue vide letter of the appellant dated 16-1-2013 enclosing a copy of challans. The appellant also informed, during the pendency of the appeal before the Tribunal earlier, the appellant has deposited Rs. 4 lakhs, being pre-deposit ordered by this Tribunal.
The appellant applied for refund for an amount of Rs. 10 lakhs (Rs. 6 lakhs + Rs. 4 lakhs) as mentioned above vide application for refund. Vide Order-in-Original dated 2-4-2012, refund in cash was allowed in favour of the appellant. It appears from the refund order that the Dy. Commissioner had called for a report from the Superintendent and after detailed verification, the Range Superintendent opined that the said refund is admissible and the same can be given in cash. It is further recorded in the order that the final order of the Tribunal has been accepted by the Revenue. The Dy. Commissioner further recorded that after going through the refund application and examining the various documents and report of the Range Superintendent, he observed that the issue is settled and the demand raised earlier against the appellant cannot be enforced as the matter is finally decided in its favour. The Dy. Commissioner also examined the Chartered Accountant’s certificate, dated 7-2-2012, which stated that the said amount in question has been written off and accordingly has not been passed on to any body and accordingly recorded his finding that the refund is not hit by doctrine of unjust enrichment, the refund was granted.
Being aggrieved, the Revenue filed appeal before the Commissioner (Appeals) mainly on the ground that the Dy. Commissioner has simply relied upon the C.A. certificate and concluded that the claim is not hit by the doctrine of unjust enrichment. Thus, the adjudicating authority has failed to check this aspect by verifying the Books of Account as to why the assessee has taken the payment in Ledger and Balance-sheet.
The appellant challenged the appeal of the Revenue by filing cross-objection and relying on the ruling of the Hon’ble Supreme Court in the case of Mafatlal Industries Ltd.- 1997 (89) E.L.T. 247 (S.C.), it was stated that ‘unjust enrichment’ is not attracted where the amount is paid ‘under protest’. It was further contended that the amount of Rs. 6 lakhs was paid at the time of investigation on the direction of the Revenue authorities and the matter went into litigation on issue of the protective demand and thus, the amount was under protest in the facts and circumstances.
Further, as regards deposit of Rs. 4 lakhs under Section 35F of the Central Excise Act, 1944 during the pendency of the matter before this Tribunal, it was contended that unjust enrichment is not attracted in the matter of pre-deposit during the pendency of the appeal.
As regards reliance on C.A’s Certificate, it was contended that the adjudicating authority was justified in relying on the C.A’s certificate along with detailed report of the Range Superintendent and it cannot be stated that the refund has been allowed merely relying on the C.A’s certificate. The Commissioner (Appeals) vide order dated 29-11-2012 has set aside the order, dated 2-4-2012 (Refund) on the following observations :-
(i) When the case of unaccounted of goods (redemption fine and penalty) was not decided, it cannot be said that the case had attained finality for refunding the entire amount paid during investigation and as pre-deposit in response to the order of CESTAT.
(ii) Relying on the ruling of the Hon’ble Apex Court in the case of Sahakari Khand Udyog Mandal Ltd. - 2005 (181) E.L.T. 328 (S.C.), wherein it was held that the doctrine of ‘unjust enrichment’, is based on equity, and thus irrespective of applicability of Section 11B of the Central Excise Act, doctrine can be invoked to deny benefit to which a person is not otherwise entitled.
(iii) Simply relying on the C.A. certificate, the adjudicating authority ought to have verified from the respondent’s Books of Account, which has not been apparently done.
Being aggrieved the appellant is before this Tribunal in the present appeal.

Appellant contentions:- The learned Counsel for the appellant argues that so far the amount of Rs. 6 lakhs paid during the course of investigation is concerned, the doctrine of unjust enrichment is not attracted as the same was paid on the direction of the Revenue authorities, subsequent to the clearance of the goods and the demand was raised by the Revenue on the protective basis which was immediately appealed against. So far the amount of Rs. 4 lakhs during pendency of the appeal before the Tribunal, the matter is no more res integra and it has been held by the Hon’ble Bombay High Court in the case of Suvidhe Ltd. v. Union of India - 1996 (82) E.L.T. 177 (Bom.) that Section 11B of the Central Excise Act can never be applicable to such deposit since it is not a payment of duty but only a pre-deposit for availing the right of appeal. Such amount is bound to be refunded in favour of the party or the appellant. Following the said ruling, the said view was again reiterated by the Hon’ble High Court of Bombay in the case of NELCO Ltd. v. Union of India - 2002 (144) E.L.T. 56 (Bom.).
As regards the amount deposited during investigation and subsequent to clearances of the goods, the appellant relies on the ruling of the Division Bench of this Tribunal in the case of Plas Pack Industries v. Commissioner of Central Excise, Ahmedabad - 2004 (167) E.L.T. 422 (Tri.-Mum.), wherein this Tribunal relying on the earlier ruling of the Tribunal in the case of Gwalior Oil Mills - 2002 (52) RLT 648 (CEGAT) and Punjab Beverages Pvt. Ltd. - 2000 (118) E.L.T. 506 (Tri.), held that the presumption under Section 12B of the Central Excise Act, that incidence of duty has been passed on to the buyer will not be attracted, when duty is paid subsequent to clearance.
So far the ruling of Sahakari Khand Udyog Mandal Ltd. (supra) relied upon by the Commissioner (Appeals), the appellant points out to the facts in this case from para 7 of the ruling, wherein it is recorded that the Assistant Commissioner has observed that the claimant had already charged and collected the duty amount from its customers and as such it was not entitled to claim the said amount. The said ruling is not applicable in the appellant’s case as in the said case there is clear finding by the Apex Court that excise duty has been passed on to the customers and in view of such findings, its opinion, Sahakari Khand Udyog Mandal was not entitled to refund and unjust enrichment was attracted. Thus, the appellant prays for setting aside the impugned order. He also states that the impugned order is cryptic, non-speaking and also does not satisfy the provisions of Section 35A of the Central Excise Act, wherein it is provided that under Section 35A(3) the Commissioner (Appeals) shall after making such further enquiry, as may be necessary, pass such order, as he thinks just and proper, confirm, modify and set aside the decision or order appealed against.

Respondent contentions:-The learned DR supports the impugned order and further states that the Commissioner (Appeals) is justified in holding that proper enquiry have not been made by the Dy. Commissioner in the order granting refund. The learned DR also points out that in spite of direction of the Tribunal, the appellant have not filed the copy of its balance-sheet and ledger account for the said period, as to the treatment of the amount of Rs. 6 lakhs was paid.

Reasoning of Judgment:-Having considered the rival contention, Learned Tribunal find that the ruling of the Hon’ble Apex Court in the case of Sahakari Khand Udyog Mandal (supra) is not applicable in the facts of this case, the facts being totally different and there is no finding in this case that the appellant have collected the disputed amount from anybody. Secondly, it was found that so far the amount of Rs. 6 lakhs deposited during the investigation is concerned, the said amount was paid under protest and also relying on the ruling of this Tribunal in the case of Plas Pack Industries (supra) wherein it was held that bar of unjust enrichment is not attracted. So far the amount of Rs. 4 lakhs deposited as pre-deposit under Section 35F of the Act following the Hon’ble Bombay High Court’s decision in the case of Suvidhe Ltd. (supra), it was held that the doctrine of unjust enrichment is not attracted on the said amount.
As regards the objection of the learned DR regarding non-filing of the balance-sheet of the appellant, the same is only academic and not necessary for deciding the appeal. Tribunal held that the order of the Commissioner (Appeals) was cryptic and non-speaking as there is no finding recorded and there is failure to exercise his power, as the Commissioner (Appeals) has failed to make any enquiry regarding the ground of unjust enrichment alleged by the Revenue. Accordingly, it was held that the order is vitiated for lack of exercise of jurisdiction. Thus, the impugned order of the Commissioner (Appeals) is set aside and appeal is allowed in favour of the appellant with consequential relief, if any.

Decision:- Appeal allowed.

Comment:-The crux of the case is that the bar of unjust enrichment will not be applicable if the duty is deposited under protest at the time of investigation. Moreover, non filing of balance sheet is only in the nature of academic finding and shall not be considered as rational ground to conclude that the bar of unjust enrichment is applicable.

Prepared By: Meet Jain

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