Whether principles of unjust enrichment apply for refund of credit taken on inputs used in the manufacture of export goods?

PJ/Case Law/2013-14/1966

Case:- SAI CREATION Vs COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III

Citation:-2013 (294) E.L.T. 637 (Tri. - Mumbai)

Brief facts:-The facts of the case were that the applicant M/s. Sai Creation filed a refund claim of Rs. 2,23,254/- being unutilized credit balance in their CENVAT account attributable to inputs used in the manufacture of goods which were cleared for export. The claim for refund was rejected and the matter was considered by this Tribunal and this Tribunal vide Order No. A/560-562/2010/SMB/C-IV, dated 16-9-2010 allowed the refund. Pursuant to the said order, the jurisdictional Asst. Commissioner vide order dated 12-10-2011 allowed the refund to the appellant. The revenue preferred an appeal against the said order before the Commissioner (Appeals) on the ground that while sanctioning the refund, the jurisdictional Asst. Commissioner did not examine the aspect of unjust enrichment. The lower appellate authority considered the matter and allowed the appeal filed by the revenue on the ground that in terms of the Hon’ble Apex Court’s decision in Mafatlal Inds. Ltd.[1997 (89)E.L.T.247 (S.C.)] and Sahakari Khand Udyog and Others [2005 (181)E.L.T.328 (S.C.)] cases all types of refund claim had to pass the proof of not passing on the incidence of duty (unjust enrichment) and in the instant case the appellant had not led any evidence to show that they had not passed on the incidence of tax.

Appellant’s contentions:-None appeared for the appellant. However, on going through the appeal memo wherein the appellant had contended that in terms of clause (c) of the proviso to sub-section (2) of Section 11B of the Central Excise Act, the provisions of unjust enrichment would not apply if the refund relates to credit of duty paid on excisable goods used as inputs for manufacture of export goods in accordance with rules made or any Notification issued under the Act. In the instant case, the goods had been exported and the appellant had the balance of credit lying in his account in respect of the duty paid on inputs used in the manufacture of export goods, and that was the reason why the appellant preferred a claim under Rule 5 of the CENVAT Credit Rules, 2004. The appellant had also relied upon the judgment of the Hon’ble High Court of Gujarat in the case of Indo-Nippon Chemicals Co. Ltd. - 2005 (185)E.L.T.19 and the judgment of Opel Alloys P. Ltd. - 2010 (249)E.L.T.408wherein it was held that in respect of cases covered by clause (c) of first proviso to Section 11B(2) of the Central Excise Act, 1944, the principles of unjust enrichment were not attracted or applicable.

Respondent’s contentions:-Ld. AR representing the revenue reiterated the findings of the lower appellate authority by holding that claim for refund should be rejected as the principle of unjust enrichment was attracted to the case concerned.

Reasoning of judgment:-Tribunal had considered the rival submissions carefully. As the issue lies in a narrow compass, the appeal itself was taken up for disposal after dispensing with the requirement of pre-deposit.

The provisions of unjust enrichment did not apply if the refund pertained to credit of duty on excisable goods used as inputs in the manufacture of goods which were exported. In the instant case there was no dispute on this point. Therefore, the lower appellate authority was completely wrong when it said the provisions of unjust enrichment were attracted. Reliance placed on Mafatlal Inds. case by the lower appellate authority was also incorrect inasmuch as the said decision pertains to a situation where the provisions of unjust enrichment would apply. When Section 11B providing for grant of refund of excise duty specifically provides that in certain specified situations, the provisions of unjust enrichment shall not apply, the law had to be interpreted and enforced accordingly.
On an identical issue, the Hon’ble High Court of Gujarat in the case of Indo Nippon cited supra held that the provisions of unjust enrichment will not apply in respect of CENVAT credit taken on inputs used in export goods and the said decision was upheld by the Hon’ble Apex Court in Asst. Comm. v. Indo Nippon - 2005 (186) E.L.T. A117 (S.C.). Again this Tribunal in the case of Opel Alloys (supra), following the Apex Court judgment, held that in view of clause (c) of first proviso to Section 11B(2) of Central Excise Act, 1944, principles of unjust enrichment shall not apply, in the case of CENVAT credit taken on inputs used in the manufacture of export goods. The ratio of these decisions applies squarely to the facts of this present case.

Accordingly, the impugned order was set aside and the appeal was allowed with consequential relief. Stay application was also disposed off.

Decision:-Appeal allowed.

Comment:-The analogy drawn from the case is that when Section 11B providing for grant of refund of excise duty specifically provides that in certain specified situations, the provisions of unjust enrichment shall not apply then the same is to be strictly followed and executed. Accordingly, the principles of unjust enrichment shall not apply in the case of CENVAT credit taken on inputs used in the manufacture of export goods.

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