Whether Unjust Enrichment is applicable in case of captively consumed imported goods when the manufacturer was aware that the duty has been paid in excess?

PJ/Case Laws/ 2012-13/1217

Case:- MIDI EXTRUSIONS LTD. VERSUS COMMISSIONER OF CUSTOMS, NEW DELHI

Citation: - 2012 (282) E.L.T. 471 (Tri.-Del.)
Issue: - Whether Unjust Enrichment is applicable in case of captively consumed imported goods when the manufacturer was aware that the duty has been paid in excess?

Brief fact: - The Appellants imported two consignments of aluminium alloy billets and filed two Bills of Entry for home consumption bearing Nos. 447920 and 447923, dated 1-9-2005 for clearing the goods. The Customs EDI systems assessed the Bill of Entry showing Basic Cus-toms Duty at the rate of 7.5%, the Appellants paid Custom duties on the said Bills of Entry based on such assessment.

On 1st September 2005 i.e the date of filing of the Bills of Entry the Customs duty was reduced from 7.5% to 3.75% vide Notification No. 79/2005. When the importer went for clearing of the goods from the shed and a final print outs of the Bills of Entry were taken the Bills Of Entry were seen assessed adopting the new rate of 3.75% which had come into force on 1st September 2005 itself. The importer took delivery of the goods and also the final print out of the Bills of Entry showing the new lower rate and thereafter filed an application for refund of the Customs duty.

The Assistant Commissioner who decided the refund application held that the duty was paid in excess, sanctioned the refund claim but credited the amount to the Consumer Welfare Account on the ground that the importer has not been able to prove that the incidence had not been passed on to anybody else. The Appellants filed appeal with the Commissioner (Appeals) who did not give any relief. Aggrieved by the order of the Commissioner (Appeals), the Appellants have filed this Appeal.

Appellant Contention: - The Appellant submitted that this is a case where the Customs department failed to update their computer system with the new rate of duty which came into force on 1-9-2005. When the Appellants took delivery of the goods and the Bills of Entry were finally assessed as per the new rate the excess duty paid became automatically refundable. Since they knew at the time of taking delivery of the goods itself that they had paid duty in excess of what should have been paid they did not pass on the incidence to anyone else. Further the Appellants submit that they repeatedly asked the custom authorities at the time of submissions of Bills of Entry to check the new rates and update the computer systems. But the authorities informed the Appellants that a copy of the above notification was not received by them and consequently the rates were not updated in the computer and therefore the old rates would prevail. Because they needed the goods urgently they opted to pay the duty assessed at the higher rate and to claim refund later on. The Appellants also submit that they had produced the certificate from a Chartered Accountant clearly showing that the extra duty was not passed on to the customers in any way. They further submit that these goods were used for captive consumption in their own manufacture and when they knew from the day they took delivery of goods that they were eligible for refund, there was no question of passing on the incidence to any consumer and therefore it is totally unjust on the part of the Revenue to deny refund in cash after having failed to update their computer system in time.

Respondent contention :- The Revenue submits that it is decided by the Hon'ble Apex Court in the case of Union of India v. Solar Pesticides Pvt. Ltd.- 2000 (116) E.L.T. 401 (S.C.) that the principle of unjust enrichment will apply even in the case of captive consumption. He argues that the burden to prove that the incidence has not been passed on to anybody else is on the person claiming refund as per the provisions of Section 27 of the Customs Act. He also points out that as recorded by the Commissioner (Appeals), the Appellants had not produced any invoices, balance sheet and relevant Income Tax returns to show that the duty incidence has not been passed on to the consumer and therefore they are not eligible for impugned refund.

Reasoning of judgment: - Thisis a case where the imported goods have been captively consumed and therefore there is no question of passing on the incidence showing it under an invoice showing the impugned customs duty. Further the appellants knew from the date of clearance of the goods that there is a refund due to him because the finally assessed Bills of Entry showed duty payment less than what was actually paid by them and the imported goods have been captively consumed, therefore there is no question of passing on the incidence showing it under an invoice showing the impugned custom duty. In fact in this situation there is no payment adjusted towards Customs duty but only an excess payment in the bank which did not get adjusted towards Customs duty due. In such a situation there is no need for looking at the balance sheet, income tax returns etc. to come to the obvious conclusion that the incidence has not been passed on to the consumer. Tribunals are of the view that in this type of situation even a certificate from the Chartered Accountants is not required, though the Appellants have produced such a certificate. This is a case of simple mistake in assessment on account of the fact that computer systems of Customs were not promptly updated. Quite often the notification issued on a day and effective from that day is available to officers outside the Ministry and the public only by evening of the day in the next few days. We are convinced that in this type of cases the onus is on the appellants to prove that the incidence has not been passed on is not a heavy burden.

Decision: -Appeal disposed off

Comment:-This is very important case where it has been held that when the importer is knowing from day one that the custom duty is payable at reduced rate and later on the department asks to prove the undjustenrichment then there is no need to establish from Balance Sheet as well as CA certificate and it is implied that this duty has not been passed on to the customer.

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PJ/Case Laws/ 2012-13/1217

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