Applicability of  Unjust Enrichment on Refund Claim of Excise Duty: CESTAT Remands Matter to Consider CA Certificate [Read Order]

The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal,( CESTAT ) remanded the matter to consider the Chartered Accountant (CA) certificate while deciding the applicability of  unjust enrichment on refund claim of Excise Duty

Bhor Industries Ltd, the appellants are aggrieved by the rejection of their claims of refund of duty on the ground that the lower appellate authority wrongly proceeded on the basis that duty burden has been passed on to their customers and for which reason he has not at all considered the Chartered Accountant’s certificate produced by them before the authorities below to substantiate their stand that they duty element has not been passed on to their customers.

It was submitted before the commissioner of appeals that there was no sale or buyer to pass on the incidence of duty by the appellants to their customers. This is being so, and since the appellants have also submitted the Customs Act, 1962’s Certificate, which has not been looked into by the Commissioner (Appeal), they set aside the impugned order and remand the case of the appellants for considering the case on merit in the light of the CA certificate, to the Commissioner (Appeals). The appeal is thus allowed by way of remand.’

Show cause notices came to be issued to the appellant proposing rejection of the said refund applications and the confirmation thereto by the Assistant Collector of Central Excise, upon challenge before the first appellate authority remanded the matter to the original authority.  The claim for refund was rejected on the ground that duty had not been paid ‘under protest’ and, therefore, did not merit consideration in claims preferred in 1989. 

It was also held that the bar of ‘unjust enrichment’, mandated under section 11B of the Central Excise Act, 1944, had not been overcome. It would, thus appear that the lower authorities have categorized the claims into three parts.

The Supreme Court in re Bhor Industries Ltd established that duty liability had not arisen at all, and, therefore, the question of ‘under protest’ should not have been an issue owing to the absence of a formal mechanism for such payment. 

The Tribunal held that the assessee had sufficiently shown that the prices of the final product remained the same irrespective of the fact whether duty was being paid by them on the tapes or not and held that the Commissioner (Appeals) without considering any evidence regarding the aspect of unjust enrichment passed the order in favour of the Revenue

The Tribunal had, in its substantive remand, directed that the certificate of Chartered Accountant on the absorption of disputed duty liability be taken into consideration.  It would also appear that the Tribunal was cognizant of the decision of the Supreme Court in Union of India v. Solar Pesticide Pvt Ltd and its implication when issuing the direction to the first appellate authority.

A two-member bench comprising Mr C J Mathew, Member (Technical) and Mr Ajay Sharma, Member (Judicial) directed to take fresh decision after taking the submission of facts, as well as a certificate of the Chartered Accountant, into account.

The CESTAT set aside the impugned order and remanded the matter back to the first appellate authority on the terms and conditions directed by the Tribunal formerly and subject to the law as judicially determined. 

To Read the full text of the Order CLICK HERE

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