Provision of Unjust Enrichment will not apply When Assessee paid Duty during Investigation on Post clearance of Goods: CESTAT allows Refund to Hindustan Coca Cola Beverages Ltd [Read Order]

The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) in the case of Hindustan Coca-Cola Beverages Pvt. Ltd had allowed the refund claim as the provision of unjust enrichment will not apply when the assessee paid duty during the investigation on post clearance of goods.

The appellant was engaged in the manufacture of Mineral Water and Aerated Water. The finished goods were packed and sold in glass bottles and crates and during handling some bottles got damaged also. The scrap i.e. damaged bottles etc. was disposed of by the appellants. Empty packing material, received in plastic containers and bags were also disposed of by the appellants.

As per the direction of the department,  the appellant started clearing waste and scrap on payment of duty w.e.f. December 2001 and also paid excise duty on past clearance of waste and scrap up to November 2001 ‘under protest’.  The chargeability of the scrap generated during handling was settled by this Tribunal in favour of the appellant vide order by observing that duty would not be chargeable as the scrap was a residual material generated during handling and was not the result of any manufacturing activity.

After getting the order, the appellant herein filed a refund claim for the duty paid by them under protest. The refund involved herein is limited to the period February 2000 to December 2001 amounting to Rs.6,02,400/-.  Although the adjudicating authority sanctioned the refund the same was credited to the Consumer Welfare Fund Account on the ground of ‘unjust enrichment’.

On appeal filed by the appellant, the Commissioner (A) upheld the order of the adjudicating authority by dismissing the Appeal. On further appeal filed by the appellant, the Tribunal vide order dated 12.4.2016, after making few observations about the manner of passing the appellate order, remanded the matter back to the 1st appellate authority for giving findings on the issue after considering the evidence produced by the appellant including the Chartered Accountant’s certificate.

It was evident that the appellants, during the period when they started paying duty under protest, recovered the duty from the clients at the rate at which they had paid to the Revenue. This has been done in such a manner that the total price has remained the same. The invoices issued by the appellants were worked out in such a manner that while duty was recovered from the buyers the price of the goods remained more or less the same.

However, in such circumstances, it cannot be said that duty elements have not been passed on to the customers. So long as the invoice shows the duty amount, the same is deemed to have been passed on to the customers.

The appeal is confined to the refund claim of Rs.6,02,400/- of duty paid under protest.  For the period before December 2001, which also includes the period involved herein, the appellant was clearing the waste and scrap under commercial invoice without mentioning the duty amount therein as admittedly they were not paying any duty. When they started paying the duty ‘under protest’, on the insistence of the department, after December 2001 they started issuing excise invoices at the time of clearance of waste and scrap.

The Commissioner while passing the impugned order observed the Chartered Accountant’s certificate did not mention that the excise duty for the past period had not been included in the commercial invoices and was borne by the appellant but he failed to appreciate that as per common trade practice, commercial invoices are issued when no duty is charged and once the duty is charged then excise invoice is to be issued.

It was settled through decisions that when duty had been paid during an investigation at the insistence of the department post clearance of the goods, the provisions of unjust enrichment would not apply.

A single member bench of Mr Ajay Sharma, Member (Judicial)  held that “Since the Chartered Accountant’s certificate (supra) has certified that the appellant has not recovered the duty amount of Rs.6,02,000/- from their customers, the same is not hit by the bar of unjust enrichment. The appellant is therefore entitled to refund claimed and the appeal filed by the appellant is accordingly allowed by setting aside the impugned order.”

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