Refund Claim is hit by bar of Unjust enrichment When no documents are produced to prove incidence of Duty not passed to Buyers: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Chennai Bench held that refund claim is hit by bar of unjust enrichment when no documents are produced to prove incidence of duty not passed to buyers.

The appellant, M/s. Aurolab is engaged in the manufacture of suture needles and micro surgical blades. They are registered with the Central Excise Department. The classification of suture needles was under dispute and finally settled to be under Chapter Heading 90 of CETA, 1985. The suture needles falling under Chapter 90 attracts nil rate of duty under Sl. No. 268 of Notification No. 6/2003-CE.

The appellant continued to pay the duty on the needles and blades till 12.12.2005. Thereafter, the appellant informed the jurisdictional officer that they would not be paying excise duty with effect from 12.12.2005 since those goods attract nil rate of duty.

The appellant filed a refund claim for refund of Rs.17,07,818 being the duty paid by them mistakenly on suture needles. A Show Cause Notice was issued to show cause as to why the refund claim should not be rejected as the same is hit by unjust enrichment. After due process of law, the original authority rejected the refund claim and the same was upheld by the Commissioner (Appeals).

A Single Bench consisting of SulekhaBeevi CS, Judicial Member held that “The issue is whether the refund claim is hit by the bar of unjust enrichment. Undisputedly, the appellant has mentioned the duty element in the invoices issued to the buyers. The presumption envisaged in section 12B of Central Excise Act, 1944 then applies and the burden rests upon the appellant to rebut this presumption.”

“Even after remand, the appellant has not been able to produce necessary documents to substantiate that they have not passed on the incidence of duty to the buyers of the goods. After appreciating the facts, I am of the view that the rejection of refund claim is legal and proper.”

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