Excise Duty Refund Hit by Unjust Enrichment as Realization Exceeded Declared FOB Value: CESTAT Dismisses Appeal [Read Order]

In a recent ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad, has dismissed an appeal filed by M/s Sesa Sterlite Ltd., holding that the refund of excise duty is barred by the doctrine of unjust enrichment because the export proceeds realized by the appellant exceeded the declared FOB value.

The case involved M/s Sesa Sterlite Ltd. (formerly Sesa Goa Ltd.), which exported goods and paid excise duty under provisional assessment. Following a reassessment, it was determined that a lower duty was payable, leading to a refund claim of Rs. 12,10,234/-. The adjudicating authority sanctioned this refund based on a Chartered Accountant’s certificate stating that the incidence of duty was borne by the company and not passed on to the overseas buyer.

The Revenue appealed to the Commissioner(Appeals), arguing that the refund was invalid. They pointed out that while the appellant declared an FOB value of USD 2,168,780.25 in the shipping bill, the Bank Realization Certificate (BRC) showed they actually realized USD 2,276,803.41. This resulted in an excess realization of approximately Rs. 46 Lakhs. The Department contended that this excess realization indicated that the burden of duty had been passed on to the buyer.

Notably, no representative appeared for the appellant to argue the matter during the hearing, nor were they present on previous dates.

The Department relied on Supreme Court precedents such as Mafatlal Industries Ltd. vs Union of India, Sahakari Khand Udyog Mandal Ltd. vs Commissioner of Central Excise, etc to argue that the doctrine of unjust enrichment applies to all refund claims unless it is proven that the duty burden was not passed on.

The bench of Mr. A.K. Jyotishi (Technical) and Mr. Angad Prasad (Judicial) observed that the refund sanctioning authority had failed to examine the aspect of unjust enrichment regarding the excess differential amount. The Tribunal noted that the CA certificate was silent on the reasons for the excess realization and no verification was made from the appellant's financial records.

The Tribunal observed:

“When an assessee realizes an amount in excess of declared value, a strong presumption arises that the incidence of duty has been passed on to the buyer.”

Citing the principle that no person can collect duty from both ends—from the purchaser and the State—the Tribunal held that the appellant failed to provide any cogent explanation for the excess realization. The lack of positive material to prove that the excess amount did not include the duty sought for refund was fatal to the appellant's case.

In view of this, the CESTAT upheld the order of the Commissioner (Appeals). The Tribunal found that the refund sanction was legally unsustainable as the incidence of duty had not been conclusively shown to remain with the appellant. Consequently, the appeal was dismissed.

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