The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in a recent judgement has held that unjust enrichment cannot be established without analysis of whether the incidence of duty was passed to any other person or not.
The revenue was challenged against Vapi Care Pharma P. Limited and questioned whether the refund claim of the respondent is hit by unjust enrichment or otherwise. It was submitted by the revenue that the respondent has paid the duty after the clearance of free physician samples does not establish that the incidence of duty paid by them was not passed to any other person therefore, the impugned order holding that there is no unjust-enrichment as duty paid by the respondent was not passed on to the customer, is not legal and correct.
The respondent-assessee stated that it is fact on record that the respondent has paid differential duty after clearance of free physician samples. Therefore the duty burden was borne by the respondent. This is not a case where the respondent has subsequently recovered the duty element from the dealer to whom the physician samples were cleared. Therefore, the incidence of duty was not passed on and the order passed by Commissioner is legal and proper and does not require any interference.
As per Section 11B Claim for a refund of duty and interest, sub-section (2) of Section 11B read with clause (d) of the proviso to sub-section (2) of section 11B of the act, an assessee can claim payment of a refundable amount to him only when he proves that the incidence of duty was not passed on to any other person.
It was observed by CESTAT that In the present case, the assessee has not proved that the incidence of duty was not passed on to any other person. The Commissioner (Appeals) has held that the incidence of duty was not passed on only on the basis that the duty was paid after the clearances of the physician sample and the same was not recovered from the dealer to whom the physician sample was cleared.
From the provision, it was evident that the test to be made is not only concerning the customer to whom the goods were supplied but the term “incidence of duty passed on to any other person” which means that even if the incidence of duty was not passed on to actual consignee of goods but it is also to be established that the incidence of said duty was not passed on to “any other person.”
The two-member Coram comprising Mr Ramesh Nair, Member (Judicial) and Mr C L Mahar, Member (Technical) viewed that the matter needs to be reconsidered on the aspect that even though the incidence of duty was not passed to the customer but whether the same was passed to any other person or not and then only the aspect of unjust-enrichment can be established.
The CESTAT set aside the impugned order and remanded the matter to the Adjudicating Authority to pass a fresh order after verifying the aspect of unjust-enrichment as per our above observations. The appeal is allowed by way of remand.
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