Case Law Details
Sesa Sterlite Ltd. Vs Commissioner of Customs (CESTAT Hyderabad)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad, dismissed an appeal challenging the rejection of an excise duty refund on the ground of unjust enrichment. The refund of ₹12,10,234 had originally been sanctioned following reassessment of a shipping bill, which reduced the duty liability. However, the Department issued a show cause notice seeking recovery of the refund on the basis that the appellant had realized an amount higher than the declared Free on Board (FOB) value, thereby attracting the doctrine of unjust enrichment.
The appellant did not appear during multiple hearings, including the final hearing, and the Tribunal proceeded to decide the matter after hearing the departmental representative and examining the record. The core issue before the Tribunal was whether the refund claim was barred by unjust enrichment due to excess realization over the declared transaction value.
The Tribunal noted that the declared FOB value in the shipping bill was USD 2,168,780.25, whereas the Bank Realisation Certificate showed that the appellant had actually realized USD 2,276,803.41. This resulted in an excess realization equivalent to ₹46,12,589. The Tribunal observed that the appellant failed to provide any explanation for this differential amount and did not establish that the excess realization did not include the duty element for which the refund was claimed.
It was further noted that the Chartered Accountant’s certificate relied upon by the appellant did not address the issue of excess realization and that the refund sanctioning authority had not verified the financial records to examine unjust enrichment. The Tribunal held that when an assessee realizes an amount higher than the declared value, a presumption arises that the burden of duty has been passed on to the buyer.
The Tribunal referred to established legal principles laid down by the Supreme Court, including that refund claims are subject to the doctrine of unjust enrichment and can succeed only when the claimant proves that the duty burden has not been passed on. It emphasized that unjust enrichment is a doctrine based on equity, preventing a person from retaining benefits that rightfully belong to another, and applies even independent of statutory provisions.
The Tribunal also reiterated that if the burden of duty has been passed on, the claimant does not suffer any loss, and therefore cannot claim refund. In such cases, the amount is to be retained by the State. It further observed that verification of who ultimately bore the duty is essential, and in the absence of such proof, refund cannot be granted.
In light of these findings, the Tribunal concluded that the refund sanction was legally unsustainable as the aspect of unjust enrichment had not been properly examined. It held that the impugned order rejecting the refund was consistent with settled legal principles and did not suffer from any infirmity. Accordingly, the appeal was dismissed.
FULL TEXT OF THE CESTAT HYDERABAD ORDER
M/s Sesa Strelite Ltd., (hereinafter referred to as appellant) are in appeal against the Order-in-Appeal No. 01/2013 (G)(D) CUS dated 08.08.2013. The learned Commissioner (Appeals), while allowing the Departmental appeal, rejected the refund sanction on the grounds of unjust enrichment.
2. The Adjudicating Authority had sanction refund of Rs. 12,10,234/- to M/s Sesa Goa Ltd., (now M/s Sesa Sterlite Ltd.,). In respect of excise duty paid on export goods. Subsequently, Department has issued Show Cause Notice dated 28.01.2013, proposing recovery of the erroneous refund on the ground that the appellant had realized an amount higher than the FOB value declared, thereby, attracting the doctrine of unjust enrichment.
3. No one was present for the appellant to argue the matter on several hearings in past. No one was present for the appellant even on the date of final hearing. Therefore, we heard the Learned AR and perused the records.
4. Learned AR reiterates the findings given by the Learned Commissioner (Appeals), and also submit that impugned order is based on law and recent judgments of Hon’ble Supreme Court and Tribunals. Learned AR has relied on following decisions:
i. Commissioner of Central Excise, Madras Vs M/s Addison & Co. Ltd., [2016 (8) TMI 1071 – SC]
ii. Sahakari Khand Udyog Mandal Ltd., Vs Commissioner of Central Excise & Customs [2005 (3) TMI 116 – SC]
iii. Mafatlal Industries Ltd., Vs Union of India [1996 (12) TMI 50 – SC]
iv. Sagar Cements Ltd., Vs Pr. Commissioner of Central Tax Rangareddy – GST [2024 (7) TMI 1071 – CESTAT Hyderabad]
v. Charbhai Bedi Works, Shaz Enterprises, Arshad and Co. Nav Udyog Beedi Works and Hyderabad Beedi Manufactures Vs CC & CE, lHyderabad – I, [2017 (9) TMI 869 – CESTAT Hyderabad]
vi. CCE & ST, Hyderabad – I Vs Sirpur Paper Mills Ltd., [2017 (9) TMI 1490 – CESTAT Hyderabad]
vii. Lorenzo Bestonso Vs Commissioner of Customs, JNCH [2016 (9) TMI 725 – CESTAT Mumbai]
5. The short issue involved is whether the refund sanction to the appellant is hit by the doctrine of unjust enrichment, in view of excise realisation over the declared FOB value. In this regard it is important to mention the relevant findings of impugned order which is as thus:
“6. At the outset, I find that the disputed shipping bill was reassessed on 25.07.2011 as per the directions given vide Order-in-Appeal No.3/2009 (G) CUS. dated 30.04.2009 passed by the Commissioner (Appeals), Guntur. As seen from the correspondence file C,No.VIII/20/02/2011-R of the Refund Sanctioning authority, I find that the respondent have filed a refund claim on 16.08.2011 arising on account of reassessment of shipping bill no.43/08-09 dated 15.07.2011. The said shipping bill was assessed provisionally and duty of Rs. 1,38,91,038/- paid by the respondent on 14.07.2008. The shipping bill was reassessed and the duty payable was worked out to Rs. 1,26,80,805/- vide speaking order dated 25.07.2011 and 14.10.2011. Consequent upon the reassessment, the respondent filed the refund claim and the instant refund was sanctioned by the refund sanctioning authority (i.e. AC, Customs, Krishnapatnam Port basing on the certificate dated 08.12.2011 given by M/s S.J.Thaly & Co, Chartered Accountants, Goa stating that the company has recovered only the price of the export goods from the overseas customers, as per the terms and conditions of respective export contract and accordingly, the incidence of the duty in respect of the above referred export is borne by the company and has not been recovered from the overseas customer.
7. In this context, I have gone through the Exhibit K (Appendix 22 A-Bank Certificate of Export and Realization) filed by the appellant while claiming the refund and noticed that they have realized US $ 2,276,803.41 in respect of shipping bill no.43. As seen from the relevant shipping bill, I find that the FOB value declared by them was US $ 2,168,780.25. After conversion into India currency at the prevailing rate, there was a difference amount of Rs. 46,12,589/- which was happened to be realized excess by them even above the FOB price declared in the shipping bill. When the facts stood as above, the refund sanctioning authority sanctioned an amount of Rs.12,10,234/- as Refund vide the impugned order.
8. The reasons for excess realization has not been discussed in the certificate given by the Chartered Accountant. And also the refund sanctioning authority had not made any verification from the financial records of the respondent. Though the refund sanctioning authority has given a positive finding in the impugned order that no amount was received by the respondent over and above the amount received, in view of the facts discussed above, I hold that the refund sanctioning authority had not examined the aspect of unjust enrichment clause on the excess differential amount realized by them vis-avis financial records. Further, no positive material was advanced by the respondent to prove conclusively that the excess amount realized by them do not include the amount of duty sought for refund. Hence, in view of the aforesaid discussion, I find that contention of the revenue is correct and impugned order deserves to be set aside. Accordingly, I pass the following order.”
6. The appellant declared FOB value of USD 2168780.25 in the shipping bill, however, as per Bank Realisation Certificate (BRC), they realised USD 2276803.41. Therefore, the differential amount, when converted, resulted in excise realisation of Rs. 46,12,589/-.
7. Thus, it is evident that the appellant has realized an amount substantially higher than the declared transaction value. The doctrine of unjust enrichment is statutorily embedded under Section 27 of the Customs Act, 1962 which mandates that refund shall not be granted unless incidence of duty has been passed on.
8. Hon’ble Supreme Court in the Case of Mafatlal Industries Ltd., supra, held that all claims for refund are subject to the doctrine of unjust enrichment except where specifically exempted. The relevant para of the judgment as this:
“99(iii) A claim for refund, whether made under the provision (iii) of the Act as contemplated in Proposition (i) above or in a suit or writ petition in the situations contemplated by Proposition (ii) above, can succeed only if the petitioner/plaintiff alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed /decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State, i.e., by the people. There is no immorality or impropriety involved in such a proposition.
The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched.”
9. Hon’ble Supreme Court in the case of Sahakari Khand Udyog Mandal Ltd., supra, held that unjust enrichment is a doctrine of equity and applies even independent of statutory provisions. The relevant para for ready reference as below:
“31. Stated simply, ‘Unjust enrichment’ means retention of a benefit by a person that is unjust or inequitable. ‘Unjust enrichment’ occur when a person retains money or benefits which in justice, equity and good conscience, belong to someone else.
32. The doctrine of ‘unjust enrichment’, therefore, is that no person can be allowed to enrich inequitably at the expense of another. A right of recovery under the doctrine of ‘unjust enrichment’ arises where retention of a benefit is considered contrary to justice or against equity.
48. From the above discussion, it is clear that the doctrine of ‘unjust enrichment’ is based on equity and has been accepted and applied in several cases. In our opinion, therefore, irrespective of applicability of Section 11Bj of the Act, the doctrine can be invoked to deny the benefit to which a person is not otherwise entitled. Section 11B of the Act or similar provision merely gives legislative recognition to this doctrine. That, however, does not mean that in absence of statutory provision, a person can claim or retain undue benefit. Before claiming a relief of refund, it is necessary for the petitioner/appellant to show that he has paid the amount for which relief is sought, he has not passed on the burden on consumers and if such relief is not granted, he would suffer loss.”
10. Hon’ble Supreme Court in the case of M/s Addison and Company Ltd., supra, held that the assessee is not entitled to refund as it would result in unjust enrichment. Relevant para of the judgment of ready reference:
“21. That a consumer can make an application for refund is clear from paras 98 and 99 of the judgment of this Court in Mafatlal Industries (supra). We are bound by the said findings of a Larger Bench of this Court. The word ‘buyer’ in Clause (e) to proviso to Section 11-B (2) of the Act cannot be restricted to the first buyer from the manufacturer. Another submission which remains to be considered is the requirement of verification to be done for the purpose of finding out who ultimately bore the burden of excise duty. It might be difficult to identify who had actually borne the burden but such verification would definitely assist the Revenue in finding out whether the manufacturer or buyer who makes an application for refund are being unjustly enriched. If it is not possible to identify the person/persons who have borne the duty, the amount of excise duty collected in excess will remain in the fund which will be utilized for the benefit of the consumers as provided in Section 12-D.”
11. The appellant has realized higher export proceeds than declared and failed to provide any cogent explanation for such excess realisation. The certificate given by Chartered Accountant is silent on the crucial aspect of excess realization and no correlation has been established to declare above value and actual realisation.
12. The refund sanctioning authority had failed to examine this critical aspect, rendering the original sanction legally unsustainable. 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.
13. The above principles has been followed by this Tribunals in these cases:
i. Sagar Cements Ltd., Vs Pr. Commissioner of Central Tax Rangareddy – GST [2024 (7) TMI 1071 – CESTAT Hyderabad]
ii. Charbhai Bedi Works, Shaz Enterprises, Arshad and Co. Nav Udyog Beedi Works and Hyderabad Beedi Manufactures Vs CC & CE, lHyderabad – I, [2017 (9) TMI 869 – CESTAT Hyderabad]
iii. CCE & ST, Hyderabad – I Vs Sirpur Paper Mills Ltd., [2017 (9) TMI 1490 – CESTAT Hyderabad]
14. In view of the above discussion, we find that impugned order is based on settled legal position. Therefore, no infirmity or ambiguity in the impugned order.
15. Therefore, appeal is liable to be dismissed.
16. Appeal dismissed.
(Pronounced in the open court on 10.04.2026 )
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