CESTAT explains Test to determine unjust-enrichment

Commissioner of Central Excise Vs Vapi Care Pharma P. Limited (CESTAT Ahamedabad)

The only issue involved in the present case is whether the refund claim of the respondent is hit by unjust-enrichment or otherwise.

Learned Commissioner (Appeals) has held that incidence of duty was not passed on only on the basis that the duty was paid subsequent to the clearances of physician sample and the same was not recovered from the dealer to whom the physician sample was cleared. From the above provision it can be seen that test to be made is not only with reference to customer to whom the goods were supplied but the term “incidence of duty passed on to any other person” which means that even if 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‟. This aspect was not tested by the learned Commissioner. Therefore, in our considered view 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. Accordingly, we set-aside the impugned order and remand the matter to the Adjudicating Authority to pass a fresh order after verifying the aspect of unjust-enrichment as per our above observations.

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

The only issue involved in the present case is whether the refund claim of the respondent is hit by unjust-enrichment or otherwise.

2. Shri Kalpesh P Shah, learned Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the grounds of appeal. He submits that only on the fact that respondent has paid the duty subsequent to 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.

3. Shri M.G. Yagnik, learned Counsel appearing for the respondent-assessee submits that it is fact on record that respondent have paid differential duty subsequent to clearance of free physician samples. Therefore the duty burden was borne by the respondent. This is not a case where 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 learned Commissioner is legal and proper which does not require any interference.

4. We have carefully considered the submissions made by both sides and perused the record. We find that the provision of unjust-enrichment is given in Section 11B which is reproduced:-

Section 11B Claim for refund of duty and interest, if any, paid on such duty.-

(1) any person….

(2) if, on receipt of any such application, the assistant commissioner of central excise or deputy commissioner of central excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the fund:

Provided that the amount of duty of excise and interest, if any, paid on such duty as determined by the assistant commissioner of Central Excise or Deputy Commissioner of Central Excise under the foregoing provisions of this sub-section shall, instead of being credited to the fund, be paid to the applicant, if such amount is relatable to-

(a) rebate of duty of excise

(b) unspent advance deposits

(c) refund of credit of duty paid on excisable goods…. …….

(d) the duty of excise and interest, if any, paid on such duty paid by the manufacturer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;

(e) the duty of excise and interest, if any, paid on such duty borne by the buyer,

(f) the duty of excise and interest, if any, paid on such duty] borne by any other such class of applicants Provided further that no notification under clause (f) of the first proviso In view of the above, 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 refundable amount to him only when he proves that the incidence of duty was not passed on to any other person. In the present case the assessee has not proved that the incidence of duty was not passed on to any other person.

5. Learned Commissioner (Appeals) has held that incidence of duty was not passed on only on the basis that the duty was paid subsequent to the clearances of physician sample and the same was not recovered from the dealer to whom the physician sample was cleared. From the above provision it can be seen that test to be made is not only with reference to customer to whom the goods were supplied but the term “incidence of duty passed on to any other person” which means that even if 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‟. This aspect was not tested by the learned Commissioner. Therefore, in our considered view 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. Accordingly, we set-aside the impugned order and remand 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.

(Pronounced in the open court on 03.04.2023)