We are sharing with you an important judgment of the Hon’ble Mumbai CESTAT in the case of Hindustan Petroleum Corporation Limited Vs. Commissioner of Central Excise, Mumbai-II [2014-TIOL-658-CESTAT-MUM] on the following issue:


Whether the test of unjust enrichment satisfied where the claimant has treated refund amount as ‘expenditure’ and not as ‘claims receivable’?

Facts & background:

Hindustan Petroleum Corporation Limited (“the Appellant”) utilized HSD/ Naptha captively for generation of electricity to be consumed with in the refinery. The Department was of the view that the Appellant was not eligible for the benefit of captive consumption Notification No. 67/95-CE as electricity was not excisable. The Appellant paid duty of Rs.2.33 crores after clearance of the goods and an amount of Rs.5.17 crores was paid on monthly basis.

The original authority confirmed the above duty demands but the Tribunal set aside the orders of the original authority vide Order dated July 15, 2005. The Revenue challenged the order of the Tribunal and the Bombay High Court dismissed the appeal in February, 2008. Thereafter, the Appellant filed the refund claim on May 19, 2008.

On February 4, 2009, a Show Cause Notice was issued to the Appellant proposing to reject the refund claim on the ground that the refund claim was filed much after the period of one year from the date of CESTAT order. By order dated April 9, 2009, the refund claim was rejected on account of time-barred.

The Appellant challenged the said decision and the lower appellate authority held that the payment of duty during the period of dispute should be held as “under protest” and therefore, the question of time bar would not apply. However, the refund claim was rejected on account of unjust enrichment on the ground that the claimant did not submit any evidence to show that the incidence of duty was not passed on to other person. Accordingly, the Commissioner (Appeals) ordered that the amount of refund be credited to the consumer welfare fund.

Therefore, the Appellant filed an appeal before the Hon’ble Mumbai Tribunal.


The Hon’ble Tribunal held that the payment of duty by the Appellant cannot be considered as payment under protest at all since the payment of duty was not on account of any directions from the court or appellate authority. Further, the Appellant did not follow the procedure prescribed for payment of duty under protest.

The Tribunal further observed that refund claim became due from the first order of the Tribunal in 2005. However, the refund claim was filed 3 years after the said order. Hence, refund claim has been filed much after the stipulated period of one year and is time-barred.

Moreover, the Tribunal observed that the refund claimed was not reflected in the books of account of the Appellant as claims receivable. This implied that the duty paid was shown as expenditure and formed part of Profit and loss account of the Appellant. Therefore, the Hon’ble Tribunal held that it is a settled position in law that where the Appellant has itself treated the refund amount due as expenditure and not as “claims receivable”, the Appellant cannot be said to have passed the test of unjust enrichment.

Therefore, the contention of the Appellant was rejected and the case was decided in favour of the Revenue.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)

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