2016 (1) TMI 733 - AT - Central Excise

Refund claim - whether the respondent has passed the bar of unjust enrichment as held by Commissioner (Appeals) ? - Held that - The appellants paid duty under protest and burden of duty passed on to the buyers at the time of issuance of invoices. The buyers also took cenvat credit thereof and have not reversed the credit while issuing debit notes to the respondent.As these facts are not in dispute by mere issuing debit notes, the respondent is not able to discharge the burden of unjust enrichment. In this case, it is an admitted fact that the buyer has not debited cenvat credit along with the amount of duty in dispute as claimed by the respondent as a refund. In the circumstances, relying on the decision in the case of Oriental Textile Processing Co. (P) Ltd. (2012 (5) TMI 247 - CESTAT, NEW DELHI ), we hold that the ld. Commissioner (Appeals) is in error in holding that the respondent has passed unjust enrichment. Therefore, the impugned order is set aside - Decided in favour of revenue

Summary

Issues: Appeal against refund claim allowed by Commissioner (Appeals) based on unjust enrichment principle.

Analysis:
1. The respondent filed a refund claim stating that duty was wrongly collected on forged products under incorrect tariff item. The duty was paid under protest and later held as not required. The refund claim was rejected initially due to failure to pass unjust enrichment test. However, Commissioner (Appeals) allowed the claim, noting that the burden was not passed on as buyers issued debit notes to the respondent.

2. The Revenue argued that duty was collected from buyers who took cenvat credit, and the respondent failed to pass unjust enrichment test as buyers did not reverse the credit. Citing precedent, the Revenue contended that the refund should not have been sanctioned.

3. The respondent's counsel argued that as buyers issued debit notes, the burden was not passed on. They relied on tribunal decisions supporting their stance. They emphasized that the debit notes indicated that duty was not collected from buyers.

4. After hearing both parties, the Tribunal noted that the burden of duty was passed on to buyers at the time of issuance of invoices, and buyers did not reverse the cenvat credit when issuing debit notes to the respondent. Citing a precedent, the Tribunal held that the mere issuance of debit notes did not discharge the burden of unjust enrichment. The Tribunal found the Commissioner (Appeals) erred in holding that the respondent passed unjust enrichment and set aside the order, allowing the appeal.