1999 (11) TMI 85 - SC - Customs

Whether the order of the Division Bench of the High Court confirming the order of the learned Single Judge directing refund of customs duty on consignments of certain goods imported by the respondent-firm between 1978 and 1980 was justified in law or not? Held that - While upholding the plea of the respondents that the disputed import duty paid by it was not legally payable still the question survives for consideration as to whether refund could have been ordered to it if the burden of duty was passed on to third parties. Only for deciding this limited question the proceedings will have to be remanded to the Assistant Collector from whose order the proceedings arose in writ petition before learned Single Judge and ultimately went before the Division Bench which disposed of the same by the impugned order. Appeal partly allowed.

Summary

Issues:
1. Whether the order directing refund of customs duty on imported goods was justified.
2. Whether the respondent-firm can retain the refunded amount on the principle of unjust enrichment.

Analysis:

Issue 1:
The case involved a dispute regarding the refund of customs duty on goods imported by the respondent-firm between 1978 and 1980. The Single Judge upheld the claim for refund, which was later confirmed by the Division Bench of the High Court. The Supreme Court found that the decision of the High Court was justified on merits as it was in line with relevant exemption notifications. However, the Court raised a question regarding the principle of unjust enrichment, i.e., whether the respondent-firm could retain the refunded amount.

Issue 2:
The Court referred to a Constitution Bench decision emphasizing that even if a claim for refund is justified on merit, the principle of unjust enrichment must be considered. The respondent-firm argued that the format order by the Court did not cover this aspect, while the appellants relied on the Constitution Bench decision. The Court clarified that if the burden of duty was passed on to third parties, the refund could not be retained by the respondent-firm. As this aspect was not examined by the High Court, the order directing refund was set aside, and the case was remanded to the Assistant Collector for further consideration.

In conclusion, the appeal was partly allowed, and the order directing refund was set aside pending a determination on whether the burden of duty was passed on to third parties. The Court emphasized that the remanded proceedings should focus on the merits without considering the limitation issue. The decision on whether the respondent-firm should return the refunded amount would depend on the outcome of the remanded proceedings, ensuring compliance with the principle of unjust enrichment.