Union of India (UOI) vs Pharmacia India [P] Ltd.

B.V. Nagarathna, J.—The revenue has filed this appeal by challenging the final order No. 1238 of 2005 dated 27.07.2005 passed in Appeal No. C/323/2002 dated 3.8.2005.

At the time of admission itself, the following substantial questions of law were framed by this Court on 5.9.2006 which read as under:

Whether, on the facts and circumstances of the case, refund claim made by the respondent is not covered by ''unjust enrichment''?

Whether the respondent has discharged its burden in the matter of passing on liability directly or indirectly to other person?

The facts leading to the filing of this appeal are that the respondent - assessee had imported certain machinery on payment of duty. However, it subsequently found that the said goods were exempted from customs duty by virtue of notification dated 2.6.1998. Therefore, the respondent - assessee filed an application for refund of the amounts mistakenly paid as duty.

The Deputy Commissioner [Refunds] held that the application was in time and that the same was not hit by unjust enrichment. However, he concluded that the imported machinery was not covered by the notification regarding exemption. He therefore rejected the claim for refund.

Against the said order the respondent - assessee had preferred an appeal before the Commissioner [Appeals] who came to a conclusion that the imported equipment was entitled for exemption under the said notification and also the fact that the respondent was entitled for refund. However, he directed that the amount to be refunded has to be paid to the Consumer Welfare Fund on the ground that the respondent had unjust enrichment with regard to the said amount.

The same was challenged by the respondent - assessee before the CESTAT. The Tribunal has taken into consideration the fact that the exemption was granted by the Commissioner [Appeals] and as also on facts held that the respondent - assessee did not have the benefit of any unjust enrichment and accordingly allowed the appeal of the respondent.

Being aggrieved by the said order, the revenue has preferred this appeal.

We have heard learned Counsel for the revenue and learned Counsel for the respondent - assessee.

The main contention on behalf of the revenue is that when there is no challenge to the assessment order passed in the instant case which had attained finality, the application for refund could not have been considered and therefore the authorities could not have granted exemption with regard to payment of customs duty when the assessment order was not modified or reviewed. He further submits that when the assessee had unjust enrichment in the context of the duty which had been paid by the assessee and was subsequently exempted, the Tribunal was not justified in holding that there was no unjust enrichment on the part of the respondent - assessee. He therefore submits that the order of the Tribunal has to be set aside and the refund application has to be rejected as held by the Deputy Commissioner [Refunds].

Per contra, learned Counsel for the respondent - assessee while supporting the order of the Tribunal has also submitted that as against the order passed by the Commissioner [Appeals], no appeal was filed by the revenue with regard to the entitlement of exemption granted under the notification dated 2.6.1998 to the assessee and therefore the present appeal is not maintainable.

Having heard the learned Counsel on both sides and on perusal of the material on record, we find that while initially the authority with regard to Refunds had held that the respondent - assessee was not entitled to exemption, the appellate authority had allowed the exemption as per the notification dated 2.6.1998. However, a direction was given to pay the amount to the consumer welfare fund on the ground of unjust enrichment. In fact, the Tribunal has gone into this question and has held that in fact there was no unjust enrichment by the assessee when in fact there was no collection of the duty amount from the customers of the assessee and the duty had been mistakenly paid by the assessee to the Department and when that was noticed, exemption claimed which was just and proper and when an order entitling exemption was granted, then the question of the assessee having unjust enrichment or benefit does not arise at all. We find that the said reasoning of the Tribunal is correct which does not call for any interference in this appeal.

It is also necessary to note that the machinery which was imported by the respondent - assessee was for installation at its factory premises to be used for the purpose of manufacture as captive consumption and not for further sale of the same, in which event, there would have been no occasion to collect the duty from its customers. When such being the case, the Tribunal was right in holding that the refund claimed was not hit by the rule of unjust enrichment.

The decisions relied upon by learned Counsel for the appellant in the case of Union of India v. Solar Pesticide Pvt. Ltd. reported in 2000 [116] ELT [SC] and in the case of Priya Blue Industries Ltd. Vs. Commissioner of Customs (Preventive), , are not applicable to the facts of the present case.

Accordingly, the substantial questions of law raised in this appeal have been answered in favour of the respondent - assessee and against the revenue.

Accordingly, the appeal is dismissed.