Amount Paid Under Protest After Clearance Of Goods Is Not Covered By Unjust Enrichment: CESTAT
Pranav B Prem
The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that the principle of unjust enrichment does not apply to amounts paid under protest, especially when such payments are made after the clearance of goods. The Tribunal, comprising Judicial Member Binu Tamta, allowed the appeal filed by M/s Oiles India Pvt. Ltd. and set aside the order of the Commissioner (Appeals), thereby sanctioning the refund of excise duty paid by the appellant under protest.
The dispute arose in connection with an Investment Subsidy granted to the appellant under the Rajasthan Investment Promotion Policy (RIPS) – 2010. This subsidy was adjusted against the appellant’s liability towards VAT and CST between January 2014 and June 2015. The Department raised a demand of central excise duty on the said subsidy. However, the Tribunal, by its final order dated 21.12.2018, had already quashed the duty demand and associated penalties, granting consequential relief. Accordingly, a refund was sanctioned to the appellant for that period.
Subsequently, the appellant sought a refund of Rs. 14,34,293/- on 03.07.2019 for duty paid voluntarily and under protest for a later period, through various entries in their RG-23A register and challans dated between 2015 and 2017. The Adjudicating Authority initially rejected this claim citing the one-year limitation period. On appeal, however, the matter was remanded back, with the finding that the limitation clause did not apply and with a specific direction to examine the issue of unjust enrichment.
On remand, the Adjudicating Authority allowed the refund, holding that the concept of unjust enrichment was not applicable in this case. The Authority noted that the amount was paid voluntarily against a potential future liability which had not yet been confirmed and was later quashed. It was also noted that there were no goods sold to the Government of Rajasthan, nor had the duty burden been passed to any customers. Therefore, it concluded that there was no unjust enrichment.
The Department challenged this refund before the Commissioner (Appeals), contending that the books of accounts reflected the duty paid under protest as an “expense” in the profit and loss account, rather than as a “receivable”. Relying on the decision in Hindustan Petroleum Corporation Ltd. v. CCE, Mumbai-II [2014 (5) TMI 1136 CESTAT-Mumbai], the Department argued that this accounting treatment implied the burden had been passed on and the refund should be denied.
The Commissioner (Appeals) accepted this argument and reversed the refund, but this decision was subsequently challenged by the appellant before the Tribunal.
Allowing the appeal, the Tribunal emphasized that accounting treatment alone does not determine whether the incidence of duty has been passed on. Referring to past decisions including M/s Chambal Fertilizers and Chemicals v. Commissioner of Central Excise and CGST [2023(2) TMI 10 CESTAT-New Delhi], U.T. Electronics Pvt. Ltd. [2020 TIOL 386 CESTAT-Delhi], and Allied Chemicals and Pharmaceuticals Pvt. Ltd. [2019 2TMI 849 (Trbl.-New Delhi)], the Tribunal reiterated that booking duty as an “expense” does not automatically result in unjust enrichment.
Further, reliance was placed on the case of Barmer Lignite Mining Co. Ltd. v. Commissioner CE & CGST [2024 (12)TMI 940-CESTAT, New Delhi], where it was held that unjust enrichment principles do not apply to amounts deposited under protest. In the current case, since the disputed duty was paid much after the clearance of goods, it could not be considered that the burden was passed on to customers.
The Tribunal also cited the judgment of the Delhi High Court in Team HR Services Pvt. Ltd., where it was clarified that deposits made under protest during investigation or pending adjudication cannot lead to unjust enrichment merely due to nomenclature. Such payments are treated as deposits, not duties borne by others.
Finally, the Tribunal relied on Advanced Steel Tubes v. CCE, Ghaziabad [2014(310) ELT 370 (Tri.-Del.)], to reinforce that where tax or duty is deposited after supply of goods, there is no question of the burden being passed on. In conclusion, the Tribunal held that since the excise duty in question was paid under protest after the clearance of goods and was not recovered from any buyers or the government, the doctrine of unjust enrichment was inapplicable. The impugned order of the Commissioner (Appeals) was set aside, and the refund was allowed with consequential relief.
Appearance
Shri B.L. Yadav, Consultant for the appellant.
Shri Vishwa Jeet Saharan, Authorised Representative for the respondent.
Cause Title: M/s. Oiles India Pvt. Ltd. V. Commissioner of Central Excise & CGST
Case No: Excise Appeal No.50314 of 2024
Coram: Binu Tamta [Member (Judicial)]
[Read/Download order]
