By TIOL News Service

MUMBAI, JAN 31, 2017: THE appellant has filed an appeal against an o-in-a disallowing the refund sanctioned by original authority on the ground that the claim is hit by the bar of 'unjust enrichment'.

The genesis of the claim was the demand of Rs.66,00,257/- of CENVAT credit alleged to have been wrongly availed which the Tribunal, vide its order dated 27th April 2010, had held to be incorrect recovery to the extent of Rs.38,73,765/- while remanding the matter for deciding on applicability of bar of limitation to the remaining amount.

Refund of the amount held as erroneous recovery was claimed by appellant and allowed by original authority. Incidentally, the amount was adjusted towards a payment default of October 2010 after rendering a finding that the bar of 'unjust enrichment' is not attracted to the claim.

The impugned order of the Commissioner (A) holds that refund claim has been filed u/s 11B of CEA, 1944 and in view of the apex court decision in Sahakari Khand Udyog Mandal - 2005-TIOL-48-SC-CX-LB all refund claims must cross the hurdle of 'unjust enrichment' and failure to establish that burden of duty had not been passed on would deprive the appellant of the amount.

The Bench inter alia observed -

+ It would appear that this claim for refund was preferred in the form prescribed for refunds under section 11B of Central Excise Act, 1944. Notwithstanding the form in which the claim was sought, under no circumstance is it possible for the appellant to receive this amount in spendable form . All that is possible is restitution of credit that was disallowed.

+ Unfortunately, a procedure for such restitution has not been laid down in the CENVAT Credit Rules, 2004 and it is this processing gap that has fostered the practice of applying for such restoration of credit in Form-R of Central Excise Series No 2AA and thus giving free rein to the officers handling such claims to indulge in such absurd exercises.

+ There is no dispute that appellant claims refund; nor has the original authority allowed such cash refund. The credit restored by that authority was applied towards other dues of the appellant. On the other hand, the action of the first appellate authority has deprived the settlement of some portion of that due and, with his finding that the claim is impacted by unjust enrichment requiring transfer of the said amount to the Fund, he has enabled a credit to the Fund that serves neither man nor beast . It is doubtful if it was his intention that this amount, otherwise rules as entitled to the appellant, be recovered in cash for deposit in the Fund or to be transferred from the Consolidated Fund of India to the Fund. The futility of the order that has been issued without proper application of mind becomes patent.

+ It is accordingly held that restoration of credit, or re-credit, is not a refund but a procedural step that is to be accorded without ado. Such re-credit cannot fail to cross the hurdle of 'unjust enrichment' and must be allowed as a right of the appellant.

+ It would appear that it is only tax administrators who continue to hold fast to the hurdle of 'unjust enrichment' to deny rightful claims for restoration of CENVAT credit. Such obduracy is ill-founded and not in accordance with the law.

Setting aside the impugned order, the appeal was allowed.

(See 2017-TIOL-290-CESTAT-MUM)