BRIEF FACTS AND PROCEDURAL HISTORY-

1. Grasim Industries (Respondent) purchased Electro static precipitators (ESPs) from BHEL, Ranipet.

2. There was a notification dated 20.03.1990 no. 78/1990 CE, under which respondent is entitled to buy the said ESPs at concessional rate of duty which was 5%.

3. There was a condition regarding the concessional rate of duty that the concessional rate becomes payable only when officer not below the rank of Deputy Secretary in the Ministry of Environment and Forests (MOEF) certifies that  goods manufactured are meant for pollution control purpose.

4. The dispute is regarding that respondent was entitled for concessional rate of duty or not. He paid the duty at a normal rate which was 15% ad valo rem duty, so he raised the contention of refund of money which was extra paid by them amounted to Rs. 27, 66,970.

5. The respondent(R) succeeded in its first attempt before the Judicial Fora, but the appellant refused to refund the money and rejected the application of (R) on ground that the (R) had passed on the burden and therefore refunding the extra duty paid would result in unjust enrichment to the (R).

6. Against this order, the (R) filed an appeal before the Commissioner of Central Excise (Appeal) Chennai, they also dismissed the appeal vide order dated 21.9.2000.

7. Then he filed appeal before CESTAT.

ISSUE- 

       ⮚     Whether Doctrine of unjust enrichment will be applicable in case of refund of duty paid on capital goods which are captively consumed?               ⮚     Whether the (R) is applicable to get back the extra amount paid?

RATIO-

 The court had taken into consideration facts of two cases which have mentioned in case laws. The court has considered the following statements-

●      If a particular product is used to manufacture the final product which is considered as cost of the product.  As an insofar the cost of production is concerned, it may include capital goods which are a part of Fixed costs as well as raw materials that are  part of variable costs;

●      Therefore, in the case of solar pesticides, the principle has been laid down that unjust enrichment will apply in the case.  For captive consumption, capital goods will be expanded to be used in the manufacture of  product and the cost of goods is gone;

●      To come out of the applicability of the principle of unjust enrichment, it becomes the assessed is required to demonstrate, in the cost of the particular product

●      Capital goods were ignored;

●      Overview of the Honourable Tribunal which deals with capital goods.  ESP is used only in captivity Not used for pollution control purposes and for any other processing or manufacturing  There is no question of going through the burden of duty for the final product and hence any one erroneous in law.

HELD- 

Tribunal judgment is set aside. Court held that doctrine of unjust enrichment will be applicable in case of refund of duty paid on capital goods which are captively consumed. However, in case of respondent the court is of view   that he can get extra paid amount by showing that goods manufactured are meant for pollution control.