SAKTHI SYNTHETIC GEMS LTD. Vs. CC

JUDGEMENT

(1.) THESE are three appeals filed by M/s. Sakthi Synthetic Gems Ltd, against similar orders of the Commissioner (Appeals), Chennai upholding the orders of the Dy. Commissioner of Customs (Refunds), Custom House, Chennai sanctioning the refund claimed by the appellants and crediting the same to the Consumer Welfare Fund. The original authority had held that though the Madras High Court had decided in the appellant's writ appeals that the principle of unjust enrichment would not apply if the capital goods imported had not been captively consumed, the apex court in the Solar Pesticides Pvt. Ltd. case had overruled the principle laid down by the Madras High Court whereby it had become incumbent upon the appellants to prove that the duty paid, of which refund was claimed had not been passed on to another person directly or indirectly. The appellants had failed to establish that the amount claimed had not been passed on to its customers. Following the same arguments, the Commissioner (Appeals) upheld the orders of the original authority relying on the ratio of the apex court in the Solar Pesticides case (supra). The refunds related to CV duty paid on silica crucibles imported in 78 and 79 and involved about Rs. 2.03 lakhs in total.

(2.) LD . advocate Shri R. Venkatnarayanan argued that the issue was decided in their favour by the Madras High Court in its judgment dated 22.11.95, . He cited the observations of the Hon'ble High Court in paras -30 and 31 of the judgment wherein the Hon'ble Court observed that "silica crucibles" used in the manufacture of "synthetic gems" had not become part and parcel of 'synthetic gems', though it was captively used as refractory goods. Disagreeing with the decision of the ld. single Judge of the Bombay High Court in the Solar Pesticides Pvt. Ltd., the court decided that the principle of unjust enrichment was applicable only in a case like the one dealt with in that case where 'copper scrap' had been consumed as a raw material in the manufacture of the product viz. copper oxychloride.

(3.) LD . SDR, citing the passages from the same judgment, submitted that Madras High Court had overruled the view taken by the single Judge of Bombay High Court that an importer would be entitled to refund of the duty paid if he had not 'directly' passed on the incidence of duty to any other person. If the Legislature had any such intention, the court held, it would have made the intent clear by using the expression "directly" or "indirectly" at the appropriate places in the enactment of the provisions relating to unjust enrichment. The court had observed that unjust enrichment would not apply in a case where the imported goods were captively consumed. However, in the Solar Pesticides case, the apex court had observed that Section 27 was a self -contained code and required the person seeking refund to furnish documents and evidence to establish that the amount of duty in respect of which refund was claimed had been collected or paid by him and incidence of such duty had not been passed on by him to any other person. The court had interpreted the provisions to mean that when the whole or part of the duty which was incurred on the import of the raw material was passed on to another person, then an application for refund of such duly would not be allowed under Section 27 (1) of the Act. Ld. SDR referred to para -20 of above judgment where it excerpted and commented on the principle of unjust enrichment explained in the 'Mafatlal Industries' case in support of the view that principle of unjust enrichment applies to captive consumption of raw material as well as capital goods. Para 20 of the judgment reads as follows: We are of the opinion that the aforesaid observations would be applicable in the case of captive consumption as well. To claim refund of duty it is immaterial whether the goods imported are used by the importer himself and the duty thereon passed, on to the purchaser of the finished product or that the imported goods are sold as such with the incidence of tax being passed on to the buyer. In either case the principle of unjust enrichment will apply and the person responsible for paying the import duty would not be entitled to get the refund because of the plain language of Section 27 of the Act. Having passed on the burden of tax to another person, directly or indirectly, it would clearly be a case of unjust enrichment if the importer/seller is then able to get refund of the duty paid from the Government notwithstanding the incidence of tax having already been passed on to the purchaser.