Holding

The doctrine of unjust enrichment applies to imported raw material captively consumed, and a refund of customs duty is barred if the incidence of duty has been passed on to any other person.

Summary

The Union of India appealed against the Bombay High Court’s order dismissing Solar Pesticides Pvt. Ltd.’s claim for refund of additional customs duty paid on imported copper scrap used as raw material for copper oxychloride. The issue was whether the doctrine of unjust enrichment applies when imported raw material is captively consumed in the manufacture of a final product, and how Sections 27(1), 27(2), 28C and 28D of the Customs Act, 1962 should be interpreted. The Supreme Court held that "incidence of duty" means the burden of duty and that the principle of unjust enrichment applies both to direct and indirect passing on of that burden, even in cases of captive consumption. Consequently, a refund cannot be granted if the duty burden has been passed on to any other person. The Court set aside the High Court judgment, allowed the Union’s appeal and dismissed the respondent’s writ petition.

Issues considered

The applicability of the doctrine of unjust enrichment to imported raw material that is captively consumed in the manufacture of a final product.
Interpretation of "incidence of such duty" in Section 27(1) of the Customs Act, 1962.
Whether a refund of customs duty can be claimed when the duty burden has been passed on, directly or indirectly, to another person.

Legislation cited

Customs Act, 1962s. 27(1), s. 27(2), s. 280, s. 28C, s. 28D

Subjects

customs dutyrefundunjust enrichmentcaptive consumptionincidence of dutySection 27import of raw materialCustoms Act

Judgment

'
I
l '

UNION OF INDIA A
v.
SOLAR PESTICIDES PVT. LTD. ETC.

FEBRUARY 4, 2GOO

[B.N. KIRPAL, D.P. MOHAPATRA A"ID R.P. SETHI, JJ.] B

Customs Act, 1962, ss.27(2) provisos (a) to (c), r/w 28 C and 28
[)--Doctrine of Unjust Enrichment-Whether applicable in relpect of raw
material imported and captively consumed in the manufacture of a fmal
product-Held, principle of unjust enrichment would be applicable in respect c
of imported raw material captively consumed in the manufacture of a final
product.

Customs Act, 1962, s.27( Jt-"incidence of such duty"-ln relation to its
being passed on to another person would take it within its ambit not only the D
passing of the duty directly but also indirectly.

The respondent imported copper scrap for use as a raw material in
the manufacture of copper oxychloride. Although at the time of clearance
of the goods the additional customs duty was paid by it, the responde11t
subsequently filed an application for refund of the said duty claiminu E
benefit under an txemption notification. The Assistant Collector of Cus·
toms rejected the claim.

In a writ p;:titio11 film by the respondent, the Bombay High Court
held that the refund applicati11n cf the respondent had been wro1t1gly F
rejected. T'.i;: revenue the11 contended that in view of the amendme11ts in
1991 to the Act, a claim for refund could be entertained under s.27 (2) only
if the importer WDS able to show that he had not passed 11n the incidence
of lmpurt duty to any other person. The High Court neaatived this plen
and held that the question of unjust ellrichment \tould not arise in the case
of captive consumpti11111 of the imported ra\7 material. It v;ou:ld arise under G
the amended Act 011ly when refund \tas asked for by a person who had sold
the imported goods and, in the process, had directly passed on the burden
of duty to the buyer. Revenue appealed to this Court.

Allowing the appeal, this Court H
629
630 SUPREME COURT REPORTS [2000) 1 S.C.R
A HELD : 1.1. The principle of tmjust enrichment would be applicable
in respect of imported raw material captively consumed in the manufac·
tu re of the final product. [642· D]

1.2. 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
B application ror refund of such duty would not be allowed under s.27(1) of
the Act. [638-G]

1.3. To claim refund of duty it was immaterial whether the goods
imported were used by the importe1r himself and the duty thereon passed
C on to the purchaser of the finished product or that the imported goods
were sold as such with the incidence of tax being passed on to the buyer.
In either case the principle of unjust enrichment would apply. (640-E]

Mafatlal Industries Ltd. v. Union of India, (1997] 5 SCC 536, followed.

D HMM Limited v. Administrator, Bangalore City Corporation, [1989]
Supp. 1SCR353; State of Rajasthan v. Hindustan Copper Limited, (1998]
9 SCC 708 andBhadrachalam Paperboards Ltd. v. Govt. of Andhra Pradesh,
(1999] 1116 E.L.T. 290 S.C., referrecll to.

2. The words "incidence of such duty" mean the burden of duty.
E S.27(1) of the Act ta1!'5 of the inciden~e of duty being passed on and not
the duty as such being passed on to another person. "Incidence of such
duty" in relation to its being passf'd on to another person would take it
within its ambit not only the passing of the duty directly to another person
but also cases where it is passed on indirectly. Where the duty paid on raw
F material is added to the price of the finished goods which are sold, thie
burden or the incidence of the duty on the raw material would stand passed
on to the purchaser of the finished product. (638-E-F]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 921 of
1992 Etc.
G
From the Judgment and Order dated.22.10.91 of the Bombay High
Court in W.P. ~o. 1402 of 1988.

M.K. Banerjee, Soli Sorabjee Attorney Generals, D.P. Gupta,
Solicitor Genera~ V.R. Reddy, M. Chandrashekharan, K.N. Bhat, C.S.
H Vaidyanathan, Additional Solicitor General, AK. Ganguly, Joseph Vet-
VD.I. v. SOIAR PESTICIDES PVT. LTD. ~KIRPAL,J.j 631

lapally, G.L. Sanghi, Harish N. Salve, F.S. Nariman, R.F. Nariman, D.A. A
Dave, K. Parasaran, Jayant Das, V.A. Bobde, Ashok H. Desai, B.B. Ahuja,
Anil B, Divan, P.P. Rao, A Subba Rao, P. Parmeswaran, Manik Karan-
jawala, V.B. Misra, Dushyant Dave, R. Karanjawala, Mrs. Nandini Gore,
Mrs. M. Karanjawala, Rajesh Kumar, Aditi Chowdhary, V. Balachandran,
Sarwa Mitter, Ms. Biraj Tiwari, Ashok Kr. Gupta, Mukul Mudga~ D.S.
Mehra, C.V.S. Rao, S.N. Terdol, Ms. Indra Sawhney, Mohinder Rupal,
B
Anand Prasad, t.:.A Rana, Aqeel Sheerazi, Darius Shroff, Ms. Amrita
Mitra, Ravinder Narain, S.C. Sharma, Pochkhanwala, Rajan Narain, S.
Ganesh, P. Mullick, N.K. Sahoo, B.N. Agarwal, Ms. Nisha Bagchi, S. Faz!,
t.:. Sagar, P.H. Parekh, M. Nanavati, V.K. Bhatt, S.l. Nanavati, V.K. Bhatt,
Ms. Meenakshi Arora, V.K. Verma, NX Bajpai, G.S. Chatterjee, P. c
Mahale, B.V. Desai, Ms. MeenakshiArora, J.K. Das, K.R. Nagaraja, Sonu
Bhatnagar, V. Sridharan, V. Lakshmikumaran, Ms. Aparna Jha, M.K.
Mohan, Rajiv Tyagi, BJ. Mehta, Ms. Aruna Banerjee, Ms. Sushma Sur~
A Raghunath, P.R. Tiwari, G. Prakash, P. Narashimhan, Ms. Savita Shar-
ma, Dalip Tandon, K. Swami, M. Gaurishankar Murthy, Krishan Tyagi, D
Sajan Narain, Mohit Kapoor, Ms. Ruby Ahuja, Bhaskar Raj Pradhan,
Vikram Nankani, R. N. Banerjee, Devan Parekh, Sameer Parekh, E.R.
Kumar, Krishan Mahajan, Raju Ramachandran, R. B. Hathikhanawala,
Rajesh Kumar, Sandeep Mittal, Nikhil Sakhardande, Ms. Neeru Vaid,
Dilip Tandon, S. Muralidhar, Arvind P. Datar, S.D. Sharma, Ms. Amrita
Mishra, K.C. Kaushik, N.K. Bajpai, Ms. Hemantika W&hi, Farrukh Rashid, E
Ms. Sumita Hazarika, K.K. Dhawan, Ms. Shobha, Gupal Jain, K.C.
Kaushik, B.K. Prasad, Pavan Kumar, P.B. Agarwala, U.K. Khaitan, D.S.
Mehra, H.M. Singh, C. Siddharth, Pragyan K. Sharma, Ms. Anu Sawhney,
Hemant Sharma, T.C. Sharma, AR. Madhav Rao, AK. Chopra, Ram
Ekbal Roy, M.P. Jha, K. Srinivasan, S. Vallinayagam and Jaideep Gupta
F
for the appearing parties.

The Judgment of the Court was delivered by

KIRPAL, J, Whether the doctrine of unjust enrichment is applicable
in respect of raw material imported and consumed in the manufacture of G
a fmal product is the question which arises for consideration in these
appeals.

In order of decide the aforesaid issue, we need refer to the facts in
the case of Civil Appeal No. 921 of 1992 filed by the Union of India against H
632 SVPREME COURT REPORTS [2000) 1 S.C.R.
A Solar Pesticide Private Limited {hereinafter referred to as 'the
respondent'). The respondent imported copper scrap for use as a raw
material in the manufacture of copper oxychloride. At the time of import
of copper scrap the respondent sought exemption from payment of addi-
tional customs duty ( filso known as countervailing duty or CVD) which was
B available under !ht Customs Notification No. 35/81 CE dated 1.3.1981. At
the time of clearance this duty was paid, subsequently, the respondent filed
an application for refund of additional customs duty paid by it at the time
of import of copper scrap claiming bi:nefit under the afon:said exemption
Notification of 13.1981. The Assistant Collector of Customs, by order
dated 16.2.1985, rejtcted tht: claim and held that the imported copper
C scrap was correctly assessed to CVD @ Rs. 3,300 per M.T.

Three years after the rejection of the said claim, a writ petition was
filed by the respondent in the Bombay High Court. It was claimed tht:rein
that the aforesaid ex.::mption Notification gave complete exemption from
D payment of excise duty of copper for use in the manufacture of chemicals.
Hence, when copper scrap was imported for use in the manufacture of
chemicals, additional customs duty (countervailing duty) could not be
levied on copper scrap so imported.

The High Court accepted this contention and came to the conclusion
E that the refund application of the respondent had been wrongly rejected.
The High Court then considered the contention rai\ed on bd1alf of the
customs authorities th.rt the claim for rdund will have to be decided
keeping in view of the amendments which had been carried out in 1991 to
the Customs Act, 1962 (hereinafter ri:forred to as 'the Act'). It was sub-
F milted that with the introduction of sub-section {2) of section 27 of the Act,
a claim for refund could be entertained if the importer was able to prove
that he had not passed on the incidence of such duty to any other person.
In other words, the submission was that the n::fund of duty, the incidence
of which has already been passed on to other person, would result in unjust
enrichment and in view of the amendments made in the Act, such unjust
G enrichment is not permissible.

The amendments whicli were made in the Act, inter alia, sought to
provide that the manufacturer or importer of goods shall not be entitled
to refund of duty of excise or, as the case may be, the duty of customs, if
H he has already passed on the incidence of such duty to the buyer. The
I
/
/'

t;.O.I. v. SOLAR PESTICIDES PVT. LTD. [KIRPAL, J.J 633

burden of proof that the incidence of the duty has not been passed on to A
the buyer shall be on the person claiming the refund. The High Court, on
interpreting Sections 27, 28C and 280 of the Act, came to the conclusion
that the question of unjust enrichment would not arise in the case of captive
consumption of the imported raw material. According to it, the question
of unjust enrichment would arise under the amended Act when refund is
B
asked for by a person who has sold the imported goods and, in the process,
had directly passed on the burden of duty to the buyer. This, according to
the High C-Ourt, was clear from clauses (a), (b) & (c) of the proviso to
Section 27(2) read with the presumption contained in Section 280 of the
amended Act.
c
In this appeal, there is no dispute with regard to the question as to
whether the respondent was entitled to get the benefit of the exemption
notification with regard to the payment of the countervailing duty. We,
therefore, proceed on the assumption that the decision of the High Court
that the respondi;;nt was entitled to the said benefit was correct and it
would normally be entitled to refund of the said duty which it had paid. D

On behalf of the appellant, the learned Attorney General contended
that a nine Judges Bench of this Court in Ma/atlal Industries Ltd. v. Union
of India, [1997) 5 SCC 536 has upheld the validity of the amended Section
27 of the Act. He ~ubmitted that the perusal of sub-section (2) of Section E
27 of the Act shows that onus was on the importer to prove that he had
not passed on the incidence of duty to any other person before he could
claim refund of the amount of duty paid by him.

Learned counsel appearing on behalf of the respondent in this p
appeal, however, contended that sub-section (2) of Section 27 of the Act
cannot be read in isolation. The said provision has to be read with Sections
28C and D of the Act and the principle of unjust enrichment could not
apply in the case of captive consumption of the imported raw material.

Before considering the rival contentions it is necessary to refer to the G
relevant provisions of the Act after its amendment in 1991. Sections 27,
28C and 280 read as under :

q--
"27. Claim for refund of duty:- (1) Any person claiming refund of
H
634 SUPREME COURT REPORTS [2000] 1 S.C.R.
A (i) paid by him in pursuance of an order of assessment; or

(ii) borne by him,

may make an application for refund of such duty and interest,
if any paid on such duty to the Assistant Commissioner of
B Customs-

(a) in the case of any import made by any individual for his
personal use or by Government or by any educational, re-
search or charitable~ institution or hospital, before the expiry
of one year;
c
(b) in any other case, before the expiry of six months,

from the date of payment of (duty and interest, if any, paid
on such duty) (in such form and manner) as may be specified
in the regulations made in this behalf and the application shall
D be accompanied by such documentary or other evidence
(including the documents referred to in section 28C) as the
applicant may furnish to establish that the amount of (duty
and interest, if any, paid on such duty) in relation to which
such refund is claimed was collected from, or paid by, him and •-
E the i111cidence of such (duty and interest, if any, paid on such
duty) had not been passed on by him to any other person:

Provided that where. an application for refund has been made
before the commencement of the Central Excises and Cus-
toms Laws (Amendment) Act, 1991, such application shall be
F deemed to have be,en made under this sub-section and the
same shall be dealt with in accordance with the provisions of
sub-section (2):
,-
Provided further t:hat the limitation of one year or six
months, as the case may be, shall not apply where any duty
G
and interest, if any, paid on such duty has been paid under
protest:

(Provided also that in the case of goods which are exempt
from payment of duty by a special order issued under sub-
H section (2) of section 25, the limitation of one year or six
U.O.I. v. SOLAR PES11CIDES PVT. LTD. [KIRPAL, J.j 635

months, as the case may be, shall be computed from the date A
of issue of such order.)

(Explanation 1 - For the purposes of this sub-section, the date
of payment of duty and inti::rest if any, paid on such duty, in
relation to a person, other than the importer, shall be con-
strued as ''the date of purchases of goods" by such person). B

(Explanation 11.-Where any duty is paid provisionally under
Section 18, the limitation of one year or six months, as the
case may be, shall be computed from the date of adjustment
of duty after the final assessment thereof.) c
(2) If, on receipt of any such application, the Assistant Commis-
siom:r of Customs is satisfied that the whole or any part
of the duty and interest if any, paid on such duty paid by
the applicant is refundable, he may make an order ac-
cordingly and the amount so determined shall be credited D
to the Fund:

Provided that the amount of duty and interest, if any, paid on
such duty as determined by the Assistant Commissioner of
Customs under the foregoing provisions of this sub-section
E
shall, instead of being credited to the Fund, be paid to the
.• applicant, if such amount is relatable to-

(a) the duty and interest, if any, paid ,)n such duty paid by the
importer, if he had not passed on the incidence of such duty
and interest, if any, paid on such duty to any other person; F

(b) the duty and interest, if any paid on such duty on imports
made by an individual for his personal use;

(c) the duty and interest, if any, paid on such duty borne by the
buyer, if he had not passed on the incidence of such duty and
G
interest, if any paid on such duty to any other person;

(d) the export duty as specified in section 26;

(e) drawback of duty payable under sections 74 and 75; H
636 SUPREME COURT REPORTS [2000] 1 S.C.R.
A (t) the duty and interest, if any, paid on such duty borne by any
other such class of applicants as the Central Government may,
by notification in the Official Gazette, specify:

Provided further that no notification under clause (f) of the
first provis.o shall be issued 'unless in the opinion of the
B Central Government the incidence of duty and inten:st, if any,
paid on such duty has not been passed on by the persons
concerned to any other person.

28C. Price of goods to indicate the amount of duty paid thereon
c - Notwithstanding <mything contained in this Act or any other
law for the time being in force, every person who is liable to
pay duty on any goods shall, at the time of clearance of the
goods, prominently indicate in all the documents relating to
assessment, sales invoice and other like documents, the
amount of such duty which will form part of the price at which
D such goods are to be sold.

28D. Presumption tlzat incidence of duty has been passed on
to the buyer - Every person wl)o has paid the duty on any
goods under this Act, shall, unless the contrary is proved by
him, be deemed to have passed on the full incidence of such
E
duty to the buyer of such goods."

The validity of Section 27 of the Act and the interpretation of the
'·
same came up for consideration before this Court in Mafatlal's case
(supra). While upholding the validity at page 631, it was observed that "the
F situation in the case of captive consumption has not been dealt with by us
in this opinion. We leave that question open.'' It is this question which has
now come up for consideration in the present appeals.

The first proviso to Section 27(1) deals with cases where application
for refund had been made before the commencement of the Central Excise
G and Custo~ Laws (Amendment) Act, 1991. According to this proviso,
such an application for refund shall be dealt with in accordance with the
provisions of sub-section (2). In the present bunch of cases, we are con-
cerned with the import of raw material where payment of duty had been
made and applications for refund were made prior to the commencement
H of the Amendment Act, 1991. All such applications are required to be dealt
U.O.L v. SOLAR PESTICIDES PVT. LTD. !KIRPALJ] 637

-r with in accordance with the provisions of sub-section (2) of Section 27 of A
the Act.

Sub-section (1) of Section 27 of the Act provides for making of a
claim for refund of duty, in certain cases duty and interest, and the period
of limitation within which such a claim has to be made. This sub-section,
inter alia, provides that the applicant will have to establish that the amount B
of duty and interest in relation to which the refund is claimed was collected
from, or paid by, him and the incidence of the duty and interest, if any,
had not been passed on by him to any other person. Sub-section (2) of
Section 27, which applies in the present case, provides that if the Assistant
Commissioner is satisfied that whole or any part of the duty/or interest is c
refundable, then an order shall be made accordingly to that effect and the
amount so determined shall be credited to the fund. The word "fund"
means, according to Section 2(21A) of the Act, the Consumer Welfare
Fund established under Section 12C of the Central Excises and Salt Act,
1944.
D
Clause (a) of proviso to sub-section (2) of Section 27 of the Act
however stipulates that the amount of refund which is found due will not
be credited to the fund and shall be paid to the applicant inter alia, if such
an amount of refund is relatable to the duty and interest which has been
paid by the importer and if he had not passed on the incidence of the same E
to any other person. In other words if it cannot be shown that the duty, in
respect of which refund is claimed, had not been passed on to any other
person then in such an event the amount of refund due will be credited to
the fund.

F
Sections 28C and 0 of the Act have been included in the new
Chapter VA whose heading is "Indicating amount of duty in the price of
goods etc. for the purpose of refund". Section 28C makes it obligatory on
other person who is liable to pay duty on any goods to, at the time of
clearance of goods, indicate in the documents relating to assessment, sales
invoice and other like documents the amount of such duty which will form G
part of the price on which such goods are to be sold. Section 280 contains
a presumption that incidence of duty has been passed on to the buyer, but
this presumption is n:buttable. In the absence of proof of such duty not
having been passed on to the buyer Section 280 provides that the passing
of such duty by the seller to the buyer shall be deemed to have taken place. H
638 SUPREME COURT REPORTS (2000! 1 S.C.R.
A It was 5ubmitted by the learned counsel for the respondent that the
scheme of the amending provision should be considered as a whole and
Section 27 of the Act should be wnstrm:d harmoniously with Section 280
of the Act. It was contended that it could not have been the intention to
provide for a presumption only in n:spect of one type of refund and not
the other, because the need for pn:sumption would be greater in the case
B of captive consumption as against re-sale of imported goods as such. The
absence of prcsmption, therefore, it was submitted, leads to an inference
that the provisions of unjust enrichment were not intended to apply to cases
of captive consumption.

C We arc unable to agree v.ith the aforesaid submission of learned
counsel. Section 27 of the Act is, in a sense, complete code by itself, dealing
with the claim for rdund of duty. The procedure provided by Section 27(1}
is applicable in case of application for refund being filed after the said
section was amended. Sub-section (1) itself requires a person making an
D application for refund to furnish documents and evidence (including the
documents referred to in Section 28C} to establish that the amount of duty,
in respect to which refund is claimed, was collected or paid by him and
incidence of such duty had not been passed on by him to any other person.

The use of the words ''incidence of such duty..... " is significant. The
E words ''incidence of such duty" mean the burden of duty. Section 27(1} of
the Act talks of the incidence of duty being passed on and not the duty as
such being passed on to another person. To put it differently the expression
"incidence of such duty" in rdation to its being passed on to another person
would take it within its ambit not only the passing of the duty directly to
F another person but also cases where it is passed on indirectly. This would
be a case where the duty paid on raw material is added to the price of the
finished goods which are sold in which case the burden or the incidence
of the duty on the raw material would stand passed on to the purchaser of
the finished product. It would follow from the above that when the whole
or part of the duty which is incurred on the import of the raw material is
G passed on to another person then an application for refund of such duty
would not be allowed under Section 27(1} of the Act.

Section 27(2) of the Act, as already noticed, deals with the cases
where application for refund had been made prior to the amendment of
H the Act in 1991. Sub-section (a) of the proviso is similar to the provisions
)

U.O.l. v. SOLAR PESTlCIDES PVT. LTD. ; KIRP AL, J.] 639

contained in Section 27(1) of the Act i.e. refund of duty paid by the A
importer wm be allowed if he had not passed on the incidence of such duty
to any other person. Section 28C of the Act would have reforence to those
goods which are cleared and would undoubtedly have no application to the
cases of the captive i.;onsumptiun. It is in respect of those goods which arc
cleared that Section 28C requires a person clearing the goods to indicate
the amount of duty paid thereon which will form part of the price at which
B
such goods an: to b.: sold. It is nut pussiblt: to accept the contention that
because Section 28C' of the Act cannot be applied in the cases of goods
imported for captive consumption, therefore, the principle of unjust enrich-
ment would not be applicable in such cases. As we have already indicated,
Section 27 of the Act has been re-cast with the amendments made in 1991 c
and the said section does not necessarily have to be read in conjunction
with Sections 27C and D of the Act. If the incidence of duty paid on the
imported raw material has not been passed on to any other person, then
by virtue of proviso to Section 27(2) of the Act in the case where applica-
tion for refund had been made prior to 1991, refund due on the duty paid D
would be given to the applicant.

Even though in Mafatla/'s case (supra) the question with regard to
captive consumption was kft open, this Court was called upon to interpret
Section 27 of the Act. After discussing and deciding the various contentions
which had been raised, the majority judgment of Jeevan Reddy, J. under E
para 108 at page 631 for the sake of convenience set out the propositions
which flowed from the judgment. With regard to claim for refund, at page
633 it was observed as follows :

''(iii) A claim for refund, whether made under the provisions of p
the Act as contemplated in Proposition (i) above or in a suit or
writ petition in the situations contemplated by Proposition (ii)
above, can succeed only if the petitioner/plaintiff alleges and es-
tablishes that he has not passed on the burden of duty to another
person/other persons. His refund claim shall be allowed/decreed
only when he establishes that he has not passed on the burden of G
the duty or to the extent he has not so passed on, as the case may
be. Whether the claim for restitution is treated as a constitutional
imperative or as a statutory requirement, it is neither an absolute
right nor an unconditional obligation but is subject tu the above
requirement, as explained in the body of the judgment. Where the H
l"'-

\
640 SUPREME COURT REPORTS [2GOOJ l S.C.R.

A burden of the duty has been passed on, the claimant cannot say
that he has suffered any real loss or prejudice. The real loss or
·-
prejudice is sufft:red in such a case by the person who has ultimate-
ly borne the burden and it is only that person who can legitimatdy
claim its n:fund. But where such person does not come forward
or whae it is not possible to refund the amount to him for one or
B the other reason, it is just and appropriate that that amount is
retained by the State i.e. by the people. There is no immorality or
impropriety involved in such a proposition.

The doctrine of unjust emichment is a just and salutary doctrine.
c No person can seek to collect the duty from both ends. In other
words, he cannot collect the duty from his purchaser at one end
and also collect the same duty from the State on the ground that
it has been collected from him contrary to law. The power of the
Court is not meant to be exercised for unjustly emiching a person.
The doctrine of unjust enrichment is, however, inapplicable to the
D State. State represents the people of the country. No one can speak
of the people being unjustly emiched."

We are of the opinion that the aforesaid observations would be
applicable in the case of captive consumption as well. To claim refund of
E 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
F 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 enrich-
ment 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.
G
Learned Counsel for the respondent had also contended that in cases
of captive consumption of imported goods, it would be impossible for the
assessee to establish whether the duty component has been passed on to
the buyers of the finished products or has been borne by the importer
H himself. Difficulty in proving that the incidence of the duty borne by the
)

L'.U.I. v. SOI AR PESTIC!DhS PVf. LTD. [KIRPAL,J I 641

importer has not been passed on to the purchaser of the finished product A
can be no ground for interpn:ting Section 27 differently. It is not possible
that in no case will an importer not be able to prove that the incidence of
the duty imposed on the imported raw material has not been passed on to
any other person. In fact in Civil Appeal No. 4381 of 1999 tiled by the
Commissioner of Customs against \-1/s. Surya Roshini Limited, the im-
porter had produced certificate from the Chartered Accountants giving
8
details of costing of the final product and the Commissioner (Appeals)
found as a fact that the component of excess customs duty paid on the
imported raw material had not gom: into the costing of the finhhed
product. Without going into the correctness of this finding we wish to
emphasize that even in cases of captive consumption, it should be possible c
for the importer to show and prove before the authorities concerned that
the incidence of duty on the raw material, in respect of which refund is
claimed, has not been passed on by the importer to anybody else.

The High Court in considering the question of the applicability of D
the doctrine of unjust enrichment had relied upon the decision of this
Court in HMkl Limited & Anr. v. Administrator, Bangalore City Corporation,
Bangalore and Anr., (1989] Supp. I SCR 353. That case pertained to the
levy of octroi on goods on their entry into the city limits. Octroi had been
collected on the said goods even though there was no use or consumption
within the Municipal limih. This Court held that the amount of octroi paid E
was refundable. In this context, a contention had been raised on behalf of
the Corporation that refund could not be given bt:cause tht:re was a
possibility of undue enrichment of the claimant. This Court did not accept
this contention and came to the conclusion that octroi was a duty on the
entry of raw material which was payable by the producer or manufacturer. F
It was not the duty on going out of the finished products in respect of which
the duty might have been charged or added to the costs passed on to the
consumers. This Court then concluded that "in such a situation, no question
of 'undue enrichment' can possibly arise in this case". This decision is thus
clearly not applicable in the present case where the question of unjust G
enrichment does arise.

In State of Rajasthan and others v. Hindustan Copper Limited, [ 1998]
9 SCC 708, this Court accepted the averment made in the affidavit on
b.:half of the assessee to the effect that the excess duty paid on rectified H
l
/
\
\
642 SUPREME COURT RFPORlS [2000] 1 S.C.R.
A spirit, in respect of which refund was claimed, had not been passed on to
any consumer of the final product. It is in view of this that this Court held
that the principle of unjust enrichment did not apply. Lastly, our attention
was drawn ta the case of Bhadrachalam Paperboards Ltd. v. Govt. of
Andhra Pradesh, (1999) (106) E.L.T. 290 (S.C.). In this case claim was
B made for refund of sales tax which had erroneously been paid. The High
Court had denied the refund as it was of the view that the asses&ee must
have passed on the burden to the consumer, thereby applied the principle
of unjust enrichment. Allowing the appeal of the assesst;e, this Court held
that the High Court was not right in presuming that the burden of tax had
C been passed on to the customer. This Court further held on facts that the
question of appellant therein passing on the tax liability to the consumer
diid not arise. This case, therefore, can be of no assistance to the respon-
dent.

D For the aforesaid reasons, we hold that the High Court has not
correctly interpret.:d the relevant provisions of the Customs Act and, in
our opinion, the principle of unjust enrichment incorporated in Section 27
of the Act would be applicable in respect of imported raw material and
captively consumed in the manufacture of a final product. Whether the
incidence of the duty had been passed on to the consumer was not decided
E by the High Court in Solar Pesticides' case (supra) because in its opinion
the principle of unjust enrichment could not apply to the cases of captive
consumption. In the case of Solar Pesticide Pvt. Ltd., therefore, we do not
go into this question whether the incidrnce of duty had not bei::n passed
on by the respondent. This appeal is, accordingly, allowed and the im-
p pugned judgment of the High Court is set aside, the effect of which would
be that the writ petition filed by the Solar Pesticide Pvt. Ltd. stands
dismissed. Writ Petiton (C) No. 189 of 1993 filed by M/s. Solar Pesticides
Private in this Court also stands dismissed. No costs.

Civil Appeal No. 4381 of 1999
G
In the above-noted matter the respondent had imported prime
quality hot rolled steel in coils on which duty was paid. A claim was made
for the refund of the duty on the basis of the classification of the goods.
Ultimately the respondent succeeded and the Collector (Appeals), Bom-
H bay directed the refund of the excess duty paid. 13 applications for refund
U.O.L v. SOLAR PESTICIDES PVT. LTD. [KlRPAL,J.] 643

were filed and the Assistant Collector grouped them as follws : A

(i) Claims based on bill of entries at serial numbers l ·6 in the
list which were received by the department on 22.6.1989

(ii) Claims relating to hills of entries at serial numbers 7-9 and
B
(iii) Claims arising out of rest of the 4 bills of entires.

With regard to the first catcgo~y the Assistant Collector held that the
claims were barred by limitation. Claims falling under the second
category were held by him to be not maintainable in view of the C
principle of unjust enrichment and the claims made under the third
category were held to be pre-mature. Before the Assistant Collector, the
respondent had produced a certificate from its Chartered Accountant
in an effort to show that the duty, in respect of which refund was being
claimed, had not been passed on to tht:ir customers of finished products.
The Assistant Collector, however, came to the conclusion that the said D
certificate did not establish that the duty had not been passed on to the
customers.

The Collector (Appeals) set aside the order of the Assistant Collec-
tor and directed the refund of duty amount of Rs. 85, 71,688.34. In arriving E
at this conclusion th:: Collectnr (App,:ab) accepted the certificate
produced by thi: respondent from their Charl.:rcd Accountant who had
certified that the respondent had not included the excess duty amount, in
respect of which refund was being claimed, in the costing of their finished
products. The Collector (Appeals) having accepted the said certificate
allowed the refund.
F

The Revenue filed an appeal before the Tribunal. The appeal was
dismissed by the Tribunal by following the decision of the Bombay High
Court in Solar Pesticides (India) Limited v. Union of India, (1992) (57) ELT
201, a decision, which we have now held was not correct. The Tribunal did G
not go into the question whether in fact there would be unjust enrichment
in the event of refund being ordered to be paid. This question requires
adjudication by the Tribunal. For the reasons stated above, the decision of
the Tribunal in Solar Pesticides (India) Limited that the principle of unjust
enrichment does not apply to the cases of captive consumption is obviously H
L

644 SUPREME cmrK:· REPORTS (2000[ l S.CR
A incom:ct. We, therefore, allow rhis appeal, set aside the judgment of the
Tribunal and direct it to decide the appeal of the Revenue afresh on the
...
question as to whether the principle of unjust enrichment would, on facts,
apply or not

B Civil Appeal No. 27I I of 1999

In view of the decision of this Court in Civil Appeal No. 921 of 1992,
we allow this appeal, set aside the judgment of the Tribunal and direct it
to decide tht: appeal of the Revenue afn;sh on the qm:stion as to whether
the principk of unjust enrichment would, on facts, apply or not.
c
Civil Appeal No. 6113 of 1999

In a claim for refund of duty, the respondent raised two contentions.
Firstly that the duty had not been passed on to the consumer and the
D principle of unjust enrichment did not apply.

The second contention was that in any event, in view of the decision
of the Bombay High Court in the case of Solar Pesticides (India) Limited
v. Union of India, (1992) (57) ELT 201, the principle of unjust enrichment
E was not applicable in cases of captive consumption. Neither the Assistant
Commissioner nor the Commissioner (Appeals) accepted any of the two
contentions. It was held that lht: respondent had failed to prov.; that the
incidence of duty in respect of the imported goods had not been passed
on.

F On appeal filed by the assessee, the Tribunal allowed the same
following the decisions of the Bombay High Court m Solar Pesticides
(India) Limited v. Union of India, (1992) (57) ELT 201, which we have now
held is not a good law. The Tribunal did not decide as to wht:thcr the
assessee had passed on the incidence of duty to the consumer. That
G contentio~ would require consideration. Accordingly, we allow this appeal,
set aside the judgment dated 6.7.1999 of the Customs, Excise and Gold
(Control) Appellate Tribunal, New Delhi and direct it to decide the appeal
by the assessee afresh on the qm:stion as to whether the incidence of duty
on the imported raw material had been passed on by the importer to any
H other person.
U.O.I. v. SOLAR PESTICIDES PVf. L1D. [KIRPAL,J.] 645
Civil Appeal Nos. 5688-89/ 1995 A
In view of tht: decision of this Court in Civil Appeal No. 921 of 1992,
this appeal is allowed.

Civil Appeal Nos. 16890, 16894 and 16885 of 1996
B
In view of tht.: dt:cision of this Court in Civil Appt:al No. 921 of 1992,
these appeals are allowed, judgments of the High Court are st:t asidt: the
rt.:sult of which is that the writ petitions filed by the rt:spondi::nts stand
diMnisst:d.

Civil Appeal No. 1565 of 1999 c
Thi: Tribunal upheld the order of the Collector (Appeals) following
the decision of Bombay High Court in Solar Pesticides (India) Limited v.
Union of India, (1992) (57) ELT 201. ln view of the decision of this Court
in Civil Appeal No. 921 of 1992, this appeal is allowed, judgment of the
Tribunal is set-aside. Inasmuch as the Tribunal did not go into the question D
as to whether excess duty had been passed on or not, the Tribunal should
decide the appeal afresh.

Civil Appeals Nos. 5407-5409 and 6261of1999

The Tribunal, following the decision of the Bombay High Court in E
Solar Pesticides' case (supra) had allowed payment of refund on the ground
that the principle of unjust enrichment does not apply in the case of captive
consumption. In view of our decision in Civil Appeal No. 921 of 1992,
where the decision of the Bombay High Court has been reverted, these
appeals of the Revenue are allowed. No costs. F
S.M. Appeals allowed and Petition dismissed.