24.06.2022: Unjust Enrichment Shall Not Be Applicable To Refund Of Pre-Deposit – CESTAT Mumbai

The Hon’ble CESTAT Mumbai vide its order dated 16.06.2022 in the matter of M/s Chowgule Industries Pvt. Ltd. Vs. Commissioner of CGST & Central Excise, Pune – I in Service Tax Appeal No. 88473 of 2018, held that unjust enrichment would not be applicable on the amount deposited as pre-deposit to acquire right of appeal.  Such payment being made under protest in compliance of the statutory requirement, refund for the same, cannot denied on the ground that it is hit by the doctrine of unjust enrichment.

The Appellant in the present appeal has assailed the order of rejection of refund of pre-deposit made in compliance of Section 35F, against the order-in-original confirming demand of tax, interest and penalty on him, to pursue appeal before the CESTAT.


  • The Appellant is engaged in the trading of cars and is an authorized dealer of Maruti Udyog Ltd. That as per the dealership agreement, the Appellant is bound to provide the first free servicing to the customers who purchased car from it.
  • It appears that two show cause notices were issued to the appellant for the period October, 2006 and November, 2006 on the ground that first free service was a part of the Appellant’s trading margin from Maruti Udyog, and also on handling charges, on which it is already paying VAT.
  • The demand proposed in the aforesaid show cause notices was later on confirmed in the order-in-original during the adjudication process to the tune of Rs. 11,11,997/- with equivalent penalty under Section 78 and interest under Section 75. Further in compliance of Section 35F, the Appellant made payment towards pre-deposit and filed an appeal before Commissioner (Appeals) however, no relief was granted.
  • That against the said order of Commissioner (Appeals), the Appellant preferred an appeal before the Hon’ble CESTAT and got the desired relief vide the tribunal’s order dated 26.08.2015.
  • The appellant then, filed a refund of the amount deposited a pre-deposit against the Order-in-Original in compliance of Section 35F. However, the said refund was rejected through an adjudication order and later on by Commissioner of Central Tax (Appeals-II) vide order dated 10.05.2018, upholding the order-in-original wherein the amount of Rs. 21,26,143/- was sanctioned under Section 11B and ordered to be transferred to Consumer Welfare Fund on the ground that the Appellant has failed to prove that the there is no unjust enrichment. Being aggrieved of this order, the appellant is before the Tribunal in appeal.


Appellant’s Submissions: –

  • That relying on CBEC Circular Nos 1053/2/2017-CX, 984/8/2014-CX and 275/37/2k-CX.8A of 2002 and the judgment of Hon’ble Bombay High Court in the matter of Suvidhe Ltd. Vs. Union of India reported in 1996 (82) ELT 177 (Bom.), it was submitted that doctrine of unjust enrichment under Section 11B is not applicable to the pre-deposit made under Section 35F. Further regarding that a letter date 21.08.2009 was also filed with Additional Commissioner of Service Tax Cell, Pune – III informing that the said amount has been deposited under protest in compliance of statutory requirement of Section 35F to acquire the right of appeal.
  • That the refund of said deposit cannot be denied on the ground of unjust enrichment.
  • Relying on the Bombay High Court decision in Commissioner of Central Excise, Pune-I Vs. Sandvik Asia Ltd. [2015 (323) ELT 431 (Bom.), it was contended that by posting of the said amount of pre-deposit on the expense side in P&L Account as expenditure, it cannot be presumed that burden of duty has been passed on to the consumer.

On the other hand, the findings of the impugned order were supported on the behalf of the respondents.


  • The Hon’ble CESTAT Mumbai after going through the submissions from the both sides and the facts of the case, took note of the law stated in Section 35F of the Central Excise and observed that perusal of the said section would clearly indicate that for the purpose of filing an appeal, the assessee has to deposit confirmed demand, interest and penalty with the department.
  • Further the letter of the Appellant dated 21.08.2009 borne testimony to the fact that such amount was deposited against the demand confirmed vide order dated 27.07.2009 for filing an appeal against such order before the Commissioner of Central Excise & Customs (Appeals).
  • There cannot be a second opinion with respect to the amount deposited by the Appellant for filing the appeal, is in the form of pre-deposit so as to acquire right of appeal.
  • The CBEC circulars 1053/2/2017-CX, 984/8/2014- CX, 275/37/2k-CX.8A referred by the Appellant wherein, it has stated that ‘a simple application would be sufficient for the purpose of processing the refund’ would clearly apply to the present case. Further the judgment relied upon by the Appellant in Suvidhe Ltd., wherein, it was held ‘that the doctrine of unjust enrichment would not apply to such deposits’, would clearly apply to the scenario in the present case.
  • The Hon’ble Bench considering the argument advanced on the behalf of the respondent that ‘the amount shown in the books as expenditure, is indirectly passed on to the other person’ found that this argument is without any basis as there is no such accounting procedure. Moreover, the conditions mentioned by the Additional Commissioner in the order-in-original dated 15.12.2017, is without any authoritative support and appears to have been designed in conformity to his erroneous understanding.
  • The Hon’ble Tribunal relying on the decision of Hon’ble Bombay High Court in Commissioner of Central Excise, Pune-I Vs. Sandvik Asia Ltd. wherein, it was held that ‘The Tribunal was not concerned with the treatment given to the amount and as deposited in the Assessee’s profit and loss account. It is immaterial and irrelevant for the Tribunal and equally for us as to what the Assessee terms this amount in his Books of Account. Even if it is shown on the ‘expense side’ that does not mean that the presumption that the burden has been passed to the consumer can be raised’ found that there is no such authority that would show that any amount shown as expenditure would automatically get credited in the income side as if it is realised from a third party/person.

The Hon’ble CESTAT with the above findings set-aside the impugned order and held that the Appellant is entitled to get the refund of the entire amount of Rs. 21,26,143/- along with applicable interest with the directions to the Department to pay the same within three months of the order.

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