Legal principle

In the absence of any legal provision, the principle of unjust enrichment cannot be applied to refund of fine and penalty under the Customs Act, 1962, since the proviso to Section 27(2) and Section 28D confine it to duty and interest.

Court decision

The Tribunal allowed the appeal: holding that in the absence of any legal provision, unjust enrichment cannot be applied to fine and penalty, it declared the impugned order unsustainable in law and held the appellant entitled to refund of the excess fine and penalty paid, with consequential relief, if any.

Facts

M/s. Paras Industries Ltd. claimed refund of excess fine and penalty paid by it in customs proceedings. The adjudicating authority rejected the refund claim, and the Commissioner of Customs (Appeals), Mumbai Customs Zone-I, in Order-in-Appeal No. 325/MCH/AC/EPCG/2013 dated 27/5/2013, upheld the rejection on the ground of unjust enrichment. The Revenue pointed out that the appellant had added the fine and penalty to the cost of machinery in its books of accounts. The appellant appealed to the CESTAT, West Zonal Bench at Mumbai, against the rejection of its refund claim.

Key provisions

• Section 28D, Customs Act, 1962 — Presumption that incidence of duty has been passed on to the buyer
• Section 27(2), Customs Act, 1962 — Claim of refund duty