ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 19.01.2026
CESTAT Delhi Sets Aside Order on Unjust Enrichment in Customs Duty Refund
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.comor on his Mobile +91-9999005379.
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, recently delivered a significant judgment in the case of M/s. β Lord Image vs. Commissioner of Customs β Jaipur I (Customs Appeal No. β 50283 of 2022). β The appeal was filed by M/s. β Lord Image challenging the Order-in-Appeal No. β 69(SM)/CUS/JPR/2021 dated 26.05.2021, which denied their refund claim on the grounds of unjust enrichment. β The judgment, pronounced by Honβble Member Judicial, on 06.01.2026, marks a crucial victory for the appellant. β
Background of the Case
M/s. Lord Image, a Jaipur-based importer, had imported gold jewelry from Thailand under two Bills of Entry dated 20.10.2011 and 17.11.2012, with a total value of Rs. β 40,20,932/-. The goods were classified under sub-heading 711319 of the Customs Tariff Act, 1975, and the appellant claimed duty exemption under Notification No. β 82/2004-Cus. and Notification No. 101/2004-Cus., both dated 31.08.2004. β However, the department denied the exemption under the Free Trade Agreement (FTA) scheme and issued a show cause notice on 07.09.2013, demanding recovery of short-paid customs duty amounting to Rs. β 4,18,297/-. The appellant deposited the amount under protest on 29.12.2012. β
The adjudicating authority later dropped the demand for short-paid customs duty through Order-in-Original No. β 40/2018-19 dated 29.11.2018, which was accepted by the department. β Subsequently, M/s. β Lord Image filed a refund claim for Rs. β 4,18,297/- on 27.11.2019, supported by a Chartered Accountant Certificate dated 04.01.2020. β The refund was sanctioned via Order-in-Original No. β 26/2019-20 dated 30.01.2020, as it was filed within the limitation period. β However, the department reviewed the order under Review Order No. β 01/2020 dated 20.03.2020, claiming that the refund was hit by the principle of unjust enrichment. β The department filed an appeal against the refund order, which was decided in their favor by the Commissioner (Appeals), leading to the present appeal before CESTAT.
Arguments Presented
Appellantβs Submissions: The appellant argued that the Order-in-Original dated 30.01.2020 had correctly considered both the limitation period and the principle of unjust enrichment. β The Chartered Accountant Certificate clearly certified that the burden of customs duty was borne by the appellant and was not passed on to customers. β The invoices for selling gold did not include any customs duty, and the departmentβs reliance on book entries in the profit and loss account was insufficient to prove unjust enrichment. The appellant emphasized that the findings of the Commissioner (Appeals) ignored documentary evidence and were contrary to the Customs Act, 1962. β
Departmentβs Submissions: The department contended that the customs duty was booked as an expense under βDirect and Manufacturing Expensesβ in the profit and loss account, indicating that the burden of duty was passed on to customers. β They argued that the refund claim was rightly denied under the principle of unjust enrichment. β
CESTATβs Observations and Decision β
After hearing both parties and reviewing the evidence, CESTAT made the following key observations:
- Nature of Deposit: The customs duty deposited by the appellant during the investigation was deemed a revenue deposit made under protest. β CESTAT relied on precedents, including the Honβble Supreme Courtβs decision in Sooraj Mull Baijnath Industries (P) Ltd. and EBIZ Com Pvt Ltd., which held that such deposits must be refunded with interest as they are not subject to unjust enrichment.
- Chartered Accountant Certificate: The certificate submitted by the appellant confirmed that the customs duty burden was not passed on to customers. β It certified that the duty was booked under βImport Duty Paidβ in the profit and loss account, leading to a reduction in profit, and was not included in the sale value of goods. β
- Invoices as Evidence: The Tribunal emphasized that invoices are the best evidence to determine whether the duty burden was passed on to customers. β The appellantβs invoices showed no mention of customs duty, proving that the duty was not included in the sale price. β
- Misinterpretation by Commissioner (Appeals): CESTAT held that the Commissioner (Appeals) erred in relying solely on book entries in the profit and loss account without considering the invoices and other documentary evidence. The findings were deemed inconsistent with established legal principles. β
- Legal Precedents: The Tribunal referred to various judgments, including Vishal Video & Appliances Pvt. β Ltd. and Organan (India) Ltd., which established that the principle of unjust enrichment does not apply when the duty burden is not passed on to customers. β
Final Order
CESTAT set aside the impugned order and allowed the appeal, holding that the refund claim was not hit by the principle of unjust enrichment. The Tribunal concluded that the appellant had successfully demonstrated that the burden of customs duty was borne by them and not passed on to customers. β
Key Takeaways
- Importance of Documentary Evidence: This case highlights the significance of invoices and Chartered Accountant Certificates in proving that the burden of customs duty has not been passed on to customers. β
- Nature of Deposits: Deposits made under protest during investigations are treated as revenue deposits, and the principle of unjust enrichment does not apply to such cases. β
- Legal Precedents: The judgment reinforces established legal principles regarding unjust enrichment and refund claims under the Customs Act, 1962. β
- Role of Adjudicating Authorities: The case underscores the importance of thorough examination of evidence by adjudicating authorities to ensure justice. β
Conclusion
The judgment in favor of M/s. β Lord Image is a landmark decision that upholds the principles of justice and fairness in refund claims under the Customs Act. It serves as a reminder to both importers and authorities to rely on concrete evidence and established legal precedents while adjudicating disputes. β This case sets a precedent for similar cases and provides clarity on the application of the principle of unjust enrichment in customs duty refunds.
Source: CESTAT Delhi
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