COMMNR. OF CENTRAL EXCISE, CHENNAL-111 versus GRASIM INDUSTRIES

Citation: [2015] 4 S.C.R. 515 · Decided: 13-03-2015 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Appeal(s) allowed

Judgment (excerpt)

(2015] 4 S.C.R. 515 
COMMNR. OF CENTRAL EXCISE, CHENNAl-111 
A 
v. 
GRASIM INDUSTRIES 
(Civil Appeal No. 8359 of 2003) 
MARCH 13, 2015 
[A.K. SIKRI AND R. F. NARIMAN, JJ.] 
B 
Doctrine of Unjust Enrichment - Applicability of - In c 
the case of refund of duty paid on 'capital goods' used 
captively - Held: The doctrine is applicable in case of 
refund of duty paid on 'capital goods' used captively, 
unless it is proved by the assessee that in costing of a 
particular product, the cost of 'capital goods' was not taken D 
into consideration - In the present case, claim for refund 
of duty paid on such goods, to be decided after the 
assessee demonstrates to the authorities concerned that 
cost of 'capital goods' was not included in the costing of 
the product - Central Excise Act, 1944. 
E 
Allowing the appeal, the Court 
HELD: 1. If a particular material is used for 
manufacture of a final product, that has to be F 
treated as the cost of the product. Insofar as cost 
of production is concerned, it may include capital 
goods which are a part of fixed cost as well as raw 
material which are a part of variable cost. 
Both are 
the components which come into costing of a G 
particular product. In order to come out of the 
applicability of the doctrine of unjust enrichment, it 
therefor becomes necessary for the assessee to 
515 
H 
516 
SUPREME COURT REPORTS 
[2015] 4 S.C.R. 
A demonstrate that in the costing of the particular 
product, the cost of 'capital goods' was not taken 
into consideration. [Para 9] [526-E-F,G-H; 527-A] 
2. However, in the facts of the present case, one 
s opportunity should be granted to the respondent to 
demonstrate to the assessing authority that the cost 
of the capital goods was not included in the costing 
of the machinery. Only if the respondent is able to 
prove the aforesaid aspect, it shall be entitled to the 
C refund and not otherwise. [Para 11] [527-D-E-] 
Union of India vs. Solar Pesticides Pvt. Ltd. 2000 (2) 
SCC 705: 2000 (1) SCR 629; Indian Farmers Fertiliser 
Coop. Ltd. vs. C.C.E. Ahmedabad 1996 (86) ELT 177 
D (S.C.) - relied on. 
E 
F 
Mafatlal Industries Ltd. and Ors. vs. Union of India 
and Ors. 1997 (5) SCC 536:1996 (10) Suppl. SCR 585 
- followed. 
Case Law Reference 
2000 (1) SCR 629 
relied on. 
Para 3 
1996 (10) Suppl. SCR 585 followed 
Para 6 
1996 (86) ELT 177 (S.C.) 
relied on. 
Para 8 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 
8359 of 2003. 
G 
From the Judgment and Order dated 17.06.2003 of the 
Customs Excise & Service Tax Appellate Tribunal, Southern 
Zonal Bench,Chennai in Appeal No. E/47/2001/Md. 
Ashok Panda, Arijit Prasad, Sushma Manchanda, B. 
H Krishna Prasad for the Appellant. 
COMMNR. OF CENTRAL EXCISE, CHENNAl-111 v. 
517 
GRASIM INDUSTRIES 
A. K. Chitale, Sumit Kumar Sharma, Niraj Sharma for A 
the Respondent. 
The Judgment of the Court was delivered by 
A.K. SIKRI, J. 1. The issue involved in the present 8 
case pertains to . the applicability of the doctrine of unjust 
enrichment in the case of refund of duty paid on 'capital 
goods' used captively. The factual matrix under which the 
aforesaid issue arises for consideration is taken note of, 
in short, hereinbelow: 
2. The respondent herein purchased Electro Static 
Precipitators (ESPs for short) from M/s. BHEL, Ranipet. 
In terms of Notification No.78/1990-CE dated 20.3.1990, 
the respondent was entitled to buy the said ESPs at 
concessional rate of duty which was 5% ad valorem 
in contra distinction to the normal rate of 15% ad 
valorem duty. 
This concession rate becomes payable on 
c 
D 
the condition that an officer not below the rank of Deputy E 
Secretary in the Ministry of Environment and Forests 
(MoEF)certifies that the goods manufactured are meant 
for pollution control purpose. The dispute arose as to 
whether the respondent was entitled for concessional 
F 
rate of duty or not. It paid the duty at normal rate and 
fought for refund of the extra duty paid on the 
ground that only concessional rate of duty at 5% could 
have been charged. 
Respondent succeeded in its 
attempt before the judicial fora. 
In view thereof, G 
question of refund of duty paid which was in the tune of 
Rs.27,66,970/-,arose for consideration. The Revenue/ 
appellant herein, refused to release this refund and 
rejected the application of the respondent in this behalf H 
518 
SUPREME COURT REPORTS 
[2015] 4 S.C.R. 
A on the ground that the respondent had passed on the 
burden and therefore refunding the extra 

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