UNION OF INDIA versus SOLAR PESTICIDES PVT. LTD. ETC.

Citation: [2000] 1 S.C.R. 629 · Decided: 04-02-2000 · Supreme Court of India · Bench: B.N. KIRPAL, D.P. MOHAPATRA, R.P. SETHI · Disposal: Appeal(s) allowed
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Judgment (excerpt)

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I 
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UNION OF INDIA 
v. 
SOLAR PESTICIDES PVT. LTD. ETC. 
FEBRUARY 4, 2GOO 
[B.N. KIRPAL, D.P. MOHAPATRA A"ID R.P. SETHI, JJ.] 
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 
of imported raw material captively consumed in the manufacture of a final 
product. 
A 
B 
c 
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 
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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 
629 
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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] 
G 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 921 of 
1992 Etc. 
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
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