CESTAT Delhi Allows Pharma Company's ₹70 Lakh Refund, Holds Claim Not Hit By Unjust Enrichment

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has allowed a pharma company's appeal and held that its refund claim of about ₹70 lakh was not hit by unjust enrichment, setting aside orders directing the amount to be credited to the Consumer Welfare Fund.

The ruling was delivered by a tribunal comprising Judicial Member Binu Tamta and Technical Member P.V. Subba Rao.

Vivek Pharmachem India Ltd., which manufactures medicaments, had availed CENVAT credit of about ₹70 lakh on input services relating to service commissions.

After the Department disputed the credit, the company reversed the amount. The tribunal later allowed the credit in separate proceedings, following which the company sought a refund.

The adjudicating authority sanctioned the refund but credited it to the Consumer Welfare Fund, holding that the company had failed to establish that it had not passed on the incidence of service tax to its customers. The Commissioner (Appeals) upheld that decision.

Before the tribunal, the company submitted that it had not raised any invoice to recover the reversed CENVAT credit from customers. It relied on a Chartered Accountant's certificate, issued after examining its books of account, certifying that the burden of the reversed service tax had not been transferred to any other person.

The Revenue argued that the statutory presumption that the incidence of duty is passed on to the buyer applied in the case. It also relied on the Supreme Court's ruling in Union of India v. Solar Pesticide Pvt. Ltd. to contend that the refund claim was barred by unjust enrichment.

Examining the record, the tribunal found that the Department had not produced any material to show that the Chartered Accountant's certificate was incorrect.

It also held that Solar Pesticide did not apply to the facts of the case, noting that Vivek Pharmachem had itself borne the burden of the reversed CENVAT credit and had not recovered it from its customers. On that basis, the tribunal set aside the impugned order and allowed the appeal with consequential relief.

For Appellant: Advocate Priyanka Goel, 

For Respondent: Shashank Yadav, Authorized Representative