ONGC Rebutted Unjust Enrichment Presumption, Entitled To ₹4.42 Crore OID Cess Refund: CESTAT Chennai

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has recently, in a case involcing ONGC held that the statutory presumption that duty incidence has been passed on stands rebutted where contractual documents, invoices, and independent certifications establish that the burden of duty was not passed on to the buyer.

The ruling came while allowing Oil and Natural Gas Corporation Ltd.'s (ONGC) refund claim of ₹4.42 crore towards excess Oil Industry Development Cess (OID Cess).

A bench of Judicial Member Ajayan T.V. and Technical Member Vasa Seshagiri Rao set aside an order rejecting the refund claim on the ground of unjust enrichment.

The bench observed, “the doctrine of unjust enrichment is to be applied on the basis of substantive evidence and not on presumptions or conjectures.”

The dispute related to the period from March 2016 to May 2016. During this period, ONGC paid OID Cess at an ad valorem rate of 20% pursuant to a notification issued under the Oil Industry (Development) Act, 1974.

ONGC subsequently claimed that excess cess had been paid. It contended that the sale price of crude oil had been treated as an ex-duty value instead of a cum-duty value. According to the company, this resulted in payment of duty on duty.

The department rejected the refund claim. It held that ONGC had failed to establish that the incidence of the cess had not been passed on to Chennai Petroleum Corporation Limited (CPCL). The department therefore invoked the doctrine of unjust enrichment.

Before the tribunal, ONGC contended that the pricing mechanism contained in Schedule B of the Crude Oil Sale Agreement (COSA) did not include OID Cess as a recoverable component. It argued that the cess was required to be borne by the seller.

The company also relied on invoices, a Chartered Accountant's certificate and a confirmation issued by CPCL. According to ONGC, these documents demonstrated that the burden of the cess had not been passed on.

The Tribunal noted that Schedule B specifically identified the levies recoverable from the buyer. It found that OID Cess was not included among those components.

The Tribunal further noted that the invoices issued to CPCL reflected only the base price and VAT. They did not contain any element of OID Cess.

The bench ruled, “we hold that the Appellant has successfully rebutted the presumption under Section 12B and established that the incidence of OID Cess has not been passed on. The refund is therefore not hit by unjust enrichment.”

The tribunal held that the excess payment arose due to adoption of an incorrect valuation methodology. It found that ONGC had established that the incidence of the cess had not been passed on to the buyer. The tribunal therefore held that the refund was not barred by unjust enrichment.