Mere Accounting Entry Can’t Establish Unjust Enrichment in Excise Refund Dispute: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi has ruled in favour of JK Cement Works in a long-running excise refund dispute, holding that merely reflecting excise duty as expenditure in books of accounts cannot automatically lead to a conclusion that the burden of duty was passed on to customers. The bench of Ashok Jindal (Judicial Member) andK. Anpazhakan (Technical Member) has observed that the company had successfully crossed the test of unjust enrichment and was entitled to retain the refund amount along with interest already sanctioned. The dispute traces back to an excise duty incentive introduced by the Central Government under Notification No. 36/87-CE dated March 1, 1987, which granted a rebate of ₹50 per metric tonne to cement units commencing production after April 1, 1986, with the objective of encouraging cement manufacturing and expansion in Rajasthan. JK Cement established a new manufacturing unit at Nimbahera and became eligible for the incentive. However, pending departmental approval of its classification list, the company continued paying excise duty at higher rates under protest. Following eventual approval of the classification list, the company sought refund of excess duty paid amounting to approximately ₹1.85 crore and ₹20.29 lakh for different periods. The litigation thereafter travelled through multiple rounds of proceedings before adjudicating authorities, CEGAT/CESTAT, the Rajasthan High Court, and even the Supreme Court. The central issue throughout remained whether the refund claims were barred by the doctrine of unjust enrichment. The Revenue authorities argued that the company had effectively recovered the duty burden from customers since the duty component was recorded as expenditure in the books of accounts. Authorities also contended that despite the losses suffered by the company, the burden of duty stood passed on and that the Chartered Accountant's certificate relied upon by JK Cement lacked evidentiary value. JK Cement, on the other hand, contended that during the relevant period it was operating a newly established plant and had incurred substantial losses due to high setup costs and market competition. The company submitted that cement was being sold below the cost of production and therefore the excise burden had been absorbed by it rather than transferred to customers. It also furnished an affidavit and a Chartered Accountant certificate demonstrating that the sales realization remained below expected cost levels and that the company had suffered significant losses. After examining the record, the Tribunal found that it was an undisputed fact that JK Cement had established a new plant and had suffered heavy losses during the relevant period. The Tribunal observed that the company had not separately shown duty elements in invoices and had failed to recover even the cost of production from customers. The Bench specifically rejected the Revenue's argument that accounting treatment by itself establishes passing on of duty incidence. It relied on earlier judicial precedents including Commissioner of Central Excise v. Sandvik Asia Ltd., where courts had clarified that entries in profit and loss accounts cannot be treated as conclusive proof of unjust enrichment. The Tribunal observed that merely recording duty as revenue expenditure does not mean that the incidence of duty has necessarily been passed on to customers. Rather, the burden lies upon the Revenue to establish actual passing of such incidence. The Bench also gave significant weight to the Chartered Accountant certificate submitted by JK Cement. It observed that such certificates constitute relevant and sufficient evidence unless effectively rebutted by contrary material. The Revenue had discarded the certificate without producing cogent evidence against it. The Tribunal held that JK Cement had successfully rebutted the presumption of unjust enrichment and was entitled to the refund amounts. It further held that the refund had been rightly sanctioned along with applicable interest and disposed of all appeals accordingly. Case Details Case Title: M/s. JK Cement Works Versus Commissioner of CGST and Central Excise, Jodhpur Citation: JURISHOUR-1314-CES-2026(DEL) Case No.: EXCISE APPEAL NO. 53894 OF 2018 Date: 20/05/2026 Counsel For Appellant: B.L. Narasimhan, Advocates Counsel For Respondent: Bhagwat Dayal, Authorised Representative Click Here To Read Order Read More: CESTAT Clarifies Individual Houses Can Form Part of ‘Residential Complex’

Mere Accounting Entry Can’t Establish Unjust Enrichment in Excise Refund Dispute: CESTAT

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