No unjust enrichment if discount amount returned to buyer by cheque or credit note :
If credit note is issued after supplier, its input tax credit can be adjusted in Electronic Credit Ledger.
Even otherwise, there is ample case law that if the discount amount is refunded by supplier by way of credit note or cheque, there is no unjust enrichment and refund is admissible.
In UOI v. A K Spintex (2009) 234 ELT 41 (Raj HC DB), it was held that once credit note is issued to customer who has issued corresponding debit note, bill amount minus amount of credit/debit note becomes price of goods. In such case, incidence of duty cannot be assumed as passed on to purchaser. Doctrine of unjust enrichment does not apply. Refund is not deniable – followed in* RPG Cables v. CCE (2009) 240 ELT 684 (CESTAT SMB) *Hindalco Industries v. CCE (2009) 240 ELT 693 (CESTAT SMB) * CCE v. Sirpur Paper Mills (2010) 253 ELT 269 (CESTAT) [The decision was noted but not followed in SPBL Ltd. v. CCE (2010) 254 ELT 104 (CESTAT)]
Same view has been held in CCE v. Solaris Chemtech (2011) 273 ELT 191 (Karn HC DB) * Sudhir Papers v. CCE (2012) 276 ELT 304 (Karn HC DB) * CCE v. Jineshwar Malleables (2012) 281 ELT 43 (Karn HC DB) * CCE v. Gokak Mills (2013) 295 ELT 392 (Karn HC DB) * Hyderabad Chemical
Supplies v. CCE (2015) 320 ELT 756 (AP HC DB) * CCE v. Bhushan Steel (2015) 319 ELT 347 (CESTAT).
In Shiva Electricals v. CST (2007) 7 STR 35 = 3 STT 105 (CESTAT), it was held that issue of credit notes also amounts to payment (to recipient) and hence unjust enrichment doctrine does not apply – relying on Mohd. Ekram Khan v. CTO 2004 (6) SCC 1083 (SC), where it was held that issue of credit note to client is also a form of payment [This is after specifically noting the contrary decisions of large bench of Tribunal in S Kumar and Grasim Ind] -view upheld in CST v.Shiva Analyticals (2009) 21 STT 328 (Karn HC DB) – followed in Professional International Courier v. CST (2009) 26 VST 434 (CESTAT) * Professional International Couriers v. CST (2010) 24 STT 172 (CESTAT SMB) * PML Industries v. CCE (2010) 259 ELT 433 (CESTAT SMB) * CCE v. IOCL (2014) 302 ELT 67 (CESTAT SMB) * CCE v. Indian Explosives (2015) 315 ELT 606 (CESTAT).
Credit note/debit note is a standard practice and accepted practice in accounting terminology for deciding liability or claim of refund. Issue of credit note is sufficient to grand refund – CST v. Purnima Advertising & Promotion (2010) 25 STT 166 = 29 VST 261 (CESTAT).
In Thermo Heat Tracers v. CCE 2001(132) ELT 455 (CEGAT), it was held that once manufacturer has credited buyer’s account with disputed amount of duty, manufacturer took back incidence of duty on himself. In such case, the question of buyer passing on the burden to third person does not arise. – same view in Indo Flogates Ltd. v. CCE 1997(20) RLT 443 (CEGAT SMB) * Siltap Chemicals v. CCE 2006 (193) ELT 461 (CESTAT) * CCE v. NVK Mohd Sultan (2008) 223 ELT 276 (CESTAT SMB) * CCE v. Modest Infrastructure (2011) 33 STT 278 = 14 28 (CESTAT) – view confirmed in CCE v. Modest
Infrastructure (2012) 37 STT 505 = 27 6 (Guj HC DB).