Doctrine of unjust enrichment not applicable to PSUs: HC

Bengaluru, NT Bureau: The High Court of Karnataka has said that the “Doctrine of unjust enrichment is not applicable to Public Sector Undertakings.”

It dismissed an appeal filed by the Commissioner of Customs, Mangaluru, challenging a Customs Excise & Service Tax Appellate Tribunal (CESTAT) order which had rejected the refund to a company.

“The impugned order shows that a solitary contention with regard to unjust enrichment was urged before the CESTAT. Following the authority in Mafatlal Industries Ltd., and others Vs. Union of India and others4 the CESTAT has rightly held that the Doctrine of unjust enrichment shall not be applicable in the case on hand as the claimant is a PSU,” the division bench of Justice PS Dinesh Kumar and Justice TG Shivashankare Gowda said in their judgement recently.

Ms JM Baxi and Company had filed a Bill of Entry for the bunkers and the provisions consumed on the vessel ‘MT Swarna Kalash’ of the Shipping Corporation of India (SCI) which is a PSU.

The bill was provisionally assessed on advance payment of Rs.59,51,007. When the assessment was finalized, the Deputy Commissioner of Customs noticed an excess payment of Rs.38,85,649.

A refund was claimed and it was accorded on November 25, 2016. The sanction for refund was challenged by the Customs on grounds that the aspect of unjust enrichment was not considered by the original authority.

The Original Authority examined the refund claim and passed an order in favour of the company. Customs challenged it before the Commissioner (Appeals).

The appeals were also dismissed after which an appeal was filed before the HC in 2020. The HC gave its judgment recently.

The counsel for the Customs argued that the “CESTAT has dismissed the appeal on the premise that the Doctrine of unjust enrichment is not applicable in the instant case because, the Shipping Corporation of India is a Public Sector Undertaking,” but this was unsustainable in law.

The HC in its judgement said that the principle laid down in the Mafatlal Industries case has not been reversed or modified subsequently and therefore the doctrine of unjust enrichment does not apply to PSUs.