Madras High Court
The Commissioner Of Customs vs M/S.Sterlite Industries (I) Ltd on 13 March, 2018
Author: P.Velmurugan
Bench: P.Velmurugan
C.M.A.(MD).Nos.287 to 290 of 2019
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Judgment Reserved on: 16 / 10 / 2025
Judgment Delivered on : 09 / 01 / 2026
Coram:
THE HONOURABLE MR.JUSTICE P.VELMURUGAN
and
THE HONOURABLE MRS.JUSTICE L.VICTORIA GOWRI
C.M.A.(MD).Nos.287 to 290 of 2019
---
The Commissioner of Customs,
Custom House,
New Harbour Estate,
Tuticorin-628 004. .. Appellant in all the appeals
Vs.
M/s.Sterlite Industries (I) Ltd.,
SIPCOT Industrial Complex,
Madurai By-pass Road,
T.V.Puram, P.O. Tuticorin-628 002. .. Respondent in all the appeals
Civil Miscellaneous Appeals filed under Section 130 of the Customs Act,
1962, against the common final order No.40781-40784, dated 13.03.2018 on the
file of the CESTAT, South Zonal Bench, Chennai.
For appellant
in all appeals : Mr.AR.L.Sundaresan,
Additional Solicitor General of India,
Assisted by Mr.R.Gowri Shankar,
Standing Counsel
For respondent
in all appeals : Mr.V.Raghavachari,
Senior Counsel,
assisted by Mr.Vishaal Agarwal
for Mr.Y.Prakash
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C.M.A.(MD).Nos.287 to 290 of 2019
COMMON JUDGMENT
P.VELMURUGAN, J These Civil Miscellaneous Appeals have been filed by the Commissioner of Customs, Custom House, Tuticorin, under Section 130 of the Customs Act, 1962, challenging the Common Final Order Nos.40781–40784 of 2018 dated 13.03.2018 passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai.
2. The case of the respondent, M/s.Sterlite Industries (India) Ltd., SIPCOT Industrial Complex, Tuticorin, is that they had sought refund of customs duty paid on imports of copper concentrate. The Assistant Commissioner of Customs (Refund), Tuticorin, sanctioned the refund claims through Orders-in-Original passed in 2009, consequent to final assessments.
3. The Department preferred appeals before the Commissioner (Appeals), contending that the refund claims were barred by the principle of unjust enrichment, as the Chartered Accountant’s certificate produced was vague and Page No.2/17 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm ) C.M.A.(MD).Nos.287 to 290 of 2019 did not establish that the incidence of duty had not been passed on to consumers. The Commissioner (Appeals), by Order-in-Appeal dated 29.01.2010, accepted the Department’s contention, allowed the appeals, and set aside the Orders-in-Original.
4. Aggrieved by the appellate order, the respondent carried the matter before the CESTAT, Chennai. The Tribunal, by its common final order dated 13.03.2018, allowed the appeals of the respondent and rejected the Department’s case. The Tribunal held that the bar of unjust enrichment was not attracted in the present case since the final product prices of copper were determined on the basis of London Metal Exchange (LME) prices fixed by Mineral & Metal Trading Corporation (MMTC), and therefore the incidence of duty could not have been passed on to consumers. Reliance was placed on the judgment of the Hon’ble Supreme Court in State of Rajasthan v. Hindustan Copper Ltd. [(1998) 9 SCC 708], and also on the Tribunal’s earlier decision in Hindustan Copper Ltd. v. Commissioner of Central Excise, Jaipur [2010 (261) ELT 943].
5. The Commissioner (Appeals) had held that the refund was barred by unjust enrichment and set aside the sanction of refunds. The Tribunal, on the other hand, held that unjust enrichment was not applicable because the product prices were fixed on LME rates and upheld the respondent’s entitlement to Page No.3/17 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm ) C.M.A.(MD).Nos.287 to 290 of 2019 refund.
6. Challenging the common order passed by the CESTAT, the appellant/Revenue is before this Court.
7. The following substantial questions of law arise for consideration in these appeals:
"(i) Whether the CESTAT was correct in holding that the impugned claims of refund are not hit by bar of unjust enrichment envisaged under Section 27 of the Customs Act, 1962? and
(ii) Whether the CESTAT was correct in allowing the impugned claims of refund in the light of misrepresentation by the importer to circumvent the bar of unjust enrichment envisaged under Section 27 of the Customs Act, 1962?"
8. The learned Additional Solicitor General appearing for the appellant/Revenue submitted that the order of the Tribunal is unsustainable both on facts and in law. It was argued that the Tribunal has failed to examine the issue of unjust enrichment on merits and has erroneously proceeded on the footing that since the final product prices of copper are fixed on the basis of Page No.4/17 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm ) C.M.A.(MD).Nos.287 to 290 of 2019 London Metal Exchange (LME) rates, the question of unjust enrichment does not arise. According to the Revenue, this approach is fundamentally flawed. It was pointed out that the respondent had three distinct units, namely the Domestic Tariff Area (DTA) unit at Tuticorin, the Export Oriented Unit (EOU), and the unit at Silvassa, each separately registered under the Central Excise law. The refund claim in question pertained only to the DTA unit, which manufactures copper anode and certain by products such as sulphuric acid, phosphoric acid, hydrofluoro silicic acid, phospho gypsum and copper slag. These products are either transferred to sister units for further manufacture or sold locally. The copper anode is transferred to the sister units under CT 3 and invoices for captive consumption, and its valuation is done under Rule 8 of the Central Excise Valuation Rules, 2000, based on CAS 4 costing method. In such circumstances, reliance on LME prices, which apply only to the final products of the sister units, is wholly irrelevant to the DTA unit’s transactions.
9. The learned Additional Solicitor General further submitted that the Hon’ble Supreme Court in Union of India v. Solar Pesticides Pvt. Ltd. [2000 (116) ELT 401] has categorically held that the principle of unjust enrichment applies even in cases of captive consumption. Similarly, in Commissioner of Central Excise v. Grasim Industries [2015 (318) ELT 594], the Apex Court reiterated that unjust enrichment extends to captive consumption of raw Page No.5/17 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm ) C.M.A.(MD).Nos.287 to 290 of 2019 materials and capital goods, since the cost of production necessarily includes such elements. These binding precedents were ignored by the Tribunal, which instead relied on State of Rajasthan v. Hindustan Copper Ltd. [(1998) 9 SCC 708], a case distinguishable on facts.
10. It was also submitted that the Tribunal treated the respondent company as a whole, without distinguishing between its separate units, and failed to consider the impact of duty incidence on the by products sold locally. The balance sheet and Chartered Accountant’s certificate were examined only at the company level, without analyzing the accounts of the DTA unit specifically. This vitiates the Tribunal’s finding. The Revenue contends that the incidence of duty paid on the imported copper concentrate would necessarily be reflected in the costing of the copper anode and the by products, and therefore the bar of unjust enrichment under Section 27 of the Customs Act, 1962 squarely applies. On these grounds, it was urged that the order of the Tribunal dated 13.03.2018 is legally unsustainable and liable to be set aside.
11. The learned counsel for the respondent submitted that the entitlement of the respondent to refund of excess customs duty paid under provisional assessment is not in dispute. The only controversy raised by the Revenue is whether such refund is barred by the principle of unjust enrichment. Page No.6/17 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm ) C.M.A.(MD).Nos.287 to 290 of 2019 It was urged that the allegation of unjust enrichment is wholly misconceived, inasmuch as the respondent had produced comprehensive documentary evidence to establish that the incidence of duty was not passed on to its customers.
12. The learned counsel pointed out that the respondent had furnished before the authorities not merely a Chartered Accountant’s certificate, but also its balance sheets, profit and loss accounts, trial balances, sales invoices, purchase orders, and general ledger accounts. The Commissioner (Appeals), in Order-in- Appeal No.11/2012 dated 29.03.2012, had categorically recorded that these documents demonstrated that the element of duty had not been passed on to the buyers, and that the refund amount was shown as “Customs Duty Receivable” in the books of account. This finding of fact was never challenged by the Department in subsequent proceedings. It was further submitted that the Deputy Director (Cost), Coimbatore, appointed pursuant to CBIC Circular No. 437/03/99-CX dated 20.01.1999, had examined the respondent’s business model and accounting practices and, by report dated 12.06.2017, concluded that the principle of unjust enrichment was inapplicable to the respondent’s refund claims. Counsel emphasized that the respondent consistently adopted London Metal Exchange (LME) prices for its final products, copper cathodes and copper rods, and therefore had no occasion to load the incidence of customs duty into Page No.7/17 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm ) C.M.A.(MD).Nos.287 to 290 of 2019 the sale price.
13. Reliance was placed on the decisions of this Court in CC v. Virudhunagar Textile Mills Ltd. [2008 (230) ELT 411] and CC v. Saralee Household & Bodycare India (P) Ltd. [2007 (216) ELT 685], wherein it was held that if the duty claimed as refund is shown as a receivable in the claimant’s books of account, the burden of unjust enrichment stands discharged. Learned counsel also referred to the Tribunal’s decision in Hindustan Copper Ltd. v. CCE, Jaipur [2010 (261) ELT 943], which was accepted by the Department, holding that where duty is absorbed and accounted for, a refund cannot be denied on the ground of unjust enrichment. On the strength of these factual and legal findings, counsel submitted that the CESTAT’s order dated 13.03.2018, which allowed the respondent’s refund claims, is correct and legally tenable.
14. Heard the learned Additional Solicitor General appearing for the appellant/Revenue and the learned counsel appearing for the respondent/assessee. Perused the materials available on record, including the common final order dated 13.03.2018 passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai. Page No.8/17 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm ) C.M.A.(MD).Nos.287 to 290 of 2019 SUBSTANTIAL QUESTION OF LAW - (i) Whether the CESTAT was correct in holding that the impugned claims of refund are not hit by bar of unjust enrichment envisaged under Section 27 of the Customs Act, 1962?
15. It is not disputed that the respondent imported copper concentrate and paid customs duty provisionally. After the final assessment, it was found that excess duty had been paid, so refund claims were filed. These were initially approved by the Assistant Commissioner of Customs. The main issue in these appeals is not whether the respondent can claim the refund, but whether the refund is barred under unjust enrichment under Section 27 of the Customs Act, 1962.
16. The Tribunal ignored the fact that the respondent is not a single integrated unit. At the relevant time, the company had three separate units, each registered independently:
(i) the DTA unit at Tuticorin,
(ii) an Export Oriented Unit (EOU), and
(iii) the Silvassa unit.
Each unit followed its own Central Excise rules and statutory compliance. Page No.9/17 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm ) C.M.A.(MD).Nos.287 to 290 of 2019
17. The refund claims arise only from imports by the DTA unit, which is a smelting unit. It produces copper anode (its main product) and by-products like sulphuric acid, phosphoric acid, hydrofluorosilicic acid, phospho-gypsum, and copper slag. The by-products are sold in the domestic market, while the copper anode is transferred to sister units for further use under proper excise invoices and CT-3 certificates.
18. It is not disputed that copper cathodes and copper rods, priced according to LME rates, are produced only by the EOU and Silvassa units, not the DTA unit. The Tribunal wrongly assessed unjust enrichment using these LME prices. Transfers of copper anode from the DTA unit to sister units are captive clearances, not market sales, and under Rule 8 of the Central Excise Valuation Rules, 2000, their value must be 110% of the cost of production, not market prices. At this juncture, it would be apposite to refer to Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, which reads as follows:
“Where the whole or part of the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value of such Page No.10/17 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm ) C.M.A.(MD).Nos.287 to 290 of 2019 goods shall be one hundred and ten per cent of the cost of production or manufacture of such goods.” Thus, the valuation of copper anode must follow Rule 8 and CAS-4 costing principles, and LME prices are irrelevant, as they apply only to final products made by sister units.
19. Another significant point is that the by-products produced by the DTA unit are sold in the domestic market. The Tribunal failed to examine whether the customs duty paid on imported copper concentrate had been included in the cost of these by-products and thereby passed on to domestic buyers. Overlooking this aspect goes against the core enquiry mandated under Section 27.
20. The Tribunal wrongly treated the respondent company as a single entity, instead of looking at each unit separately. The balance sheets, accountant’s certificate, and cost records were company-level, which do not prove that the DTA unit alone did not pass on the duty. Using company-level data is legally not allowed, especially since Section 27 assumes unjust enrichment unless rebutted with evidence.
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21. The law is settled by the Hon’ble Supreme Court in Union of India v. Solar Pesticides Pvt. Ltd., (supra) which held that unjust enrichment applies even in captive consumption, because the duty is part of the cost of intermediate goods.
22. In this case, the respondent has not provided clear unit-specific evidence showing that the customs duty paid by the DTA unit on imported copper concentrate was not included in:
(i) the cost of copper anode transferred to sister units, or
(ii) the pricing of by-products sold in the domestic market.
23. The Tribunal’s reliance on State of Rajasthan v. Hindustan Copper Ltd. (supra) is clearly misplaced. That decision was based on specific facts, where the Court accepted affidavit evidence showing that price fixation by MMTC left no room for passing on the duty. That decision does not alter the statutory presumption under Section 27, nor does it remove the need for unit- wise evidence, especially in a multi-unit corporate structure like the present case. Page No.12/17 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm ) C.M.A.(MD).Nos.287 to 290 of 2019
24. The Tribunal did not properly examine the requirements under Section
27. It ignored that:
• The DTA unit is a separate legal entity, • The transfers were for captive consumption, not market sales, • Valuation was done under Rule 8, not LME prices, and • By-products were sold in the domestic market.
By ignoring these facts, the Tribunal avoided the main enquiry required under the law.
25. In the absence of a proper examination of these critical facts, the Tribunal could not have concluded that the statutory presumption of unjust enrichment was disproved. The finding that unjust enrichment is inapplicable merely because final products of sister units are priced on LME rates is legally untenable and contrary to binding precedent.
26. Accordingly, the substantial question of law No. (i) is answered in favour of the appellant/Revenue.Page No.13/17
https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm ) C.M.A.(MD).Nos.287 to 290 of 2019 SUBSTANTIAL QUESTION OF LAW - (ii) Whether the CESTAT was correct in allowing the impugned claims of refund in the light of the principles governing unjust enrichment under Section 27 of the Customs Act, 1962?
27. While the Tribunal allowed the refund claims in view of the judgments relied upon by it, the question that arises is whether such reliance was sufficient to justify grant of refund without the claimant having discharged the statutory burden imposed under Section 27.
28. The Tribunal proceeded on the premise that LME-based pricing of final products conclusively establishes absence of unjust enrichment. However, the Chartered Accountant’s certificate and financial statements relied upon were prepared at the company level and did not demonstrate, in a unit-wise or product-wise manner, that the incidence of duty borne by the DTA unit was not passed on, either directly or indirectly.
29. By treating the respondent as a single economic entity and by applying pricing principles relevant to final products manufactured by sister units, the Tribunal failed to examine whether the statutory presumption under Section Page No.14/17 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm ) C.M.A.(MD).Nos.287 to 290 of 2019 27 stood rebutted in respect of the DTA unit alone. The Tribunal’s reliance on the cited judgments, without correlating them to the specific factual matrix of the DTA unit, resulted in an erroneous application of law.
30. In the absence of clear, cogent and unit-specific evidence to rebut the presumption of unjust enrichment, the Tribunal was not justified in allowing the refund claims.
31. Accordingly, the substantial question of law No. (ii) is answered in favour of the appellant/Revenue.
32. For the foregoing reasons, both the substantial questions of law are answered in favour of the appellant/Revenue. The common final order dated 13.03.2018 passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai, is set aside. Accordingly, the Civil Miscellaneous Appeals are allowed. No costs.
[P.V., J.] [L.V.G, J.]
09 / 01 / 2026
Index: Yes/no
Neutral Case Citation: Yes/no
Speaking Order: Yes/no
rns
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C.M.A.(MD).Nos.287 to 290 of 2019
To
1. The Assistant Commissioner (Refunds),
Custom house, Tuticorin.
2. The Commissioner of Customs, Central Excise (Appeals), Trichy.
3. The Customs, Excise and Service Tax Appellate Tribunal, (CESTAT), South Zonal Regional Bench, Chennai.
Page No.16/17 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm ) C.M.A.(MD).Nos.287 to 290 of 2019 P. VELMURUGAN, J and L. VICTORIA GOWRI, J rns Pre-delivery Common Judgment in C.M.A.(MD).Nos.287 to 290 of 2019 Common Judgment delivered on 09 / 01 / 2026 Page No.17/17 https://www.mhc.tn.gov.in/judis ( Uploaded on: 27/01/2026 04:05:48 pm )