JUDGMENT

A.K. Sikri, J.

1. The issue involved in the present case pertains to the applicability of the doctrine of unjust enrichment in the case of refund of duty paid on 'capital goods' used captively. The factual matrix under which the aforesaid issue arises for consideration is taken note of, in short, hereinbelow:

2. The Respondent herein purchased Electro Static Precipitators (ESPs for short) from M/s. BHEL, Ranipet. In terms of Notification No. 78/1990-CE dated 20.3.1990, the Respondent was entitled to buy the said ESPs at concessional rate of duty which was 5% ad valorem in contra distinction to the normal rate of 15% ad valorem duty. This concession rate becomes payable on the condition that an officer not below the rank of Deputy Secretary in the Ministry of Environment and Forests (MoEF) certifies that the goods manufactured are meant for pollution control purpose. The dispute arose as to whether the Respondent was entitled for concessional rate of duty or not. It paid the duty at normal rate and fought for refund of the extra duty paid on the ground that only concessional rate of duty at 5% could have been charged. Respondent succeeded in its attempt before the judicial fora. In view thereof, question of refund of duty paid which was in the tune of Rs. 27,66,970/-, arose for consideration. The Revenue/Appellant herein, refused to release this refund and rejected the application of the Respondent in this behalf on the ground that the Respondent had passed on the burden and therefore refunding the extra duty paid would result in unjust enrichment to the Respondent. Against that order the Respondent filed the appeal before the Commissioner of Central Excise (Appeal) Chennai, who also dismissed the said appeal vide order dated 21.9.2000. Challenging that order the Respondent filed further appeal before the CESTAT. In this appeal the Respondent has succeeded as vide impugned judgment dated 17.6.2003, the CESTAT has allowed the appeal and set aside the order of the Commissioner (Appeal) thereby directing the refund of the additional, duty paid by the Respondent.

3. A perusal of the order of the CESTAT would reveal that the CESTAT was grapping with the question as to whether the doctrine of unjust enrichment will be applicable in case of refund of duty paid on capital goods, which are used captively. The CESTAT has taken note of certain judgments including judgment of this Court in case of Union of India v. Solar Pesticides Pvt. Ltd. (2000 (2) SCC 705 which was relied upon by the Revenue. However, the said judgment is distinguished as not applicable in the instant case on the ground that this Court in the said case was not concerned with the issue of unjust enrichment in connection with capital goods used captively.

4. It is in this backdrop the issue, as formulated in the first para above, arises for consideration.

5. Since the judgment Solar Pesticides Pvt. Ltd. has been distinguished and held not applicable to the facts of the present case, we shall start our discussion by analysing the said judgment. In the said case the question which was formulated for decision was as under:

Whether the doctrine of unjust enrichment is applicable in respect of raw material imported and consumed in the manufacture of a final product is the question which arises for consideration in these appeals.

6. The Court in detail discussed the principle of unjust enrichment. At the outset it took note of the Constitution Bench judgment in Mafatlal Industries Ltd. and Ors. v. Union of India and Ors. (1997 (5) SCC 536) and the principles laid down therein. Thereafter the position in law on this aspect is succinctly summed up in paras 17 to 20 which are reproduced below:

17. Section 11-B, along with Section 11-A, was introduced by Customs, Central Excises and Salt and Central Board of Revenue (Amendment) Act, 1978 with effect from 17-11-1980, a fact mentioned hereinbefore. Until the enactment and enforcement of Sections 11-A and 11-B, the recovery and refun