1984 (4) TMI 58 - HC - Central Excise

Refund - Blended yarn - Duty paid under mistake of law - Limitation for refund - Interest on duty illegally recovered and retained - Remission - Connotation of

Issues Involved:
1. Validity of Excise Duty Levy on Blended Yarn Prior to March 16/17, 1972.
2. Limitation Period for Filing Suits for Refund.
3. Entitlement to Interest on Refund of Excise Duty.
4. Passing of Excise Duty Burden to Consumers and Restitution Claims.

Detailed Analysis:

1. Validity of Excise Duty Levy on Blended Yarn Prior to March 16/17, 1972:

The principal issue was whether the Mills were entitled to a refund of excise duty paid on blended yarn, which had been ruled illegal by a Division Bench in the Calico Mills case. The court confirmed that the levy of excise duty on blended yarn prior to March 16/17, 1972, was illegal, as previously decided in the Calico Mills case. Therefore, the court proceeded on the basis that the levy was illegal.

2. Limitation Period for Filing Suits for Refund:

The court examined whether the suits filed by the Mills were barred by limitation. It was agreed that Article 113 of the Limitation Act, 1963, which prescribes a three-year period from the date the right to sue accrues, was applicable. The Mills argued that the period of limitation began from the date they discovered the mistake of law, i.e., January 15, 1976, when the Calico Mills judgment was delivered. The court accepted this argument, referencing Section 17(1) of the Limitation Act, which states that the limitation period does not begin until the mistake is discovered. Consequently, the court held that the suits were filed within the limitation period and were not barred.

3. Entitlement to Interest on Refund of Excise Duty:

The Mills claimed interest on the refunded excise duty, but the court noted that the claims for interest were inconsistent and lacked a uniform basis. The Mills argued for interest under Section 1 of the Interest Act, 1839, and on equitable grounds. However, the court found that the Mills did not establish the existence of circumstances attracting equitable jurisdiction and failed to provide evidence of the current rate of interest. Therefore, the court concluded that the Mills were not entitled to interest on the refunded excise duty.

4. Passing of Excise Duty Burden to Consumers and Restitution Claims:

The court addressed whether the Mills were entitled to restitution under Section 72 of the Contract Act, which requires establishing ownership, loss, or injury. The court found that the excise duty paid by the Mills was passed on to the buyers of the fabric, and thus, the Mills did not suffer any loss or injury. Consequently, the Mills were not the real owners of the money and were not entitled to restitution. The court emphasized that restitution aims to prevent unjust enrichment and restore money to its proper owner. Since the burden of excise duty was passed on to the consumers, the Mills could not claim restitution.

The court also referenced Section 64A of the Sale of Goods Act, 1930, which supports the view that the ultimate buyers, not the Mills, are entitled to remission or refund of excise duty. The court concluded that allowing the Mills to receive the refund would result in unjust enrichment.

Conclusion:

The court dismissed the suits filed by the Mills for refund of excise duty and the claims for interest, emphasizing that the Mills had passed the burden of excise duty to the consumers. The court directed the Mills to repay the decretal amount with interest to the Revenue and expressed hope that the Government would utilize the recovered excise duty for the benefit of the consumers. The court denied the Mills' request for a certificate to appeal to the Supreme Court, stating that the cases did not involve substantial questions of law of general importance.

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