TMI Blog1989 (11) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the Petitioners ought not to be allowed to unjustly enrich themselves by obtaining an order for refund. In view of difference of opinion on the said question between different Benches of this Court, Ashok Agarwal, J. has made the present Reference for deciding the following question :- Where the tax admittedly or has been held to be levied and collected by the State without the authority of law, whether refund of the tax must be granted to the assessee or applying the principle of unjust enrichment no refund should be made to the assessee unless he can pass on the benefit to the ultimate consumer? 2. We may first briefly refer to some of the reported Division Bench decisions on this point. The said point of unjust enrichment was, for the first time, raised by the Revenue authorities in this Court in the case of Ogale Glass Works Ltd. v. Union of India, 79 Bom. L.R. 37 = 1979 (4) E.L.T. (J 468). In the said case, Deshpande and Mukhi, JJ. both held that assessment of excise duty by including the cost of packing in the price of the product was illegal. The two learned Judges who delivered separate judgments gave slightly different reasons for rejecting the claim m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndurkar, J. had referred to the Supreme Court decision in D. Cawasji and Co. s case (supra) and had held that in paragraph 10 of their judgment in the case, the Supreme Court had clearly highlighted the fact that the State was under an obligation to refund monies which had been recovered without the authority of law, vide pages 473-475. In Maharashtra Vegetable Products Pvt. Ltd. s case (supra), the additional ground given for rejection of the argument of unjust enrichment was that it was not possible to say how much of the excise duty formed part of the price which was controlled price. 5. The three subsequent Division Benches of this Court followed the decision in Maharashtra Vegetable Products Pvt. Ltd. s case (supra) that tax or duty which had been recovered without authority of law ought to be refunded to the person from whom it was collected regardless of the fact whether or not the said person had passed on the burden to his consumers, vide (1) judgment of Kanade and Pendse, JJ. in the case of Wipro Products Ltd. and Another v. Union of India and Another, 1981 (8) E.L.T. 531 (paragraph 11), (2) judgment of Chandurka - and Gadgil, JJ. in the case of Chemicals and Fibres Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity Board v. City Board, Mussoorie, A.I.R. 1985 S.C. 883. Shah, J. held that the said subsequent decisions were distinguishable and they could not be invoked in cases of claim for refund of excise duty recovered from the manufacturers without authority of law. 8. Mehta and Dr. Couto, JJ. in the case of Rapidur (India) Ltd. v. Union of India and Others, 1987 (27) E.L.T. 222, had followed the judgment of Shah, J. in the case of I. T. C. Limited v. M.K. Chipkar and Others (supra) on difference of views in the said case between Lentin and Sawant, JJ. 9. On the question of applicability of the doctrine of unjust enrichment in cases of claim for refund of excise duty illegally collected, there was again a difference of opinion between Shah, J. and Kolse-Patil, J. and on reference to him, in the said case of Associated Bearing Co. Ltd. v. Union of India, 1988 (33) E.L.T. 285, Pendse, J. had agreed with Shah, J. that the Court cannot refuse to direct the Govt. to refund the amounts collected without the authority of law on the basis of the doctrine of unjust enrichment. 10. Bharucha and Tipnis, JJ. in the case of S.S. Miranda Ltd. v. Union of India, 1988 (35) E.L.T. 621 and Lentin an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions. 14. In order to answer the question referred to us, we may now indicate with reference to the reported decisions what has been considered to be the foundation of a claim made in a writ petition for refund of a tax collected from the Petitioner without the authority of law. The mandate of Article 265 of the Constitution is that there must always be a valid law for making assessment and recovery of a tax. An assessment of a tax would be illegal when (a) the relevant legislation transgresses the constitutional limitations or (b) it is contrary to the provisions of the taxing law in question. Since no tax can be levied or collected except by authority of law, the Government has a duty to refund any sum collected without authority to the person who paid the said tax. 15. It is equally settled law that an application under Article 226 of the Constitution would lie for enforcing the obligation of the State of refund and/or return the money collected towards an illegal tax or duty. Ever since the decision in the case of Sales Tax Officer v. Kanhaiya Lal, A.I.R. 1959 S.C. 135, it has been consistently held that payment towards tax or duty which is without authority of law is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is it desirable to lay down a general rule [vide observations of Das Gupta, J. in State of Madhya Pradesh v. Bhailal Bhai (supra) which was referred to by Mathew, J. in D. Cawasji and Co. s case (supra)]. Thus, the conduct of the Petitioner who seeks refund in a writ application is certainly relevant. In some of the reported cases, on grounds of unreasonable delay, acquiescence and gross laches on the part of the Petitioner, the Writ Courts had refused to grant refunds of tax collected without lawful authority. Again, the Petitioner who seeks personal redress under Article 226 of the Constitution must, inter alia, prove that he had suffered injury or wrong. 17. Mr. Hidayatullah, the learned Counsel for the Petitioners, has submitted that since there could be no equity in the matter of payment of tax or duty, no equitable principles can be relied upon to defeat a claim for refund of an amount which had been paid as tax or duty under mistake of law or coercion. Whenever any tax or duty had been collected without authority of law, the Writ Court ought to enforce the mandate of Article 265 and compel the State to refund the illegal levy. According to Mr. Hidayatullah, it was totall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority of law and the State cannot deny that it had collected the tax without lawful authority but disputes its obligation to refund on the ground that the Petitioner had passed on the burden, there is really no conflict of equities. By appropriately moulding the relief to be granted in the Writ Petition the Court might prevent both the State and the person from whom tax had been illegally collected from making unjust enrichment. There is no real contradiction between the two concepts, viz. (1) the State is bound to refund amounts collected without authority of law and (2) the jurisdiction under Article 226 is discretionary and equitable in nature. Before further discussing the question of adjustment of equities and moulding the relief, we may deal with some of the other points raised before us. 21. Both Mr. Desai for the Interveners and Mr. Hidayatullah for the Petitioners submitted that under the Central Excises and Salt Act the levy is on manufacturer. The obligation is upon manufacturer or producer and the excise duty is recovered from the manufacturer or the producer of goods. The point of collection of the excise duty is irrelevant and the same does not detract from its r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had himself borne it or had passed on the burden to others. 22. We may also observe that some unnecessary confusion had been caused by reason of plea taken in some of the reported cases on behalf of the Union of India that the decision in M/s. D. Cawasji and Co. s case (supra) was no longer good law by reason of the subsequent Supreme Court decisions in the cases of (1) The Nawabganj Sugar Mills Ltd. and Others v. The Union of India and Others (supra). (2) Shiv Shankar Dal Mills v. State of Haryana (supra), (3) Amar Nath Om Prakash v. State of Punjab and M/s. The Food Corporation of India v. State of Punjab and Others (supra), (4) U.P. State Electricity Board v. City Board, Mussoorie (supra), (5) State of M.P. v. Vyankatlal (supra) and (6) Ayurveda Pharmacy v. State of Tamil Nadu (supra). In none of these later decisions the Supreme Court had expressly referred to their earlier decision in M/s. D. Cawasji and Co. s case (supra). Secondly, M/s. D. Cawasji and Co. s case (supra), besides referring in paragraph 10 about the absence of any provision for denying relief of refund to the assessee on the ground that he had passed on the burden, Mathew, J. did not deal with the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng moulding of relief of refund by restoring the sums to persons who acutally had paid, should be limited to cases of fee and not tax also. The principles of unjust enrichment in appropriate cases could be considered in different classes of compulsory levy of taxes, duties and fees. The contrary arguments of the Petitioners are no longer available after the emphatic observations about unjust enrichment made by the Supreme Court in paragraph 14 of their judgment in the case of State of M.P. v. Vyankatlal (supra) which reads as follows:- The principles laid down in the aforesaid cases were based on the specific provisions in those Acts but the same principles can safely be applied to the facts of the present case inasmuch as in the present case also the respondents had not to pay the amount from their coffers. The burden of paying the amount in question was transferred by the respondents to the purchasers and, therefore, they were not entitled to get a refund. Only the persons on whom lay the ultimate burden to pay the amount would be entitled to get a refund of the same. The amount deposited towards the Fund was to be utilised for the development of sugarcane. If it is not possib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mil Nadu (supra) is in fact an instance where benefits of refund of sales tax which had been illegally collected were extended, by consent/concession of the Petitioners, to those who had ultimately borne the burden of illegal taxation. But even when the parties to a Writ Petition do not give their consent, the Court does not lack jurisdiction to pass appropriate consequential orders for giving benefits of tax refunds to those who had ultimately shouldered its burden. 29. Thus, we reach the conclusion that when tax has been collected without authority of law, the State is bound to refund the case. Ordinarily, the tax illegally collected ought to be returned to the person from whom it had been collected. The concept of unjust enrichment is, however, not altogether irrelevant in the matter of granting refund of tax which has been collected without authority of law. 30. Excise duty has certain special traits which have a bearing on the question of refund of duty illegally collected. Excise duty is a tax on manufacture of goods and it is collected at the time of removal of excisable goods from the places of manufacture or from approved warehouses. The legal obligation of the manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on affidavit and the Writ Court would decide the question according to the facts and circumstances of the case. In other words, the Writ Court is required to satisfy itself that the tax burden had been in fact shifted to others and that an order for refund in favour of the Writ Petitioner would result in his unjust enrichment. 32. Even when in a given case the Court is satisfied, on facts, that the Writ Petitioner has already passed on to others the burden of tax, there could be no uniform formula for moulding the consequential relief for benefiting those who had ultimately borne the burden. The form of the said consequential relief is to vary according to the facts of each case. Without attempting to be exhaustive, we may give some of the instances of relevant facts - the total amount which is refundable, nature of the tax, the nature of the product on which the duty was illegally imposed, the possibility of identifying the persons who had ultimately borne the tax, etc. When the persons who had borne the ultimate burden form a small class, it would not be difficult to identify them and to pass appropriate order of refund in their favour. But when tax had illegally been imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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