TMI Blog1983 (2) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... do the same thing because it is sitting in Court Room No. A (i.e., while deciding appeal against a decree in a suit)? The question is when the court finds that a party is likely to be unjustly enriched, the court may refuse relief in writ jurisdiction and there is no dispute that the court has discretion to refuse relief while deciding a writ petition. But on the same facts under almost similar circumstances, while deciding an appeal against a decree passed in a suit, will the court have no power to refuse the relief prayed for and/or to mould the relief in appropriate form so as to prevent unjust enrichment and secure restitution? 2. These are some of the questions which arise in this appeal filed by the Union of India against the judgment and decree passed by the 3rd Jt. Civil Judge (SD), Vadodara, on May 5, 1979, in Special Civil Suit No. 121 of 1974. The trial Court granted the declaration to the effect that the decision and action of the excise officers in levying and charging excise duty from the plaintiff-company on the value at which the products, i.e., cameras, were sold by the plaintiff s distributors to their customers and also on the packing cost was illegal, ultra v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding the cost of packing materials in the assessable value for the period commencing from March 1, 1973 to December 1973. On the aforesaid premises, the plaintiff-company prayed for a declaration that the decision and action of the excise authorities in levying and charging excise duty from the plaintiff-company on the value at which the products are sold by its distributors to their customers and also on the cost of packing materials are illegal, ultra vires, arbitrary and outside the powers of their jurisdiction and also in contravention of the provisions of the Act and prayed for a decree against the defendant for payment of ₹ 5,21,260/-. 5. The Union of India filed its written statement on October 30, 1974 and resisted the suit on facts as well as on law points. Several contentions with regard to jurisdiction of the civil court and limitation were also raised. The trial court framed issues at Exhibit 15. Over and above the issues regarding bar of limitation, maintainability of the suit and the jurisdiction of the civil court, the issues raised were pertaining to the legality and validity of the determination of the assessable value of the excisable commodity and the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the present case. The newly inserted Section 40 read as follows :- Protection of action taken under the Act :- (1) No suit, prosecution or legal proceeding shall lie against the Central Government or any officer of the Central Government or a State Government for anything which is done or intended to be done; in good faith, in pursuance of this Act or any rule made thereunder. (2) No proceeding, other than a suit, shall be commenced against the Central Government or any officer of the Central Government a State Government for anything done or purported to have been done in pursuance of this Act or any rule made thereunder, without giving the Central Government or such officer a month s previous notice in writing of the intended proceeding and of the cause thereof or after the expiration of three months the accrual of such cause. Mere reading of the section makes it clear that there is radical change in the new provision inasmuch as the proceeding by way of suit has been taken out of the purview of sub-section 2 of Section 40 of that Act and hence the question of bar of limitation raised by the counsel for the Central Government does not survive. Therefore t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the plaintiff-company was based on the provisions of Section 72 of the Contract Act. According to him the payment of excise duty, now sought to be recovered, was made under a mistake of law and alternatively under coercion. 11. However, in the plaint there is no averment regarding the payment having been made under a mistake of law or under coercion. No basis whatsoever is laid in the pleadings for invoking the provisions of Section 72 of the Contract Act. On the basis of the pleadings, the trial Court framed issues. First three issues related to the maintainability of the suit, limitation and jurisdiction of the civil Court to entertain and decide the suit. Rest of the six issues related to the legality of the assessment made on the basis of price charged by the distributors of the plaintiff-company from their customers and also related to the inclusion of cost of packing materials while determining the assessable value of the article. The controversy between the parties centered round the question as to whether the action taken by the excise authorities while determining the assessable value of article was legal and valid or not, and if not, whether the plaintiff-company was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and not the price charged by the distributors from their customers. The plaintiff made further representation after the judgment of the Supreme Court in Voltas case (supra) and the underlined sentences make it abundantly clear that the plaintiff was never under a mistake of law. The plaintiff after the judgment of the Supreme Court asserted that what was its belief as regards the position of law was now even confirmed by the Supreme Court. In view of this state of pleadings, it cannot be said that the plaintiff has pleaded that the payments were made under a mistake of law. 12. What is a mistake? Mistake lies in thinking that the money paid was due when in fact it was not due and that mistake, if established, entitled the party paying the money to recover it back from the party receiving the same. Therefore, the payment which may not be legally due, and which could not have been enforced at law, if made under a mistaken belief, that alone can be said to have been made under a mistake of law. Here the reading of the plaint makes it clear that as far as the plaintiff-company was concerned, it was never under any mistaken thinking and there was no mistaken belief in its mind. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In the evidence of the plaintiff s sole witness Mr. B.P. Parikh, it is only stated that they were forced to pay the duty as charged as otherwise the goods could not have been cleared without paying the duty for the price sold by the distributors to their customers and on the value of packing charges. This is the only basis to spell out the coercion. Be it realised that no issue is framed on this point. No issue has been sought by the plaintiff in this behalf. In the absence of specific and unambiguous pleadings, other side had no opportunity to meet with the case based on the allegation that the payment of excise duty in question was made under mistake or coercion. Despite this position, since the argument has been advanced on this score, we have not prevented the counsel from making submission in this behalf for the first time at this stage. 15. It is true that meaning of coercion as defined under Section 15 of the Contract Act cannot be imported while interpreting the provisions of Section 72 of the Contract Act. But, that does not mean that no element of compulsion is required to be pleaded and proved by the plaintiff while invoking the provisions of Section 72 of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e distributors of the company from their customers. Mere vague statement in the plaint that the excise officers insisted upon to declare the price of the distributors cannot be treated as sufficient pleading to spell out compulsion. Even the plaintiff did not consider this much pleading to be sufficient and did not seek any issue on the point. In the evidence, the plaintiff s witnesses stated that they were forced to pay because, otherwise they would not have been able to clear the goods. From this statement in the evidence, it was sought to be argued that the very provision of law is such that the plaintiff was under compulsion to make the payment and therefore coercion and compulsion should be inferred and believed. We are afraid, this is not the position of law. In the instant case, it is not the case of the plaintiff that at any time, any protest was registered against the charging of the excise duty on the basis of the price charged by the distributors from their customers. There is not even a semblance of evidence of compulsion. There is only a vague statement in the pleadings that excise authorities insisted that the plaintiff should declare the price charged by its distribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Agfa Gavaert India Ltd., Bombay, as its sole distributor. It is also in evidence that the company has its dealing in collaboration with foreign company Agfa Gavaert. This is not a case of a person hailing from rural area not knowing the position of law and likely to be easily threatened even by a show of coercive action or expression of such words. The company knew the legal position right from the beginning and made payments on the basis of the price charged by the distributors from their customers. Thus the payments were made with full knowledge of facts and the position of law. Such payments cannot be said to have been made under compulsion. Had there been a case of compulsion, the plaintiff-company would have pointed out the name of the officer concerned who insisted to file the price list of the distributors of the company. The plaintiff would have written a protest letter to the concerned officer or to the superior officer. The Company s office is situated at Vadodara and the Headquarters of the Excise Collector are also at Vadodara. The company could have drawn the attention of the superior officers about the compulsion having been made by some inferior officers. No such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Central Government a complete legitimate course which could have been adopted by the plaintiff-company, as laid down under the provisions of the Act and the rules. But admittedly not a single step in this direction is taken by the plaintiff-company. It is not even the case of the plaintiff-company that it had chosen to adopt this course but it was prevented by any of the excise officers from pursuing this course. Another course left open to the plaintiff-company was to remove the excisable goods from the factory after payment of excise duty on the basis of the determination of assessable value of the excisable article in question by the department. The plaintiff-company adopted this course. The plaintiff-company had two choices before it (i) file objection as provided under law, seek provisional assessment and remove the goods or (ii) pay duty as per the determination of assessable value arrived at by the excise officers and then remove the goods. Any one of these two courses are perfectly legal and valid. It was open to the plaintiff-company to choose either of the courses. The plaintiff-company chose to pay the excise duty on the basis of the assessable value as deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce adopted by the plaintiff-company. A purely pragmatic and business-like approach. Had the approach been otherwise, it would have called for scrutiny. 21. Therefore both these grounds, payment made under mistake of law or under coercion, have not been made out in the pleadings. There is no issue on this point and therefore there is no discussion whatsoever in the judgment of the trial court. But in view of the fact that the plaintiff-company sought to make out a case on these two grounds we ourselves have perused the pleadings and the evidence on the point and on the re-appreciation of evidence, we have come to the conclusion that no case regarding payment made either under mistake of law or under coercion has been made out by the plaintiff-company. 22. In view of this position, can the decree passed by the trial court be sustained as discussed hereinabove. The trial court has merely examined the legality or otherwise of the actions taken by the officers of the Excise Department. The trial court after holding that the action taken by the officers of the Excise Department was illegal and not in conformity with the provisions of the Act, straightaway came to the conclusion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is any averment in this connection. As far as the question of coercion is concerned, there is vague averment to the fact that there were some circumstances under which the plaintiff-company was required to file the price list as per the prices charged by the distributors from their customers. Pleadings in this connection is also not clear and sufficient. In this state of pleadings in the plaint remand would serve no purpose whatsoever. Ordinarily in order to do justice the appellate court would and normally should exercise powers of remanding a matter. In the instant case, by remanding the matter which ends of justice are to be served? It may be noted that excise duty is an indirect tax. The burden of the duty is always passed on to the consumers. It is not the case of the plaintiff-company that the burden of the duty even to the extent of one rupee had to be borne by the company itself. It can never be so because every manufacturer is legitimately entitled to pass the burden of duty on to the wholesaler and the wholesaler in turn will pass on the same to the retailer who will ultimately pass it on to the consumers. Therefore this is not the case where the plaintiff has ultimatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be included in the assessable value of the excisable goods arises from the confusion as regards the incidence of duty and the machinery provided thereof. In this connection the nature of excise duty should be properly understood. Excise duty is a tax on the manufactured goods. Entry No. 84 of Schedule 7 of the Constitution also makes it clear that the excise duty is a tax on goods manufactured in India. The Supreme Court in the case of Ramkrishna Ramnath v. Kamptee Municipal (AIR 1950 S.C. 11 at page 14, para 11) in terms held that excise duty is a tax on manufactured goods. Again in the case of R.C. Jall Parsi v. Union of India, reported in AIR 1962 S.C. 1281, in paragraph 7 thereof, the Supreme Court, after considering the decisions of the Federal Court and the Privy Council, has observed as follows : .........It is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, that is, its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s within the competence of the Legislature to include the cost of packing materials for the purposes of determination of the assessable value of the commodity. In this view of the matter, the finding given by the trial court as regards the cost of packing materials and the decree passed on that count is erroneous and not in conformity with the law laid down by the Full Bench of this High Court in Calico Mills case (supra). The trial court clearly erred in granting declaration to the effect that the action of inclusion of cost of packing materials in the assessable value of the excisable article by the officers of the Excise Department was illegal and void. This finding is not correct and hence the said finding also requires to be reversed and set aside. Therefore, this part of the decree passed by the trial court also will have to be reversed and set aside. 27. Can the decree passed by the trial court granting relief of tax paid be allowed to be maintained? Will it not be necessary to mould the relief if decree passed in favour of the plaintiff is to be maintained? These questions have arisen and have been argued by both the sides on the assumption that the plaintiff has succes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its discretion and even go to the extent of refusing the relief of refund of the amount of tax recovered by the State which might have been eventually declared illegal. However, it is contended that the court will not have any discretion to refuse the relief of refund of amount of tax the tax which eventually may be declared unlawful, while deciding an appeal against a decree passed in a suit. The basis of this contention is that in a suit filed by the plaintiff, once his claim is established, relief prayed for by him must be granted by the court. The court cannot allow itself to be influenced by equitable considerations. In this connection reliance was placed on the decision of the Supreme Court in Kanhaiya Lal s case (supra) and on the decision in the case of M/s. D. Cawasji Co. v. State of Mysore and Another, reported in AIR 1975 S.C. 813 = 1978 E.L.T. (J 154). The counsel for the respondent-plaintiff relied upon the following observations of the Supreme Court in paragraph 10 of the judgment : ......... Nor is there any provision under which the court could deny refund of tax even if the person who paid it has collected it from his customers and has no subsisting liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it will pass on the amount of tax so collected to the Government and the `Hand will not turn to `His own (the manufacturer s) pocket. It is not even legally permissible for `him (the manufacturer) to turn his `Hand towards his own pocket and retain the amount. Section 64A of the Sales of Goods Act indicates that the buyer is entitled to remission of the amount in case the amount of tax is decreased; similarly buyer will be under an obligation to pay higher amount in case the amount of tax is increased meanwhile. Incidentally it may be noted that excise duty is specifically mentioned as one of the taxes in this section in reference to which the provision is made. In fact it would be against the basic cannons of ethics and morality that such a `hand should turn to `his (manufacturer s) own pocket. If this is permitted, it will be difficult to distinguish between `pick-pocketing simpliciter and `pick-pocketing under the cover of law . At least we confess our ignorance and frankly state that we are unaware of any civilised system of laws which permits the `hand of the manufacturer or the businessman as the case may be to take out the amount from the pockets of the consumers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s restitution if the justice of the case so requires. [Per Lord Denning in Nelson v. Larholt (1948) I.K.B. at p. 339]. The aforesaid observations made in the English cases have been approvingly quoted by the Supreme Court while explaining the juristic basis of provisions contained in Chapter V of the Contract Act, in the case of Mulamchand v. State of Madhya Pradesh, A.I.R. 1968 Supreme Court, p. 1218, (paras 6 7). From this it should be clear that the underlying object of Section 72 is that a person cannot retain the money of, or some benefit derived from another which legitimately does not belong to him and which it would be unconscionable to allow him to retain the same. Therefore, the basic idea is that there should be restitution of the money or the benefit, derived on account of mistake or coercion and the person who has been deprived of the money or benefit should be restored the same, and that there should not be unjust enrichment. 32. In this situation, if the relief of refund prayed for by the plaintiff is denied straightaway, it may be argued that the State which had no authority of law to recover the amount of tax will retain the same and in that case the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be oblivious of the socio-economic consequences of its decision and cannot ignore the socio-economic realities of the life of the nation. Judiciary is also an organ of the State machinery and, therefore, it has also to look at the provisions contained in Chapter IV of the Constitution. We cannot forget that the people have solemnly resolved to constitute this country into a Sovereign Socialist Democratic Republic. Now in this background the question be further examined. 35. If the relief of refund of the amount prayed for by the plaintiff is straightaway granted, will the object underlying the provisions of Section 72 of the Contract Act be achieved? Will there be restitution and prevention of unjust enrichment? If yes, the decree must follow. If no, will it not be the bounden duty of the Court in order to do complete justice and in order to achieve the underlying object behind the provisions of Section 72 of the Contract Act that the relief be suitably moulded and the appropriate consequential decree be passed so that the sufferer of the injury is compensated? If the relief of refund prayed for by the plaintiff is granted straightaway without moulding the relief, following resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate form, the aforesaid consequences would arise. Such a situation would never have been contemplated by the Legislature. Injury is suffered by X (consumer) and compensation to be paid to Y (manufacturer), why? This is not the object of Section 72 of the Contract Act. Look at the irony of the situation. Section 72 of the Contract Act aims at prevention of unjust enrichment. The provisions of this very section are called in aid for securing unjust enrichment. Can the conscience of any civilised nation tolerate this? 36. By the very nature of the complexity of relations in the modern day society, the Legislature is incapable of contemplating all possible circumstances which may arise in future litigations and consequently the Legislature is incapable of laying down the procedure to be followed by the courts in such situations. But even in such situation the Court is not powerless. The Courts in India are guided by the principles of justice, equity and good conscience. In such situations the courts have inherent powers, nay, it is the duty of the courts to exercise its inherent powers, so as to meet the ends of justice and prevent the abuse of the process of court. The court must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lief and for passing the decree accordingly so as to prevent the unjust enrichment and see that the benefit reaped in terms of money is restored to the ultimate consumer to whom it belonged. 39. How the relief may be moulded and what decree can be passed in such a situation? The Full Bench of this High Court in Calico Mills case (supra) has given an indication as to what may be done by the Court in such cases. It is observed to the effect that the amount of tax may be directed to be refunded to the buyer or the same be directed to be deposited in a bank account for the benefit of the consumers instead of allowing the petitioner to secure unjust enrichment. In such situations, in our opinion also, the court should direct the defendant state to deposit the amount to be refunded in a bank account to be opened for the benefit of the consumers. Such an account may be opened in the joint name of the plaintiff and the defendant or in the name of either of them as it may be found appropriate by the Court having regard to the facts and circumstances of each case. The parties should be enjoined with a duty to refund the amount to the ultimate consumer if and when such a claim is made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b on such speculative litigation. 6. If the relief is moulded and the decree is passed accordingly the manufacturer or the businessman will not suffer any injustice whatsoever. The plaintiff who may be a manufacturer or a businessman and the Government, will have the satisfaction that the case of justice not technical justice but substantial justice has been served and justice to the people is not sacrificed at the altar of technicality. 7. The principles enshrined in Article 38 of the Constitution will be achieved to some extent, namely, the orders so passed shall not add to inequality of income and it will be in the direction of elimination of the inequality of income. 8. The legal system will not be exposed to the charge that it operates against unidentifiable numerous consumers of the commodity in question. It is also the duty of the State as enshrined in Article 39A of the Constitution to secure that the operation of legal system promotes justice on the basis of equal opportunity. In a situation like this where it is not possible for the numerous unidentifiable consumers of the commodity in question to go to the court of law and get the amount of tax paid by them refu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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