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M/s. SESCOT Sheet Metal Works Ltd. Versus The Customs, Excise & Service Tax Appellate Tribunal & The Commissioner of Central Excise

2015 (4) TMI 386 - MADRAS HIGH COURT

Denial of refund claim - Unjust enrichment - Applicability of doctrine of unjust enrichment to State undertaking - Held that:- Cursory reading of the order passed by the Tribunal, reveals that the Department itself has accepted that the appellant is a State funded, State controlled and State monitored organisation supplying goods to Civil Supplies Corporation, which is another organ of the State. The order further reveals that the goods supplied by the appellant to the Tamil Nadu Civil Supplies .....

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s a primary concern of the State and the appellant is supplying goods to the Tamil Nadu Civil Supplies Corporation and that both the entities are State funded, State controlled and State monitored organisations and are discharging duties for the welfare of the people of the country. - appellant will well fall within the definition of "State".

Since Department itself having admitted the fact that the appellant is controlled, funded and monitored by the State, it cannot be said that the .....

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der of the Tribunal in dismissing the appeal filed by it, the appellant/assessee is before this Court by filing the present appeal. This Court, vide order dated 6.3.08, while admitting the appeal, framed the following substantial questions of law for consideration :- "i) Whether in the facts and circumstances of the case, the 1st respondent Tribunal is right in holding the appellant is not a "State"? ii) Whether the doctrine of "unjust enrichment" is applicable to " .....

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ensure that a fresh counsel is allocated with the present matter instead of leaving the case to limbo. Nevertheless, on the question of law involved, this Court is proceeding to decide the issue in the absence of the respondent. 3. The facts, in a nutshell, are as hereunder :- The appellant, a wing of the Government of Tamil Nadu, engaged in the manufacture of steel metal products, supplying their entire goods to the Tamil Nadu Civil Supplies Corporation, another undertaking of the State, claim .....

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he ground of unjust enrichment and held that the decision in Mafatlal Industries Ltd. - Vs - Union of India & Ors. (1997 (89) ELT 247 (SC)) does not in any way come to the rescue of the appellant and also further held that the appellant is not a "State" as envisaged under Article 12 of the Constitution of India and, therefore, is not liable to claim refund. 4. Aggrieved against the said rejection, the appellant preferred appeal before the Commissioner of Central Excise (Appeals), w .....

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ution, which represented the people of the country and, therefore, the dictum enunciated in the said decision cannot be made applicable to a company (appellant herein) instituted by another company, viz., Tamil Nadu Civil Supplies Corporation Ltd. The Tribunal further held that the appellant, though supplying materials to the Civil Supplies Corporation, a body of the State, the role of the appellant is limited, though albeit of some significance to the common people, nevertheless, it cannot be h .....

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ts that the fact that the manufacturer and the buyer are State Government owned units have not been taken into consideration by the authorities below as well as the Tribunal. It is the further submission of the learned counsel for the appellant that the dictum laid down by the Supreme Court in Mafatlal Industries case (supra), which is binding on all authorities, has not been considered in the proper perspective. It is further submitted that the appellant, being a State Government owned unit, fu .....

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back and say that the appellant is not a "State" and, therefore, the concept of unjust enrichment applies to the appellant. Reliance has also been placed on the decision of this Court in Commissioner of Central Excise, Chennai - I - Vs - Superintending Engineer, TNEB (2014 (300) ELT 48 (Mad.)) and also the judgment of the Karnataka High Court in Commissioner of Central Excise, Bangalore - Vs - Karnataka State Agro Corn Products Ltd. (2006 (202) ELT 47). 7. Heard the learned counsel app .....

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he government within the territory of India or under the control of the Government of India." 9. The meaning of "State" has been enlarged by the Supreme Court in very many decisions, more particularly by the Constitution Bench of the Supreme Court in the case of Pradeep Kumar Biswas - Vs - Indian Institute of Chemical Biology (2002 (5) SCC 111). The Supreme Court, in Zee Telefilms Ltd. - Vs - Union of India (2005 (4) SCC 649), while considering similar matter as to when an agency .....

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re not a rigid set of principles so that if a body falls within any one of them it must, ex hypothesi, be considered to be a State within the meaning of Article 12. The question in each case would be whether in the light of the cumulative facts as established, the body is financially, functionally and administratively dominated by or under the control of the Government. Such control must be particular to the body in question and must be pervasive. If this is found then the body is a State within .....

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own in Pradeep Kumar Biswass case (supra) for a body to be a State under Article 12. They are: "(1) Principles laid down in Ajay Hasia (1981 (1) SCC 722) are not a rigid set of principles so that if a body falls within any one of them it must ex hypothesi, be considered to be a State within the meaning of Article 12. (2) The question in each case will have to be considered on the basis of facts available as to whether in the light of the cumulative facts as established, the body is financi .....

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funded, State controlled and State monitored organisation supplying goods to Civil Supplies Corporation, which is another organ of the State. The order further reveals that the goods supplied by the appellant to the Tamil Nadu Civil Supplies Corporation are used in relation to Public Distribution System. In such a backdrop, this Court is unable to understand as to the basis on which Tribunal has held that there is nothing in the nature of activity of the appellant that is relatable to "Stat .....

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lfare of the people of the country. 11. If the finding as recorded by the Tribunal is accepted that the appellant cannot be held to be a "State" as defined under Article 12 of the Constitution, then the said finding is in direct conflict with the stand of the Department that the appellant is a State funded, State controlled and State monitored organisation. Further, as accepted by the Department, the appellant organisation is a State funded, State controlled and State monitored organis .....

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uarely within the definition of "State" as propounded by the Supreme Court. Accordingly, the 1st substantial question of law is answered in favour of the appellant and against the Revenue. 13. The scope of "unjust enrichment" and its applicability in a case of refund claim has been discussed in detail by the Supreme Court in Mafatlal Industries case (supra), wherein the Supreme Court has enunciated the following proposition of law and held as under :- "99. ......... (iii .....

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as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden .....

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nnot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched." 14. Similar view has been taken by this Court in Commissioner of Centr .....

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