TMI Blog2015 (9) TMI 727X X X X Extracts X X X X X X X X Extracts X X X X ..... tracted and would disentitle the manufacturer/payer from claiming any refund contrary to the said proviso. However, in those cases where the refund proceedings had finally been terminated, in the sense – that the appeal period has also expired – before the commencement of the amended provision, these cannot be re-opened and/or governed by the amended provision. Only after amendment in Section 11B of the Act in the year 1991, any person applying for refund has to establish that incidence of such duty has not been passed on by him to any other person. The unamended provision did not contain any such stipulation. Therefore, under the old provision, the only obligation of the person claiming refund was to make such an application before the expiry of six months from the relevant date and to show how the refund was admissible to the applicant. In such a case, the Assistant Collector of Central Excise was to only examine as to whether excise duty was paid in excess etc. and was refundable to the claimant as a result of adjudication of the dispute or otherwise. It is only in the amended provision that additional stipulation is provided as per which the claimant is required to file, al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 11B of the Central Excise Act, as amended, applies to cases where though an order has been passed directing refund, implementation of the order is pending? 2) The High Court has answered the aforesaid question in favour of assessee holding that since the proceedings under the old Section 11B of the Act had attained finality, the amended provision of Section 11B of the Act, in particular, proviso to sub-section (1) shall not apply. In other words, the principle of 'unjust enrichment' which was introduced by way of amendment of Section 11B in the year 1991 shall not be attracted in the instant case as the proceedings under the unamended Section stood finalised with the direction in the application filed under unamended Section 11B of the Act to refund the excise duty that was paid by the respondent/assessee. To put it pithily, the High Court has held that merely because implementation of the aforesaid order was pending, in the sense that direction to refund the amount had not been carried out, the authority could not go into the question of unjust enrichment by invoking the proviso to sub-section (1) of Section 11B of the Act that had been introduced by that ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with the provisions of sub-section (2), substituted by the amendment. Thus, the applications even filed under the unamended Act, if not disposed of and still pending, are to be treated as filed under the amended Section 11B and the consequence thereof is that even in respect of such applications doctrine of unjust enrichment would be applicable. In this scenario, when an application was not pending, in the sense that orders thereon had already been passed directing refund but the amount had not been refunded so far, we have to determine as to whether such a situation has also to be dealt with under the amended section thereby bringing into operation the doctrine of unjust enrichment ? As mentioned above, the High Court has answered this question in the negative and this Court is called upon to decide the veracity of the said view taken by the High Court in the instant appeal. 5) The facts which need to be noted for the purposes of this appeal do not need a large canvass and are recapitulated in brief, as under: 6) The period involved for which the respondent wanted refund of the excise duty paid by it is 1970-1978. It may be mentioned that there was a dispute regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled rectification application which was dismissed by the Tribunal on 20.02.2002. Thereafter, appellant filed reference application before the High Court of Delhi in terms of 35G(3) of the Act raising the question of law which has already been reproduced in the earlier part of this judgment. Again, as pointed out above, the High Court has answered this question in favour of assessee, recording the following findings: (a) It has been held that there are no merits in this reference, as the question involved is clearly settled by the 9-Judge Bench decision of this Hon'ble Court in the case of Mafatlal Industries Ltd. (supra) wherein this Hon'ble Court held that if an application for refund has been disposed off, and the order had become final before the 1991 amendment to Section 11B came into force, the principles of unjust enrichment will not apply. (b) Section 11-B, after the 1991 amendment, stated that the party applying for refund had to establish that the incidence of such duty had not been passed on by him to any other person. It follows, therefore, that Parliament did not apply the principles of unjust enrichment to cases covered by the unamended Section11B a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to in section 12A) as the applicant may furnish to establish that the amount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person: Provided that where an After 1991 amendment, the material part of Section 11B reads as follows:application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991 (40 of 1991), such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) as substituted by that Act: Provided further that the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest. (2) If, on receipt of any such application, the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty paid by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the issue of the notification, and, if it is not sitting, within seven days of its reassembly, and the Central Government shall seek the approval of Parliament to the notification by a resolution moved within a period of fifteen days beginning with the day on which the notification is so laid before the House of the People and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder. (5) For the removal of doubts, it is hereby declared that any notification issued under clause (f) of the first proviso to sub-section (2), including any such notification approved or modified under sub-section (4), may be rescinded by the Central Government at any time by notification in the Official Gazette. Explanation.--For the purposes of this section,-- (A) refund includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il above. However, it is pertinent to keep in mind that applications for refund of excise which were preferred by the assessee had already been allowed finally by the orders of CEGAT dated 01.06.1989 and 06.06.1989. This obviously happened before the amendment in the Section in the year 1991. At the same time, the refund had not been actually paid to the assessee till 1991 when the provisions of Section 11B came to be amended. We now advert to the decision in the case of Mafatlal Industries Ltd. (supra). 10) It is a nine Judge Bench decision. Majority opinion was delivered by B.P. Jeevan Reddy, J. for himself and on behalf of four other Judges. K.S. Paripoornan, J. and S.C.Sen, J. wrote their separate opinions. Hansaria, J. agreed with the conclusions and reasoning of Paripoornan, J. However, insofar as issue at hand is concerned, they concurred with the majority opinion rendered by B.P. Jeevan Reddy, J. Thus, eight out of nine Judges have taken the same view. A.M. Ahmadi, the then Chief Justice, was the only dissenting Judge, who took contrary view on this particular issue. With this background in mind, we reproduce the following relevant portions from the opinion of B.P. Jeeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an unwarranted advantage he had under the overruled decision. In cases, where the burden is not passed on, there is no prejudice; he can always get the refund. 97. There is yet another circumstance: Section 12-B does not create a new presumption unknown till then; it merely gives statutory shape to an existing situation, as explained hereinbefore. At the most, it can be said that there were two views on the subject and Section 12-B affirms one of them. Even without Section 12-B, the true position is the same, as held by us in the earlier part of this judgment. The obligation to prove that duty has not been passed on to another person is always there as a precondition to claim of refund. It cannot also be said that by giving retrospective effect to Section 11-B, any vested rights or substantive rights are being taken away. The deprivation, if at all, is not real. The manufacturer has already collected the duty from his purchaser and has thus reimbursed itself. By applying for refund yet, he is trying to reap a windfall; deprivation of that cannot be said to be real or substantial prejudice or loss. A manufacturer had no vested legal right to refund even when he had passed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has not in his turn passed on the duty to others. It is, therefore, not correct to suggest that the Act does not provide for refund of duty to the person who has actually borne the burden. There is no vice in the relevant provisions of the Act. Rules cannot be relied upon to impugn the validity of an enactment, which must stand or fall on its own strength. The defect in the Rules, assuming that there is any, can always be corrected if the experience warrants it. The Court too may indicate the modifications needed in the Rules. The Government is always prepared to make the appropriate changes in the Rules since it views the process as a trial and error method - says Shri Parasaran. 105. It would be evident from the above discussion that the claims for refund under the said two enactments constitute an independent regimen. Every decision favourable to an assessee/manufacturer, whether on the question of classification, valuation or any other issue, does not automatically entail refund. Section 11-B of the Central Excises and Salt Act and Section 27 of the Customs Act, whether before or after the 1991 Amendment - as interpreted by us herein - make every refund claim subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w and not for abrogating it. The said enactments including Section 11-B of the Central Excises and Salt Act and Section 27 of the Customs Act do constitute law within the meaning of Article 265 of the Constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the enactments are self-contained enactments providing for levy, assessment, recovery and refund of duties imposed thereunder. Section 11-B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be. It is necessary to emphasise in this behalf that Act provides a complete mechanis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution 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 and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State, i.e., by the people. There is no immorality or impropriety involved in such a proposition. The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot 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 perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decree his claim since it is bound to prejudicially affect the public exchequer. In case of large claims, it may well result in financial chaos in the administration of the affairs of the State. (viii) The decision of this Court in STO v. Kanhaiya Lal Mukundlal Saraf must be held to have been wrongly decided insofar as it lays down or is understood to have laid down propositions contrary to the propositions enunciated in (i) to (vii) above. It must equally be held that the subsequent decisions of this Court following and applying the said propositions in Kanhaiya Lal have also been wrongly decided to the above extent. This declaration - or the law laid down in Propositions (i) to (vii) above - shall not however entitle the State to recover the taxes/duties already refunded and in respect whereof no proceedings are pending before any authority/Tribunal or Court as on this date. All pending matters shall, however, be governed by the law declared herein notwithstanding that the tax or duty has been refunded pending those proceedings, whether under the orders of an authority, Tribunal or Court or otherwise. (ix) The amendments made and the provisions inserted by the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xii) Section 11-B does provide for the purchaser making the claim for refund provided he is able to establish that he has not passed on the burden to another person. It, therefore, cannot be said that Section 11-B is a device to retain the illegally collected taxes by the State. This is equally true of Section 27 of the Customs Act, 1962. 11) It is clear from the above that in no unambiguous terms and with utmost clarity and certainty, the majority interpreted amended provisions of Section 11B including proviso to sub-section (1) thereof to hold that so long as refund proceedings are pending, the amended provision would get attracted and would disentitle the manufacturer/payer from claiming any refund contrary to the said proviso. However, in those cases where the refund proceedings had finally been terminated, in the sense that the appeal period has also expired before the commencement of the amended provision, these cannot be re-opened and/or governed by the amended provision. Concurring with the aforesaid view, K.S. Paripoornan, J. expressed his opinion in the following manner: 342. ..Sections 11-B(2) and (3) cannot be made applicable to refunds already or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted, even when the order was passed, with the submission that the Assistant Commissioner even at this stage was competent to go into the question of unjust enrichment as order regarding grant of refund was post 1991 event. To buttress this submission, he argued that the principle of unjust enrichment was in the domain of public interest and intention by incorporating provisions like proviso to sub-section (1) of Section 11 was clear, namely, so far as amount is not actually refunded, the authorities were competent to invoke this doctrine of unjust enrichment . It was argued that it will be totally inequitable and unfair to the public as the party (assessee herein) would be unjustly enriched. He also relied upon the orders dated 18.07.1995 by the High Court in Civil Writ No. 3225 of 1991 specifically permitting the Assistant Collector to go into the question whether the assessee is to be granted the refund in spite of amended Section 11B of the Act with the following observation : Both the Counsel agree that a date may be fixed when the petitioner shall appear before the collector/Assistant Collector, Central Excise, Trichiapalli, to go into the question if petitioner should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpreted by this Court in Mafatlal Industries Ltd. (supra). 16) Once we find that no such application was pending and the orders on the said application had already been passed, the proviso ceases to have any application. The reason, even otherwise, is very obvious. Section 11B relates to claim for refund of duty and the procedure for such a refund is stipulated in this section. As per sub-section (1) thereof, any person claiming refund of any duty of excise has to move an application for refund of such duty to the Assistant Commissioner of Central Excise. Once such an application is made, the same is to be considered in accordance with this provision. As already pointed out above, under the unamended provision, the Assistant Commissioner was not required to go into the question as to whether incidence of such duty had been passed on by the applicant claiming refund to any other person or not. However, if the application was not decided till the time amendment was incorporated in the year 1991, as per the proviso, while dealing with such an application for refund, the Assistant Commissioner is still empowered to go into this question even when the application was filed before th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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