TMI Blog1981 (12) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... id Writ Petition was disposed of along with a batch of Writ Petitions filed by some other assessees in which the scope of Section 4 of the Central Excises and Salt Act, 1944 as amended by the Central Excises and Salt (Amendment) Act, 1973 which came into force on 1-10-1975, was canvassed. The decision of the Division Bench was reported in Indo-National Limited, Nellore-4 and others v. Union of India and others, 1979 E.L.T. 334 (AP). In paragraph 63 of the judgment, which disposing of the batch of Writ Petitions, the Division Bench observed : "......the only question raised by the petitioner-company is the legality of levy of excise duty on the cost of jute bags in which the excisable goods manufactured by the Company were packed and sold between 1-10-1975 to 8-1-1976. Admittedly, even after the amended Sec. 4 came into force, till 4-12-1975, the excise authorities did not include the cost of jute bags in the assessable value. However, from 5-12-1975 to 9-1-1976, the excise authorities made a demand in a sum of Rs 2,08,791.05 towards excise duty on the cost of jute bags. The petitioner objected to the demand, but, however, paid the amount under protest. For the earlier period betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or charges erroneously paid. It runs thus: "11. No refund of duties or charges erroneously paid, unless claimed within three months.-No duties or charges which have been maintained with the Collector under Rule 9, and of which repayment wholly or in part is claimed in consequence of the same having been paid through inadvertence, error or misconstruction, shall be refunded (unless the claimant makes an application for such refund under his signature and lodges it with the proper officer) within three months from the date of such payment or adjustment, as the case may be." The above rule was omitted by the Central Excise (Fifteenth Amendment) Rules, 1980 by reason of insertion of Section 11B in the Act by Finance (No. 2) Act, 1980 which runs thus : "11B. Claim for refund of duty.- (1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the relevant date : Provided that the limitation of six months shall not apply where any duty has been paid under protest. (2) If on receipt of any such application the Assistant Collector of Central Excise is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms authorities under the Sea Customs Act on some of the goods imported by the appellant-company therein on the ground that the invoice price was not the real value of the imported goods was held to be without authority of law. The Union of India refused to refund to the appellant company therein the amount of excess duty paid on the ground that no such claim was made within three months from the date of payment. Reliance was placed upon Section 40 of the Sea Customs Act, which is in pari materia with Rule 11 of the Central Excise Rules, 1944. Adverting to the said plea, their Lordships of the Supreme Court observed : "Section 40 on which the Union of India relied in its return, provides that no customs duties or charges which have been paid, and of which repayment wholly or in part, is claimed in consequence of the same having been Paid through inadvertence, error or misconstruction, shall be returned, unless such claim is made within three months from the date of such payment. The section clearly applies only to cases where duties have been paid through inadvertence, error or misconstruction and where refund application has to be made within three months from the date of such pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isentitled the appellant-company to the refund having been put forward and the customs authorities not being entitled to retain the excess duty, there was a legal obligation on the part of the respondents to return the excess duty and a corresponding legal right in the appellant-company to recover it. Besides except S. 40, the Act contains no other provision laying down any limitation within which an importer has to apply for refund. The refusal to return the excess duty on the ground that the appellant-company had not applied within time provided by the Act was clearly unsustainable. Since there was not and could not be any dispute with regard to the invoice price being the real value there was no point in filing any appeal; nor could the omission to file any appeal be a proper or valid ground for refusing relief to the appellant-company, when there remained no longer any dispute between the parties as to the invoice price being the real value of the imported items. 7. In State of Madhya Pradesh v. Bhailal Bhai - AIR 1964 S.C. 1006 Sales Tax assessed and paid by the dealers in the State of Madhya Bharat was declared by the High Court of Madhya Bharat to be invalid in law. In som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain, where even if there is no such delay the Government or the statutory authority against whom the consequential relief is prayed for raises a prima facie triable issue as regards the availability of such relief on the merits on the grounds like limitation, the court should ordinarily refuse to issue the writ of mandamus for such payment. In both these kinds of cases it will be sound use of discretion to leave the party to seek his remedy by the ordinary mode of action in a civil court and to refuse to exercise in his favour the extraordinary remedy under Art. 226 of the Constitution. ............It appears to us however that the maximum period fixed by the legislature as the time within which the relief by a suit in a civil court must by brought may ordinarily be taken to be a reasonable standard by which delay in seeking remedy under Art. 226 can be measured. This court may consider the delay unreasonable even if it is less than the period of limitation prescribed for a civil action for the remedy but where the delay is more than this period, it will almost always be proper for the court to hold that it is unreasonable. The period of limitation prescribed for recovery of mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent years was finally assessed in 1951 and 1952. The appellant filed appeals against the various assessment orders to the appellate authority. The appeals were decided in June, 1955. The appeals against the assessment of industrial tax were allowed on the ground that the company was not liable to pay industrial tax as it did not carry on any business which was liable to be assessed to that tax and the various assessment orders under appeals were quashed. No direction was, however, given by the appellate authority for the refund of tax which had been realised from the company. Thereafter the company approached the various officers of the State Government of Madhya Bharat for the refund of tax amounting to Rs. 1,37,770-14-2 after appropriating Rs. 37,951-7-0 to excess profits duty from Rs. 1,75,722-5-2 paid by the company towards the tax and excess profits duty. The Government adjusted the amount due for excess profits duty as requested by the company and refunded Rs. 74,961-9-0 paid subsequent to January 26, 1950 when the Constitution came into force. It, however, refused to admit the claim for refund of the amount of Rs. 62,809-5-2 which had been realised from the company prior t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting the refund of amounts illegally realised, when the order under which the amounts had been collected has been set aside, to cases in which only orders for the refund of money are sought. The parties had the right to question the illegal assessment orders on the ground of their illegality or unconstitutionality and therefore could take action under Art. 226 for the protection of their fundamental right, and the courts, on setting aside the assessment orders, exercised their jurisdiction in proper circumstances to order the consequential relief for the refund of the tax illegally realised, we do not find any good reason to extend this principle and, therefore, hold that no petition for the issue of a writ of mandamus will be normally entertained for the purpose of merely ordering a refund of money to the return of which the petitioner claim a right." In the view expressed above, the appeal preferred by the Company was dismissed and the order of the High Court was confirmed. 10. It may be noted that in the present case not only the legality of levy of excise duty on the cost of jute bags is questioned but also refund of the same paid under protest is prayed for. There is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged. Their Lordships of the Supreme Court held that the impugned Section 11(2) of the Act was not within the competence of the State Legislature under Entry 54 of List II of Schedule VII of the Constitution and that the provisions of Section 20(c) being consequential to Section 11(2) would also fall along with it. Their Lordships added : "If a dealer has collected anything from purchaser which is not authorised by the taxing law, that is a matter between him and the purchaser, and the purchaser may be entitled to recover the amount from the dealer. But unless the money so collected is due as a tax, the State cannot by law make it recoverable simply because it has been wrongly collected by the dealer." 13. In Sales Tax Officer v. Tata Oil Mills Co. Limited - 36 STC 232 (S.C.) their Lordships of the Supreme Court held : "It would not, however, be permissible for the State Legislature to enact a law under entry 64 for recovery by the State of an amount which could not be recovered as Sales Tax or purchase tax in accordance with the law on the subject and which was wrongly realised by a dealer as sales tax or purchase tax. Such a law plainly would not be a law relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act filed a suit in the Court of the Civil Judge, Senior Division at Jalgoan contending that the Union of India illegally recovered from it certain monies purported to be excise duties under the Central Excises and Salt Act. The suit was decreed. The decree was assailed by the Union of India in the High Court of Bombay on the ground that Section 40 of the Central Excises and Salt Act excluded the jurisdiction of Civil Court to recover duty illegally collected by the Government. Repelling the contention, Mukhi, J., held that Section 40 of the Central Excises and Salt Act merely enacted immunity or protection against claims for damages against the Government itself or any of its officers for acts done in good faith and that question of collection of illegal duty and/or its recovery or refund were not questions covered by the said section and that Section 40 of the Central Excises and Salt Act did not bar the jurisdiction of civil or criminal courts from recovery of duty illegally collected. In result, the appeal preferred by the Union of India was dismissed. 17. In Associated Bearing Company Limited v. Union of India and another - 1980 E.L.T. 415 (Bombay), following the earlier de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 11 of the Central Excise Rules, 1944 for purposes of refund, that the amount of duty illegally collected was refundable even though it was recovered from the consumers by the manufacturers and might result in unjust enrichment, that where the constitutional validity of a levy was in question and the departmental action amounted to recovery of tax without authority of law, it could not be said that a suit was a remedy equally expenditious, efficacious and adequate as a proceeding under Article 226 of the Constitution and that the period of limitation for filing a proceeding under Art, 226 of the Constitution was three years from the date of the court declaring the law under which the duty was paid to be invalid. 19. The Union of India applied to the Supreme Court for special leave to appeal against the decision in Maharashtra Vegetable Products Pvt. Ltd. and another v. Union of India and others (Supra) and leave was refused by their Lordships of the Supreme Court consisting of the Chief Justice and Mr. Justice Eradi on 3-4-1981. 20. In Paper Products Ltd. v. Union of India - 1981 E.L.T. 538 (Bombay), a single Judge of the Bombay High Court held that if duty paid by mistake wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of the law the court was fully competent to allow the refund of the excess amount of duty under Article 226 of the Constitution even though the claim of refund had been held to be time barred by the departmental authorities. 26. In Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh - 24 STC 487 the appellant therein was a public limited company carrying on the business manufacturing and selling asbestos cement sheets and other products with its factory situated at Sanatnagar, Hyderabad in the State of Andhra Pradesh. For the year 1959-60, the Commercial Tax Officer, in assessing the turnover of the Company allowed a deduction of Rs. 57,590.37 in respect of railway freight on articles supplied to outstation customers. The Deputy Commissioner of Commercial Taxes later revised the assessment and directed that the railway freight paid in respect of the goods sold be included in the turnover. In appeal the Appellate Tribunal set aside the order passed by the Deputy Commissioner of Commercial Taxes. But the order passed by the Tribunal was set aside by the High Court of Andhra Pradesh and the order passed by the Deputy Commissioner was restored. A writ petition mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of the illegally levied and collected duty, to the assessee even if it results in unjust enrichment of the assessee. 28. On behalf of the Union of India, reliance is placed on the decision in Madras Aluminium Company Ltd. and Another v. Union of India - 1981 (8) E.L.T. 478 (Madras). The petitioners therein filed writ petitions before the High Court of Madras questioning levy of excise duty on aluminium properzi rods and praying for refund of the duty paid under mistake of law. Adverting to the claim of refund of excise duty, Division Bench of the High Court of Madras observed : "There is one other impediment in the way of the petitioners claiming refund of excise duty in this case. The petitioners, after paying the excise duty as per the classification made by the excise authorities, have passed on the same to the actual consumers and in fact, the actual consumers have borne the entire liability towards excise duty. The petitioners admit that they are not able to trace at this stage as to who are the ultimate consumers in respect of the goods which have suffered excise duty, in respect of which refund is now sought for by them. Though excise duty is levied at the production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their unjust enrichment to the extent of the amount directed to be refunded and the court will be justified in refusing to exercise its discretionary jurisdiction to direct the refund of the excise duty collected from the petitioners. It is well established that the right of the petitioners to get a refund of the excise duty is subject to questions of estoppel, limitation and the like. If peculiar circumstances existed and they showed that the amount the State has to refund really belongs not to the petitioners but to the consumers, then the court will be justified in refusing to direct refund. In this case, any direction to refund the excise duty to the petitioners will result in their retention of the duty collected by them from the consumers and the court will be siding an unjust enrichment by the petitioners by such a direction. Admittedly the petitioners have passed on the excise duty to the consumers and this was done on the basis that they have paid excise duty to the State. But for the payment of excise duty to the State the petitioners will not be entitled to or enabled to pass on the duty to the consumers. Therefore, if there is no possibility of excise duty being refun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e noticed that the various decisions rendered by the Supreme Court and referred to earlier, recognising the right of the assessee to claim refund of duties or taxes illegally levied from him and the corresponding legal obligation on the part of the Union of India or the State to refund the same to the assessee were not noticed by the Division Bench of the High Court. 29. Reliance was also placed upon the decision of a Division Bench of this court in G.S.G.A. Co. v. State of A.P. - 30 STC 120 wherein, adverting to a claim for refund of sales tax which was held to be illegally collected, it was held : "Even if the court is satisfied having regard to all the circumstances that the petitioners are entitled to refund of the tax, the petitioners may still not be granted this discretionary relief if it results in retention of the sales tax collected by them from the public and imposes the burden of refunding the tax on the State which it had collected under a valid assessment order. The discretionary jurisdiction of this court should be exercised for public good and not to facilitate the individual to make an unlawful gain at the expense of the public on the one hand and State on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided under the statute. He cannot invoke the jurisdiction of a civil court for questioning the legality or propriety of the assessment order and if that order cannot be questioned, then the amount paid or recovered pursuant to that order cannot be directed to be refunded by a civil court. If that be so then this court exercising jurisdiction under Article 226 of the Constitution must necessarily take into account whether a party who has by his own laches has not chosen to avail himself of the alternative remedy provided by the statute for questioning the erroneous decisions of the assessing authorities by taking the matter in appeal or in revision and also by reference to this court and has allowed the assessment orders to become final, which assessment orders are not allowed by the statute to be questioned even by way of a civil suit should be granted the indulgence to invoke the extraordinary jurisdiction of this court of the grant of the discretionary relief. Even this court cannot direct refund of tax paid in pursuance of such orders without quashing the assessment orders themselves. If the assessment orders have to be quashed, this court cannot shut its eyes to the long interv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing materials could not be legally included in arriving at the wholesale cash price of the excisable goods manufactured by the assessee. The Division Bench, however, declined to grant refund to the assessee of the amounts excess duty collected from the assessee without the authority of law. Mukhi J., speaking on behalf of the Bench observed : "It requires to be noticed that the amount comes to nearly Rs. 12 lakhs and the result of an order in their favour would be that the petitioners would be enriched to that extent without any real claim to that money in so far as the record shows that the moneys were recovered by the petitioners from their customers and then passed on to the respondents. ................................................. In the petition before us, I am unable to persuade myself that justice lies on the side of the petitioners and that this court will be doing justice in ordering the respondent to refund the amount of Rs. 12 lakhs to the petitioners when, to begin with, that money never came from the petitioner's pocket. It is true that the respondents may not have the legal right to retain that money, but in the circumstances of the case justice does not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, it should not also be permitted to the State. The State has no right to collect unauthorised tax or illegal tax. Good fiscal administration enjoins that all lawful taxes should be properly collected and taxes which are not due if realised by the State should be refunded. Such fiscal administration alone ensures the atmosphere of tax compliance. But a question of limitation also arises in this case." 35. In Birla Jute Manufacturing Company Ltd. v. Union of India and others - 1980 (6) E.L.T. 593 (M.P.) two writ petitions were filed in the High Court of Madhya Pradesh by the manufacturers of Portland Cement questioning levy of excise duty on the cost of packing of cement in gunny bags from 1st October, 1975 to 8th January, 1976 and praying for refund of the excess excise duty paid by them under protest. A Division Bench of the High Court while holding that the cost of packing of cement in gunny bags was not includible in the assessable value of cement under Section 4 of the Central Excises and Salt Act, 1944, also directed refund to the assessees, the amounts of excise duty paid by the assessee under protest. Adverting to the decision of the Division Bench of the Bombay High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the imposition was perfectly valid. The learned Judge observed that the benefit, if any, of the refund of illegally levied excise duty should in all fairness normally belongs to the consumers and therefore a question may well be raised that the petitioners cannot be allowed to unjustly enrich themselves to obtain refund. The learned Judge declined to record any conclusive finding as the question did not specifically arise." The following principle s were laid down by the Division Bench of the Bombay High Court : (1) Since the excise duty is leviable on the manufacture or production of goods, the expenses and profits attributable to post-manufacturing and non-manufacturing operation are not includible in the assessable value under Section 4 of the Central Excises Act. (2) If the levy of Central Excise is totally without jurisdiction and outside the provisions of Section 4 of the Central Excises Act, the bar of limitation prescribed under Rule 11 of the Central Excise Rules is not applicable. (3) If the recovery is illegal and without jurisdiction, the claim for refund will not be governed by the Limitation Act. (4) If the duty is recovered without authority of law, the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duties or charges erroneously paid. Rule 11 cannot be invoked by the Union of India where duty was collected without the authority of law, as noticed earlier. 39. Sri K. Subrahmanya Reddy, learned Counsel for the Union of India places strong reliance upon the decision in N.S. Mills v. Union of India - AIR 1976 SC 1152 for negativing the relief of refund of the illegally collected excise duty to the Company. In the said case, the price of sugar was controlled by the State of Uttar Pradesh by a notification. Several sugar millers writ petitions in the High Court of Allahabad challenging the notification and obtained stay of operation of the notification, on their furnishing bank guarantee to the Court for the excess price. Ultimately the millers failed in their challenge of the notification and the impugned notification was upheld by the High Court. But, crores of rupees were funnelled into the millers' tills during the period when the writ petitions were pending by virtue of stay of operation of the notification. While dismissing the writ petitions, the Division Bench of the Allahabad High Court made the following directions: "We, therefore, direct that the Registrar will take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are the High Court may devise modifications of this scheme or direct the State Government to act on any scheme subject to the moneys reaching the real small buyers from the retailers. G. If any further directions in the mechanics of the scheme are felt necessary, the High Court will report to this court. H. If, within one year from today, any amounts remain unclaimed they will go into a separate deposit in the High Court to be operated on application by any claimant. I. If any legislation dealing with the subject were to be made before the amounts are disbursed, the legislative scheme will pro tanto prevail over the directions given above." It may be noted that in the aforesaid case, crores of rupees were funnelled into the millers' tills on account of the orders passed by the High Court staying operation of the notification whereunder the price of sugar was fixed and controlled. That circumstance fully weighed with the High Court and the Supreme Court in making the Directions extracted above, lest there should be no judicial sanction of unjust enrichment of the millers. 40. The learned Counsel for the Union of India also places strong reliance on the decision in Shiv Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that dealers who have not passed on the liabilities to others and others who have contributed to or paid the excess one per cent covered by these writ petitions and appeals may make claims for such sums as are due to them from him within one month or such other period as he may fix. The Registrar shall scrutinise such claims and ascertain the sums so proved. He will thereupon demand of all the market committees concerned payment into the Registry of such sums in regard to which proof of claims have been made. On such intimation, the market committees shall pay into the Registry the amounts so demanded by the Registrar within one week of such intimation. The amount shall be paid together with interest at 10 per cent per annum from today up to the date of deposit with the Registrar. IV. It shall be open to the Registrar to make such periodical claims on appropriate proof by claimants on the line stated above. V. He will devise the mechanics of processing the claims as best as he may and, in the event of dispute, may refer to the High Court for its decision of such disputes, if he thinks it necessary. Otherwise, he may dispose of the objections finally. VI. If any further d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could scarcely be imported when there was a clear and unambiguous provision of law which entitled the assessee to the relief claimed by him. 42. As observed by us earlier, on 3-4-1981 their lordships of the Supreme Court consisting of the Chief Justice and Mr. Justice Eradi, refused special leave to the Union of India to appeal against the decisions of a Division Bench of the Bombay High Court in Maharashtra Vegetable Products Pvt. Ltd. and another v. Union of India and others (supra) wherein the doctrine of unjust enrichment put forward by the Union of India was rejected. 43. We, therefore, quash the order dated 11-8-1978 passed by the 3rd respondent confirming the levy of excise duty in a sum of Rs. 22,55,795.76 on the cost of jute bags in which excisable commodity of cement manufactured by the petitioner-company was packed and sold between 1-10-1975 and 8-1-1976. A writ of mandamus shall also issue directing the respondents to refund the same amount to the petitioner-company. 44. The learned Counsel appearing for the Company also submits that the Company undertakes to reimburse its consumers or the ultimate consumers in respect of the amounts of excise duty collected from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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