TMI Blog1986 (7) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... by the word 'candy' which was mentioned in item 1-A of the Excise Tariff. By his order, dated 13th of March 1968 the Assistant Collector of Central Excise ordered the provisional assessment of lozenges on the basis that, they are included in the word 'candy'. Subsequently, by a communication, dated 5th of April 1968 the Inspector of Central Excise informed the petitioner Compressed Tablets and sticks popularly known as "Extra Strong" and sweetened cigarettes, lozenges, paper mints etc. fall in the category of "candies" and as such come under the purview of Tariff Item 1-A and they accordingly are liable for excise duty. The earlier instruction regarding the provisional assessment was to cease to have effect. The petitioner accepted the interpretation given by the communication, dated 5th April 1968 and, the petitioner says, believing that that was the correct legal position the petitioner continued to pay the excise duty on the basis that lozenges were included in the category of goods known as "candy". 3. It has been stated in the petition that with effect from 1st of March 1975, residuary tariff entry No. 68 was inserted but no specific provision was made regarding lozenges. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, based upon the discovery of a mistake of law which, according to the petitioner, was common to both the petitioner and the respondents. 5. The petition was filed in November 1980 and there is no return to this petition on behalf of the respondents. Mr. Sethna, the learned Advocate appearing for the respondents, has stated that no affidavit has been filed partly at any rate for the reason that the record of the case which is an old one could not be traced. Whatever may be the reason for the non-filing of the affidavit in reply to the petition, one must proceed on the basis that there is no such reply. The facts mentioned in the petition could not be controverted by Mr. Sethna. It must also be stated that some questions which arise from the averments made in the petition and which are mixed questions of law and fact also remain uncontroverted. 6. The law relating to the sustainability of a claim made by an assessee who has paid excise duty under a mistake of law and who claims refund of the same upon the discovery of that mistake of law is well-settled. Nevertheless, I am constrained to make brief reference to the same in view of the contest that took place at the bar at the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istency without the aid of heat. From the opinions expressed by these two institutions it is noticed that one striking difference between lozenges and candy is that in the preparation of the former no heat is applied while in the preparation of the latter heat is a very essential part of the process. It must be stated that Mr. Sethna did not contest the position that lozenges are not embraced by the word 'candy' as has been held by the Madras High Court in the above mentioned case. One, therefore, must proceed on the basis that the position that lozenges are not candies is undisputed. 8. In D. Cawasji and Co. v. State of Mysore, 1978 (2) E.L.T. l54, the Supreme Court held that the Court could not deny refund of tax paid under a mistake of law even if the person who paid it, had collected it from his customers and has no subsisting liability or intention to refund it to them. Noticing that the law of limitation did not apply to petitions filed in the High Court under Article 226 of the Constitution, it was held that the period of limitation prescribed for recovery of money paid under a mistake of law was three years from the date when the mistake was known and that period may ordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee who is under no obligation to return the same to the persons from whom it had been collected. The Supreme Court held in paragraph 9 of the judgment in Cawasji's case as follows :- "We are aware that the result of this view would be to enable a person to recover the amount paid as tax even after several years of the date of payment, if some other party would successfully challenge the validity of the law under which the payment was made and if only a suit or writ petition is filed for refund by the person within three years from the date of declaration of the invalidity of the law. That might both be inexpedient and unjust so far as the State is concerned." But it was pointed out that "the task of writing legislation to protect the interest of the nation is committed to Parliament and the legislatures of the States". The Supreme Court referred to this aspect "to alert their attention to the present state of law". 10. An occasion arose to consider the entire law on the subject before Justice Madon (as he then was) in Golden Tobacco Company Limited v. Union of India and another, 1983 (14) E.L.T. 2238. In this judgment, naturally, pointed reference was made to the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoked in case of claim for refund of excise duty recovered from the manufacturer without the authority of law. That apart, as already held by me, the decisions of the Supreme Court in Nawabganj Sugar Mills, Shiv-shankar Dal Mills and U.P. State Electricity Board (cited supra) are distinguishable and on the ratio laid down in the decision of the Supreme Court in D. Cawasji which decision has been interpreted and followed in the various decisions of this court, I.T.C. cannot be denied its claim for refund of excess excise duty paid by them on the alleged ground that granting relief of refund to them would result in their unjust enrichment." In this elaborate judgment, Shah J. has practically referred to every judgment of the Supreme Court and of this Court touching this aspect of the law. Two decisions of the Supreme Court, namely those in Shivshankar Dal Mills and U.P. State Electricity Board, were also noticed by Shah J. and he found that they did not affect the consistent view taken by the Supreme Court as well as by this Court in a long line of decisions. I am specifically mentioning this because Mr. Sethna at one stage made an attempt to show that the view taken by this Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accrual of the cause of action, it is almost always be proper for a Court to refuse to give the relief; (7) Since the cause of action for the recovery of the amount paid under a mistake of law accrues on the discovery of the mistake of law, the amount to be claimed naturally becomes due on the date on which the mistake of law is discovered; (8) A claim made within a period of three years from the date of such accrual of the cause of action will naturally include refund of the entire amount that becomes due though the same might have been paid several years earlier; (9) If such is the position in law and if it is regarded as inimical to the interests of the State the remedy lies with the law-making authorities and Courts cannot deny the relief on the ground that grant of such relief will result in the unjust enrichment of the assessee. 13. Mr. Sethna at one stage contended that the petitioner should have right from the beginning insisted that lozenges were not liable to excise duty as contended by the authorities and should have approached the Court at the earliest challenging the view taken by the excise authorities. If in the instant case, says Mr. Sethna, the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 898, a decision which has been referred to with profit in several decisions of this Court rendered later, Bachawat J., one of the three Judges who gave the majority judgment, pointed out that "the right to relief under Section 72 (of the Indian Contract Act) extends to money paid under mistake of law, i.e. 'mistake in thinking that the money paid was due when, in fact, it was not due'." This law was already to be found in Shiba Prasad Singh v. Srish Chandra Nandi (A.I.R. 1949 P.C. 297) and also in Sales Tax Officer v. Kanhaiyalal Mukundlal Saraf (A.I.R. 1959 S.C. 135). It should be stated that on the facts of Tilokchand Motichand's case, however, the Supreme Court held that the petitioner before it was not labouring under any mistake of law as to claim refund of the amounts paid. Mitter J. in the same judgment pointed out the correct meaning of "a payment made under a mistake of law". In paragraph 50 of the judgment (page 914 of the report) it was pointed out that payments made under compulsion or coercion could not be regarded as payments made under a mistake of law. Though the Judges differed on the question whether the petitioner before them could be given the reliefs asked for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment the Division Bench held that the polyester chips in question were covered by the item "Artificial or synthetic resins" and the petitioner before it was liable to pay excise duty. The question of delay in filing of the petition did not necessarily arise for decision. However, in paragraph 45 of the judgment the Division Bench noticed that the petitioners had been paying excise duty under protest from 1965 to 1969 and thereafter according to them, they were compelled to discontinue the protest. It was also noticed by the Division Bench that the claim for refund made was founded upon the decision in the case of Nirlon Synthetic Fibres Chemicals Limited rendered by this Court on 30th April, 1970. The petition in Nirlon Synthetic's case had been filed in the year 1964. The Division Bench thought that the absence of any explanation on the part of the petitioners before it as to why they did not think it worthwhile to approach the Court independently and challenge the levy which according to it was illegal was sufficient ground to deny to the petitioners the claim for the refund for a period beyond three years before the filing of the petition. Therefore it was held "No ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oneous stand which had been taken by the excise authorities. It is in these circumstances that the Division Bench in Chemicals and Fibres India Limited's case held that the petitioners ought to have given an explanation as to why they had not approached the High Court earlier without waiting for the decision in Nirlon Synthetic's case. 18. A judgment of the Supreme Court on which repeatedly reliance is being placed by the Advocates appearing for the Excise Department in this Court and upon which Mr. Sethna predictably placed reliance is the one in Shri Vallabh Glass Works v. Union of India, 1984 (16) E.L.T. 171. Reliance is being placed upon this judgment for contending that a claim for refund based upon even the discovery of a mistake of law should not be decreed for the amounts paid beyond a period of three years from the date of the filing of the claim. Before dealing with the argument of Mr. Sethna it is, again, necessary to recall what provides a cause of action for claiming refund of the excise duty paid under a mistake of law. D. Cawasji had held that discovery of a mistake of law under which excise duty has been paid by an assessee provides a cause of action for recoverin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Vallabh Glass Works' case that the amounts which were paid beyond a period of three years next before the institution of a writ petition could not be granted in a petition under Article 226 of the Constitution or for that matter even in a suit filed for the said purpose. The facts in Shri Vallabh Glass Works ought to be necessarily noted. 21. An application for refund had been made on behalf of the assessee on 20th of February 1976. On 20th of September 1976 the Assistant Collector rejected the refund application. On 28th of September 1976 a writ petition was filed by the assessee, but it was later withdrawn as alternative remedy by way of appeal was available to the assessee. The alternative remedy of appeal and revision was pursued by the assessee till 2nd of February 1978 on which day the revision application was rejected. Immediately thereafter the assessee filed a writ petition in the High Court of Gujarat which held, by its judgment dated 22nd November 1978, that refund for the period subsequent to 20th of February 1976 alone could be claimed by the assessee. Challenging the said order of the Gujarat High Court the petitioner approached the Supreme Court in an appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee there should be deemed to have arisen a cause of action based upon the mistake of law. This assumption had been made because the assessee had failed to establish when the mistake of law had been discovered by it. I do not see how this judgment lays down a proposition that in a petition under Article 226 of the Constitution no amount which had been paid beyond a period of three years next before the filing of the writ petition could be refunded to the assessee if the claim is based upon the discovery of a mistake of law. On the other hand, in my opinion, the judgment in the case of Shri Vallabh Glass Works proceeds upon the basis that any amount which becomes due on the date on which the mistake of law is discovered giving a cause of action to a party must be paid if a claim is made within a period of three years from the date on which the amount becomes so due. Far from taking a view different from the one taken by the Supreme Court in D. Cawasji's case, Shri Vallabh Glass Works affirms the law laid down in D. Cawasji's case. 24. It may incidentally be noted that in Shri Vallabh Glass Works's case an application for refund had been made by the assessee on 20th of February 1976 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts show that an application for refund had been made on 20th of October 1973, the Court held that the assessee was entitled to the refund of the moneys paid for a period of three months prior to the date of the application for refund, and since the subsequent payments had been made under protest the assessee was held to be entitled to refund of every payment so made. In fact the Court specifically stated that the question of limitation did not arise on the facts of that case. 26. Mr. Sethna returned to the argument of unjust enrichment because, according to him, though all the decisions right up to the U.P. Electricity Board's case, as I have already pointed out, have been considered by different judgments of this Court and the last one being of Shah J., there is a subsequent judgment of the Supreme Court in State of M.P. v. Vyankatlal, A.I.R. 1985 Supreme Court, 901, which has taken a view which disentitles claims of assessees like the present petitioner who would be enriching themselves if the amount is refunded to them when such refunded amount would not ultimately reach the persons who had paid them. The facts in Vyankatlal's case disclosed that the respondents in the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 possible to identify the persons on whom had the burden been placed for payment towards the Fund, the amount of the Fund can be utilised by the Government for the purpose for which the Fund was created, namely, development of sugarcane. There is no question of refunding the amount to the respondents who had not eventually paid the amount towards the Fund. Doing so would virtually amount to allow the respondents unjust enrichment." 28. The reliance placed by Mr. Sethna on these observations is apparently justified, but if one looks to the facts of the case before the Supreme Court it is easily seen that the Supreme Court directed the utilisation of the amount which had been deposited for the purpose for which the amount had been originally collected, namely for the development of sugarcane. It is clear to me that the theory of unjust enrichment, which had been repeatedly rejected by the Supreme Court itself in several cases involving claims for refund of excise duty, has not been revived by what is mentioned in p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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