TMI Blog1987 (5) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... ontroversy: M/s Oswal Oil Soap Industries (petitioner No. 1) is a unit of M/s Oswal Agro Mills Ltd. The petitioner is engaged in the trade and business activities of manufacture of soap and oils. Petitioner No. 1 had filed a classification list under Rule 173-B of the Central Excise Rules, 1944 ('the Rules' for short) effective from 20th September, 1980 seeking the classification of hydrogenated rice bran oil (H.R.B.O.) manufactured by it under Central Excise Tariff Item No. 12 incorporated in the First Schedule to the Act. If H.R.B.O. had been classified under tariff Item No. 12, it would have borne an excise duty at the rate of Rs. 100/- per tonne, but if it was classified under tariff item No. 68,the rate of excise duty leviable on the H.R.B.O. at the relevant time would have been 8% to 10% ad valorem. The Assistant Collector, Central Excise, Ludhiana, vide his order, dated August 3, 1981, held that since vegetable non-essential oil is subjected to hydrogenation process and results into emergence of a New product, the same should, therefore, fall under tariff Item No. 68. 3. Aggrieved by this order of the Assistant Collector, petitioner No. 1 preferred an appeal under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the CEGAT against the order, dated September 30, 1984 of the Collector of Central Excise (Appeals). He also made an application for the stay of the operation of the order of the Collector. It was ordered by the CEGAT that the appeal of the Department should be heard after the decision of the same point by a larger Bench. The application for stay was, however, declined by the CEGAT on April 11, 1985, because the decision of the Collector regarding classification of H.R.B.O. was in accordance with the earlier decision of the CEGAT. 5. Aggrieved by the order of the Assistant Collector declining to refund the excise duty paid by petitioner No. 1 under the classification determined by the Assistant Collector, the petitioner filed the present writ petition. 6. Messrs Hindustan Lever Ltd., Bombay filed an application for being impleaded as a respondent to the writ petition. This application was declined by me on 4th April, 1986. Civil Appeal No. 2168 of 1986 filed by M/s Hindustan Lever Ltd. was, however, allowed by the final Court on 30th April, 1986 and it was directed that M/s Hindustan Lever Ltd. be impleaded as respondent to the writ petition. They have been impleaded as respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was contended that the Collector (Appeals) had not ordered the refund of excise duty, because the decision regarding the classification of HRBO under tariff Item No. 12 instead of tariff Item No. 68 pronounced by the CEGAT was not final as the Revenue had filed appeals against this decision in the Supreme Court of India and the appeals were pending consideration. It was explained that the petitioner had sold the HRBO to its customers and the Department had allowed them proforma credit of the excise duty paid on the raw material while determining the duty payable on the finished product, namely, soap prepared out of HRBO. Respondent No. 5 has also reiterated the stand taken by the other respondents. They have further explained that the petitioner had cleared HRBO after paying duty under tariff Item No. 68 and supplied it to respondent No. 5, a manufacturer of soaps. Under the scheme prescribed by Notification No. 201/79-CE, dated 4th June, 1979, the duty paid on HRBO was effectively refunded by allowing credit to respondent No. 5. On receiving such credit, respondent No. 5 refunded the duty to the petitioner. The net duty payment by the petitioner on account of clearance of the HRBO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt shall have any jurisdiction in respect of such claim. Explanation. - For the purposes of this section, - (A) 'refund' includes rebate of duty on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India; (B) 'relevant date' means, - (a) to (e) xxx xxx (f) in any other case, the date of payment of duty." Previously, there was Rule 11 in the Rules which made provision for refund of excise duty. It read as under: "11. Claim for refund of duty. - Any person claiming refund of any duty paid by him may make an application, for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the date of payment of duty: Provided that the limitation of six months shall not apply where any duty has been paid under protest. Explanation. - xxx xxx xxxx (2) If on receipt of any such application the Assistant Collector of Central Excise is satisfied that the whole or any part of the duty paid by applicant should be refunded to him, he may make an order accordingly. (3) Where, as a result of any order, passed in appeal or revision under the Act, refund of any duty b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Sub-section (2), ibid, that only a person who has paid the excise duty can apply for its refund. Any other person, who has not actually paid the excise duty, has no locus standi to apply for its refund. Sub-section (3) takes care of an altogether different situation. It deals with cases where adjudication with regard to excise duty takes place at the hands of the appellate or revisional authorities and as a consequence thereof, it is held that the excise duty as a whole or in part was not leviable. In such cases, the Assistant Collector may refund the amount of such duty and in proper cases, even without any formal claim made in this behalf. Sub-section (4) lays down that no claim for refund of excise duty shall be entertained save and except as provided by or under the provisions of the Act. The jurisdiction of the courts to entertain claims for refund of excise duty is barred by the provisions of Sub-section (5). It is clear from a perusal and analysis of the provisions of Section 11B that the Assistant Collector or the appellate or revisional authorities cannot take into account any other circumstances or factors while determining the claim for refund of excise duty. The cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved this view of the Privy Council that even a tax paid under a mistake of law can be recovered under section 72 of the Contract Act. Their Lordships observed: "To hold that tax paid by mistake of law cannot be recovered under section 72 will not be to interpret law but to make a law by adding some such words as 'otherwise than by way of taxes' after the word 'paid'." The exception regarding plea of estoppel carved out by The Privy Council in Shiba Prasad Singh's case (supra) was sought to be raised before the Constitution Bench in Kanhaiya Lal Mukand Lal Saraf's case (supra). In that case, the respondent-firm was a dealer in bullion gold and silver ornaments and forward contracts in silver bullion had been assessed on its forward transactions in silver bullion. It had deposited the amount of Sales Tax assessed. The Sales Tax on forward contracts was held to be ultra vires. The respondent-firm asked for refund of the amount of Sales-tax paid on the forward contracts. Appellant No.2, the Commissioner of Sales Tax, Uttar Pradesh, however, refused to refund the same. The respondent thereafter filed a writ petition in the Allahabad High Court under Article 226 of the Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Nagorao v. G.G.-in-Council, A.I.R. 1951 Nag. 372 at p. 374 where Kaushalendra Rao J. observed: 'The circumstances in a particular case, disentitle the plaintiff to recover what was paid under mistake.' 'If the reason for the rule that a person paying money under mistake is entitled to recover it is that it is against conscience for the receiver to retain it, then when the receiver has no longer the money with him or cannot be considered as still having it as in a case when he has spent it on his own purposes - which is not the case here - different considerations must necessarily arise.' We do not agree with these observations of the Nagpur High Court. No such equitable considerations can be imported when the terms of Section 72 of the Indian Contract Act are clear and unambiguous. We may, in this context, refer to the observations of their Lordships of the Privy Council in 30 Ind App 114 (supra) at p. 125. In dealing with the argument which was urged there in regard to the minor's contracts which were declared void, viz., that one who seeks equity must do equity and that the minor against whom the contract was declared void must refund the advantage which he had go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot say that it was equitable to compel a person to pay moneys in respect of a transaction which is against that person the Legislature had declared to be void. Their Lordships of the Supreme Court held that on the plain language of Section 72 of the Contract Act, the respondent will be entitled to recover back the moneys paid by it to the State of Uttar Pradesh under mistake of law. 14. The apex Court in State of Madhya Pradesh v. Bhailal Bhai, A.I.R. 1964 S.C. 1006, held that the payment of Sales Tax was one made under a mistake within the meaning of Section 72 of the Contract Act and the Government to whom the payment was made by mistake was bound to repay it and the High Court had the power for the purpose of enforcement of fundamental rights and statutory rights to give consequential relief by ordering repayment of money realised by the Government without the authority of law. 15. In another case, Patel India v. Union of India, A.I.R. 1973, S.C. 1300, the Supreme Court directed the refund of duty which was illegally levied by the Customs authorities under the Sea Customs Act. 16. A Bench of seven Judges of the Supreme Court in State of Kerala v. Aluminum Industries Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted except by authority of law. Tax in this case, indubitably has been collected and levied without the authority of law. It is, therefore, refundable to the assesses because from the beginning the realisation was illegal and right of refund was embedded in the fact of payment." From the aforesaid decisions of the final Court it becomes evident that when a tax, duty or fee is paid by mistake or is levied or charged without authority of law, the authorities are bound in law to refund the same. 20. Various High Courts have also taken the same view and a brief reference to a few of such cases may suffice. 21. In Annapurna Match Industries, Cuddapah v. Union of India and another, A.I.R. 1971 A.P. 69, their Lordships of the Andhra Pradesh had declared the imposition and collection of excise duty on matches manufactured by the petitioner to be without jurisdiction and not authorised by law. Their Lordships also observed that the respondent cannot be allowed to appropriate the duty so collected and the petitioner was entitled to an order for the refund of the duty collected from him under a void provision by the respondents. 22. The Bombay High Court has consistently taken aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras Fertilisers Ltd. v. Assistant Collector of Central Excise, Madras and other, 1981 E.L.T. 194 (Madras) that the Government was not entitled to retain the excess duty recovered or collected as there was a legal obligation on its part to return the same and as there was a corresponding legal right in the assessee to recover the same. 27. A Division Bench of the Rajasthan High Court in Pern Cables Pvt. Ltd. v. Assistant Collector (Principal Appraiser) Customs, Bombay and other, 1981 E.L.T. 440 (Raj.) held that the High Court could issue a direction for the enforcement of fundamental rights to give constitutional relief by way of refund of money paid under a mistake of law and realised by the Government without the authority of law. 28. A Division Bench of the Madras High Court in Assistant Collector of Customs, Madras and others v. Prem Raj and Ganpat Raj and Co. (PJ Ltd., 1978 E.L.T. 630, directed the refund of excise duty to the assessee on the ground that the recovery of duty was without the authority of law. 29. In Vazir Sultan Tobacco Co. Ltd. v. Union of India and others, 1981 E.L.T. 140 (Delhi), a learned single Judge of the Delhi High Court took the view that any d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween him and his consumers and the High Court cannot deny refund of the illegally levied and collected duty, to the assessee even if it results in unjust enrichment of the assessee." 32. A similar view was taken by the Calcutta High Court in Calcutta Paper Mills Manufacturing Co. v. Customs, Excise and Gold Control) Appellate Tribunal and others, 1986 (25) E.L.T. 939 (Tribunal), wherein it was observed: "The ground of unjust enrichment as a defence against the claim of restitution has been rejected by the various High Courts and the Supreme Court on the ground that the duty which is collected without authority of law was refundable even though it was recovered from the consumers or manufacturers and the granting relief of refund may result in his unjust enrichment. The theory of unjust enrichment cannot be invoked in a case of claim for a refund of excise duty recovered from the manufacturer without the authority of law." 33. A Division Bench of the Delhi High Court in Bermalt (India) Private Limited, Gurgaon v. Government of India and others, 1986 63) E.L.T. 411(Del.), directed the refund of excise duty paid under protest. 34. The Bombay High Court in Radipur (India) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en taken. A few of them which succinctly bring out the opposite viewpoint may be noticed: 37. In Madras Aluminum Co. Ltd. and another v. Union of India, 1981 E.L.T. 478 (Mad.), their Lordships of the Madras High Court 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 or manufacture of goods for home consumption, in substance it is a tax on consumption, and, therefore, if at all it is the consumer who can claim the refund of the excise duty paid in respect of the article purchased and consumed by him and not the petitioners who produced the articles and who have recouped themselves to the extent of the excise duty paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases, the ratio of Vyankatlal's case could be applied to all cases because the amount of duty paid by the claimants and sought to be refunded had not been paid by the claimants from their own coffers and thus there was no question of refunding the amount to the respondents who had not eventually paid the amount towards the Fund, for doing so would virtually amount to allow the respondents unjust enrichment. A similar plea had been raised before a Division Bench of the Bombay High Court in Radipur (India) Ltd. v. Union of India and others, 1987 (27) E.L.T. 222 (Bom.), wherein their Lordships observed: "14. In our view there is no force in the submission of Mr. Nadkarni that the law laid down by the Supreme Court in Cawasji's case is not binding on us. Whether it was not necessary for the Supreme Court to deal with that question is entirely irrelevant. The Supreme Court has indeed dealt with it and has laid down the law on the subject. Thus, since even the obiter of the Supreme Court is binding on all Courts subordinate to it, we think it pertinent and necessary to advert to that ruling of the Supreme Court. Their Lordships after having dealt with other aspects of the case, observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent state of law. In other words, the Supreme Court has made it clear that if tax is paid under a mistake of law or is collected without the authority of law, the same has in all cases to be refunded to the party who paid it, irrespective of the time when the tax was paid. The only limitation that their Lordships had laid down is that the writ petition or the suit for the purpose of refund should be filed within three years from the discovery of knowledge of the mistake of law. The law as above laid down by the Supreme Court in Cawasji's case has been consistently followed by this Court. It is not necessary for us to make a detailed reference to all such decisions of this High Court, for it suffices to advert to the judgment in Chipkar's case reported in 1985 (23) E.L.T. 334, passed on the difference of opinion between Lentin and Satwant, JJ. After reviewing in detail and minutely the relevant decisions of the Supreme Court and of this Court on the subject, Shah, J. observed in paragraph 39 that the question as to whether unjust enrichment is a valid defence to the restitution in respect of the excess duty collected by the department without the authority of law has been squarely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph 14 of Vyankatlal's case to the effect that there was no question of refunding the amount to the respondents who had not paid the amount towards the Fund as doing so would virtually amount to allow them unjust enrichment. This, according to Mr. Nadkarni, lays down the law on the subject, and as such, when the amount collected does not come from the coffers or from the pockets of the person who has made the payment, the theory of unjust enrichment comes into operation and no refund can be granted. 16. Mr. Hidayatullah, however, sought to distinguish the said decision of the Supreme Court. He urged that, unlike in Cawasji's case, the Supreme Court was dealing in Vyankatlal's case with a question of price fixation and not with a matter of taxation. Therefore, Cawasji's case is a direct judgment on the point, whereas the judgment in Vyankatlal's case touches the subject only in an indirect manner. A direct judgment is preferable to and prevails over an indirect judgment. Hence, the law laid down in Cawasji's case is to be followed. That apart, in Vyankatlal's case, Article 265 of the Constitution, though urged by the petitioners in that case, did not constitute the basis fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court while deciding the Vyankatlal's case, a specific reference would have been made by their Lordships to the Cawasji's case. Thus, in our opinion, Vyankatlal's case does not help the case of the respondents, as it does not replace the law laid down in Cawasji's case. We are supported in this by Jahagirdar, J. in Parle Products Limited case. In this view of the matter, the second respondent could not have refused the refund claimed by the petitioners on the ground that it would give cause to unjust enrichment." 43. I am in respectful agreement with the above observations. They are a complete answer to the contention raised by the petitioners. The other decisions referred to by the petitioners and extracted above are not applicable to the facts of the present case. In none of those cases refund had been claimed under the provisions of Section 11B of the Act. In fact, these cases pertained to the period before the enactment of Section 11-B. These cases dealt with the claims for refund made under Section 72 of the Contract Act. According to the ratio of the Gujarat High Court's decision in Union of India and others v. Ahmedabad Manufacturing and Calico Printing Co. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a respondent. The petitioners have not claimed any relief against respondent No. 5 and in this writ petition, respondent No. 5 cannot seek any relief against the petitioners. Whatever private contract exists between the petitioners and respondent No. 5, that can be enforced through the courts of the land by way of a civil suit. The writ petition is not the forum to determine the rights of the parties under a contract. 45. Shri Shanti Bhushan also argued that on petitioners' representation, respondent No. 5 had changed its position to its detriment by refunding the excise duty to the petitioners. The petitioners are now estopped from seeking refund of excise duty, because if the excise duty is refunded to the petitioners, respondent No. 5 shall have to pay back this duty to the Revenue and then sue the petitioner for recovery of these moneys. The answer to this argument is provided by the decision of the apex Court in Kanhaiya Lal Mukund Lal Saraf's case (supra). Their Lordships of the Supreme Court have held that the principles of estoppel were not applicable in such cases. Moreover, the petitioner was claiming the relief against the Revenue and the Revenue had not changed its p ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
