TMI Blog1988 (7) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business of manufacturing straw-boards, duplex boards, packing and wrapping papers and such other materials. The plaintiffs filed suit for a declaration that Rule 11 of the Central Excise Rules, 1944 is ultra vires the Constitution is also ultra vires and certain provisions of the Contract Act and the Limitation Act and, therefore, the same be declared to be illegal and void and that the order passed by the Assistant Collector, Surat, rejecting the application for refund of Rs. 34,922.23 ps. and Rs. 2,79,242.30 ps. respectively be declared to be illegal and void, and for further declaration that the recovery of excise duty in excess of 25% on the product in question be also declared illegal and void, and for a prayer that an amount of Rs. 2,13,219.91 ps. paid as excise duty be ordered to be refunded with interest. 3. It was the case of the plaintiff-company that it started manufacturing packing and wrapping papers since year 1965. Since the grammage of the product was 220 gram per sq.m. it was classified as straw board. According to the plaintiff they improved their product from 1967 onwards and the grammage was reduced to 120 to 160 grams per sq.m. The product in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application covering the period from September 1967 to August 31, 1969 and therefore they requested that they be permitted to withdraw the application. In fact the plaintiffs submitted another application dated November 10, 1980 and claimed refund of Rs. 2,79,242-30 ps. 4. The Assistant Collector of Central Excise, Surat, by order dated November 21,1970 (Exh. 51) rejected the application for refund of Rs. 34,922.23 ps. on the ground that the exemption was available from the date of notification i.e. September 8, 1967, and for the period prior to the aforesaid notification the plaintiffs were not in a position to prove that they were actually manufacturing packing and wrapping paper and that through error they cleared the said product under the nomenclature straw board. Similarly another application has been rejected as per order dated April 3, 1971 (Exh. 38) mainly on the ground that the application was preferred after the period of limitation prescribed in Rule 7 of the Central Excise Rules, 1944. Thereafter it appears that both the aforesaid orders were appealed against and as stated in the plaint and in the evidence both the appeals were pending, when the suit was filed. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Excises and Salt Act, 1944 on "packing and wrapping paper". The trial court also directed the defendants to pay Rs. 2,13,293.91 ps. to the plaintiffs and the costs of the suit, with running interest over the said amount at the rate of 6 per cent per annum from the date of the suit till the date of realisation. The defendants having felt aggrieved by the aforesaid judgment and decree passed by the trial court have preferred this appeal, while the plaintiffes having felt aggrieved by the direction as regards payment of interest have also preferred cross objections. 7. As stated hereinabove the main basis of the suit filed by the plaintiffs is that the plaintiffs were ignorant about the correct position of law and that due to mistake they have described their product as straw board and not as packing and wrapping paper. In support of the aforesaid contention the plaintiff-Company has examined one Shri Jayantilal Mohan Lal who has been working as Assistant Manager of the plaintiff-No.1 Company. It is an admitted position that till August 1969 self-removal procedure was not introduced in the Company. The Company had to fill in AR-1 Form. Thereafter the gate passes were to be wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... world. That which is understood in ordinary parlance in the business and trade circle is to be taken as the name ascribed to that particular commodity. The learned Judge has referred to certain dictionaries and encyclopaedia for arriving at the conclusion that 'board', straw-board, and 'paper' or 'packing and wrapping paper' are two distinct articles and the grammage is one of the distinguishing factors to determine the difference between the two articles. Be it noted that for the purposes of identifying a commodity what is known and understood in the business and commercial circle is much more relevant and not what is described in several disctionaries and encyclopaedia. However, even assuming for a moment that the aforesaid literature referred to by the learned Judge of the trial is relevant, even then ultimately what it comes to is that distinguishing feature between two commodities i.e. straw-board and packing and wrapping paper is grammage. Below certain grammage per sq.m. the commodity will be called packing and wrapping paper and above certain grammage it would be called straw-board. Now it is the contention of the plaintiffs that this distinction was not known to the plaint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Department after a period of about two years for refund of excise duty already paid on the ground that it had committed mistake in describing its product. 10. Now, in the aforesaid connection evidence of plaintiffs witness be examined. The plaintiffs are in the business of paper manufacturing for a period of last twenty to twenty-five years. Its sales manager is having experience of about 25 years in this very line. The assistant sales manager who has been examined as witness has been serving with the plaintiff-company for last 22 years. There are technical personnel in the plaintiff-company who are working as per the directions given by the management. The witness has admitted in his deposition that the plaintiffs had even a small laboratory and they often tested their goods in the laboratory and while filling the particulars in the A.R.1 form they were testing their materials. The plaintiff-company has its distributors almost all over the country i.e. at Baroda, Bombay, Calcutta, Delhi and Madras. They are receiving magazines concerning paper industries. According to the plaintiffs' own witness, in the year 1965 they started manufacturing packing and wrapping papers on exper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material as described in the definition of straw-board. In para 14 of the deposition it is admitted that before January 31,.969 the plaintiffs did not get their straw-board of 150 grammage tested. In further cross-examination it is admitted that in tariff, 'straw-boards' and 'packing and wrapping papers' are shown as two different articles and that the witness knew the same. In para 17 of the cross-examination the witness has in terms admitted that when they wrote straw-board in A.R.-1 Form they knew the definition of straw-board. Then he further states "in commercial world 'straw-boards' and 'packing and wrapping paper' are known as two distinct articles". The nature of usage of both is also different. Their prices are also different. It is further admitted that the plaintiffs were receiving orders for goods described by them. They were informing their distributors that they were manufacturing straw-boards and they were receiving orders for straw-boards. It is also admitted that in the year 1967-68 the plaintiffs had not shown any goods as packing and wrapping papers. In view of the aforesaid documentary and oral evidence it is difficult to believe that the plaintiffs were una ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d., 29(1) GLR 388, a plaintiff who bases his claim under Section 72 of the Contract Act, 1872 in order to succeed, has to show: (1) that the amount was paid under a mistake to the defendant and that at the time of payment, both the plaintiff as well as the defendant were labouring under mutual mistake; (2) that the amount was paid by the plaintiff under coercion, compulsion or pressure from the defendant; and (3) that if restitution is not granted to the plaintiff, the plaintiff would suffer legal injury or prejudice. In the instant case the plaintiff company has come forward with a case that there was a mistake on its part. On evidence the plaintiff-company has not been able to show that both the plaintiffs as well as the defendant (Excise Department) were labouring under a common mistake. Right from the beginning the defendant-Excise Department has made its position abundantly clear. It was always for the plaintiff-company to fill in A.R.-1 Form and describe its goods therein. It is not because of coercion or pressure or on account of any such factor the plaintiff-company was induced to write its product differently. From the pleadings also it does not appear that any cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sec. 72, this conclusion is reached, it becomes obvious that when the plaintiff seeks to recover from the defendant tax amount on the ground that the tax was illegally collected of necessity, it is to be pleaded and then proved, that the amount was paid under a mistake or coercion and that if it is not returned or repaid, the plaintiff would suffer legal injury or prejudice. It also becomes obvious that in cases where the plaintiff who has paid alleged illegal tax, has himself not suffered the incidence thereof but has passed it on to the consumers, he cannot legitimately contend that refusal of his request for restitution would result in any prejudice to him." Thereafter, in para 15 of the judgment it is further observed as under : "....so far as the plaintiff is concerned, even assuming that tax was illegally recovered from him, he has paid the tax after collecting it from the consumers. So it is the consumer to whom (burden of) tax is passed on, who has really paid the tax through the hands of the plaintiff who is only a collecting instrumentality. If ultimately it is found that tax is illegally recovered by the defendant, then it should go back to the real tax payer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt from their coffers. The burden of paying the amount in question was transferred by the respondents to the purchasers and, therefore, they were not entitled to get a refund. Only the persons on whom lay the ultimate burden 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." In the case of Dhrangadhra Municipality (supra) the Division Bench of this High Court has also held that the aforesaid principles laid down by the Supreme Court squarely rest on the principles of restitution which in its turn is the foundation of Section 72 of the Contract Act, 1872. Therefore, it must be held that before the plaintiff who claims refund of any amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not help the plaintiff. In view of the settled legal position as far as this High Court is concerned, and since we are in respectful agreement with all the aforesaid decisions of this High Court, we do not propose to discuss in further details the aforesaid decisions of Delhi High Court and other decisions of different High Courts referred to and relied upon by the learned counsel for the respondent-plaintiff. 19. The plaintiff-Company has made its claim on equitable consideration. We fail to understand what equity is there in favour of the plaintiff-Company. The plaintiffs claim refund of excise duty. It is common knowledge that the tax levied in the shape of excise duty is an indirect tax. It is a tax on manufacture. It is not a tax on any individual, but it is a tax on commodity. As and when the commodity is manufactured the tax attaches to the commodity and that very commodity carries burden of the tax with it. Ultimately the person who consumes the commodity and pays for the same bears the burden of the same. Therefore in economic jargon many a times, and rightly, this tax is called commodity tax. When the commodity carries the burden of tax with it, no-one, right from the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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