M/S. Redihot Electricals Petitioners v. Union Of India And Others S

M.K Chawala, J.:— Amongst many others, one of the commandments of dharma is that if you borrow any money from another for a particular period then it must be returned as agreed to, but if retained beyond that period, then it should be returned with interest. This principle equally applies to the public bodies, Govt. Institutions who under the guise of the public laws recover people's moneys, later discovered to be erroneous levies, then they must return the same and at the same time compensate the citizen for the unauthorised use of his money. A similar situation has arisen in the present application.

2. The facts being admitted need not be debated. The applicant M/s Redihot Electricals are manufacturers of domestic electrical appliances. These electrical appliances are chargeable to excise duty under tariff item No. 33-C. Ad valorem excise duty is chargeable on the value of appliances and the same is to be determined under Section 4 (a) of the Central Excise and Salt Act, 1944.

3. The applicant had filed their list of prices of the various appliances with the excise authorities. That list stands approved. The goods were being cleared on payment of excise duty as per the approved list. It appears that on 3rd of December, 1974 two demand notices were issued to the applicant, under Rule 10 of the Central Excise Rules, 1944. The case of the excise authorities was that the excise duty was not payable on the wholesale price received by the applicant from its buyers but was payable on the price on which the goods manufactured by the applicants were sold by its buyers. The applicants contested the demand notices by taking numerous pleas but without success. In appeal, the appellate authority held that: —

“The appellants manufacture appliances bearing brand name on behalf of M/s Racold and M/s Killick and, therefore, Central excise duty should be paid on these goods on the basis of the prices at which these are sold by M/s. Racold and M/s. Killick.”

The applicants made the payments from their meagre resources, and by taking overdraft from its bankers, on which the substantial amounts by way of interest.

4. The applicants challenged the finding of the appellate authority by way of filing & writ petition. By order dated August, 29, 1985, Yogeshwar Dayal, J. (as his Lordship then was) concluded thus: —

“There was no question of any short levy in the circumstances and, therefore, the notices issued under Rule 10 of the Central Excise Rules, 1944 were without jurisdiction and demands were totally unauthorised. I would accordingly quash the impugned orders, notices earlier by the Asstt. Collector of Central Excise and Appellate Collector, Central Excise.”

The petitioner was allowed costs which were assessed at Rs, 2000/-.

5. Subsequent to the passing of the abovesaid order, the applicant vide its letter dated 25th January, 1986 requested the Assistant Collector to refund the excess duty paid. Their two subsequent reminders elicited no response. The personal visits to the office of the respondents, however, bore fruit. The Assistant Collector alongwith his letter dated 17th August, 1987 sent a cheque for Rs. 1,60,468.51 by way of refund of excise duty. This refund payment admittedly was made more than 2 years after the order of this Court.

6. However, as no interest on the amount refunded was paid, the applicants called upon the respondents to pay interest at the rate of 12 per cent per annum for retaining the amount without any authority of law for a period of more than 2 years. In reply, the respondents disowned their liability to pay interest by stating: —

“It is to inform you that there is no provision in the Central Excise and Salt Act, 1944 to give interest on the refunded amount.”

7. In this application, the submission of the learned counsel for the applicant is that if the excise authorities have collected any amount as tax without the authority of law, it is just and proper that they should re-pay the same with interest at the rate of 12 per cent per annum from the date of the collection of the said amount till the date of actual repayment. Alongwith the application, the petitioner has filed the statement of account calculating the interest on the amount already refunded which comes to Rs. 4,02,403/-. The respondents in reply have taken the stand that as the refund claimed pertains to the period 1974-75 to 1979-80, the relevant records are not readily available for verification. In any event, there is no provision in the Act and the Rules for the grant of interest.

8. The stand of the respondents is uncalled for and straightaway merits rejection.

9. It is the basic law that the incidence of excise duty is always on the manufacturer or the producer and not on the person whom manufacturer of the producer sells the goods. In the face of the conclusion, that the duty recovered was without authority of law, and in the face of the conduct of the Department in not refunding what was due to the manufacturer, it cannot be appreciated as to why the manufacturer should be deprived of the interest from the date of payment till the actual date of repayment.

10. The applicants have asked for the payment of interest at the rate of 12 per cent and to support their submission, reliance is placed on the Judgement reported as Vijay Textiles, a partnership firm at plot No. 4. Nirol. Abendaly v. Union of India (1979) Excise Law Times, 181, (1) wherein under similar circumstances, the respondents were directed to J pay interest at the rate of 12 per cent from the date of collection of the said amount till the date of actual repayment. Similar view was taken in the subsequent Judgement of the High Court of Gujarat in Jyoti Ltd. Baroda v. Union of India and another, 1979 ELT 546. (2). This very view was reiterated in Calcutta Paper Mills Manufacturer Co. v. Customs Excise and Gold Control Tribunal and others, 1986 (25) ELT 939 (3).

11. On the contrary, learned counsel for the respondent referred to and relied upon the Judgement of the High Court of Gujarat reported as Union of India v. Bharat Vijaya Mills Co. Ltd., 1988 (34) ELT 605 (4) wherein the claim of interest on the amount illegally collected and retained to disallowed. In the said case, the respondent Mills had based their claim for interest under the Interest Act, 1939. The Bench while rejecting the claim of interest relied upon the Judgement in Thawar Dass v. Union of India, AIR 1955 SC 468 (5) holding that the Interest Act applies where interest is not otherwise payable by law. It further held that the following amongst other conditions must be fulfilled before interest can be awarded under the Act:

1. There must be a debt or a sum certain;

2. It must be payable at a certain time or otherwise;

3. Those debts or sums must be payable by virtue of some written contract at a certain time; and

4. There must have been a demand in written stating that the interest will be demanded from the date of the demand.

12. Where not one of these elements is present, the court cannot allow interest simply because it thought the demand was reasonable. On the basis of the abovesaid reasoning, Gujarat High Court observed that in the instant case, claim for interest was not based on any agreement. There is no statute under which the mills are entitled to claim interest. The Court further observed that the respondent mills are not entitled to claim interest on grounds of equity inasmuch as the case of the mills has failed on merits, the question of computing interest does not arise.

13. This Judgement is distinguishable from the facts of the case in hand. The applicant in this case has not invoked the provisions of the Interest Act. It is a clear case of unjust recovery and illegal retention of the hard-earned money of the private undertaking and/or of the little persons having meagre income, Krishna Aiyer, J. speaking for the Court in M/s. Shiv Shankar Dal Mills and others v. State of Haryana and others (1980) 2, S.C.C 437 (6) under similar circumstances observed: —

“Where public bodies, under colour of public laws, recover people's money, later discovered to be erroneous levies, the dharma of the situation admits of no equivocation there is no law of limitation, especially for public bodies, on the virtue of returning what was wrongly recovered to whom it belongs. Nor it is palatable to our jurisprudence to turn down the prayer for high prerogatives writs on the negative plea of “alternative remedy” since the root principle of law married to justice is ubi jus ibi remedium.”. . . . . . . . . . . . . .

Further on, the Court observed:

“Another point. In our jurisdiction, social justice is a pervasive presence; and so, save in special situations, it is fair to be guided by the strategy of equity by asking those who claim the service of the judicial process to impress the basic rule of distributive justice, while maulding the relief by consenting to restore little sums taken in little transactions, from little persons to whom they belong.”

14. Interest is the return or compensation for the use or retention of another's monies. The contentions of the respondents in this case are not tenable. The applicants were forced to pay the amount from their meagre resources to beat the dead line. Some advances were secured from the banks on interest. The respondents have collected, retained and enjoyed the benefit of this ill-gotten money for sufficient long time without authority of law. The applicant under these circumstances is entitled to interest. It is just and proper that the respondents should pay interest at the rate of 12% p.a from the date of collection of the amount till the date of actual payment. It is ordered accordingly.

Petition Allowed.