1. The petitioner is a partnership firm, having an industry of re-rollers, manufacturing stainless steel product known as "Patta". The product manufactured by the petitioner was initially classified as "sheet" or "strips", falling under Sub-item (ii) of the Tariff Item No. 26AA of the Tariff Schedule, as it was then existing, under the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act of 1944'). The petitioner claimed that the product manufactured by it properly fall to be classified under Sub-item No. (ia) of the erstwhile Tariff Item No. 26AA. The petitioner based his claim on a decision given in the case of M/s. CD. Industries, by the Appellate Tribunal on 1-6-1984 and in the case of M/s. Ae Vee Iron & Steel Works Private Limited, Bombay, dated 29-5-1985. The Assessing Authority, namely, the Assistant Collector, Central Excise, Jodhpur, rejected the assessee-petitioner's claim. The petitioner filed an appeal before the Collector (Appeals). The appeal filed by the petitioner was accepted by the Collector (Appeals) on 22-1-1986, alongwith other 14 appeals of different assessees. As a result of the appellate order, passed by the Collector (Appeals), on the appeal filed by the petitioner, the petitioner became entitled to refund of duty paid by him 'under protest' as a result of wrong classification by the Assistant Collector, Central Excise.
2. The petitioner applied for the refund. The Assistant Collector, Central Excise allowed the refund in the cases of 8 assessees, whose appeals were simultaneously disposed off by a common order by the Collector (Appeals); however, the Assistant Collector rejected the claim of following 7 assessees to refund, in persuance of the order passed by the Collector (Appeals) by order dated 20-10-1986 (Ex. 3) :-
1. M/s. Sancheti Steel, Jodhpur
2. M/s. Chopra Chemicals, Jodhpur
3. M/s. Swastik Metals, Jodhpur
4. M/s. Mehta Metals, Jodhpur
5. M/s. Adarsh Metals Corpn., Jodhpur
6. M/s. Sancheti Synthetics Pvt. Ltd., Jodhpur
7. M/s. Salawas Metals, Jodhpur.
3. Aggrieved with the aforesaid order, the petitioner preferred an appeal before the Collector (Appeals), who allowed the appeal vide order Ex. 4 dated 27th September, 1988 and while setting aside the order dated 20th October, 1986, directed the Assistant Collector of Central Excise, Jodhpur to grant relief to concerned assessees as a result of appellate order Ex. 1.
4. Though the Excise Department has preferred an appeal before the Customs, Excise and Gold (Control) Appellate Tribunal and applied for staying the order passed by the Collector (Appeals), no stay was granted, yet, no refund was made by the Department of the excise duty illegally recovered from the petitioner without authority of law. In view of aforesaid facts, which are undisputed, the petitioner has filed the present writ petition seeking a mandamus against the respondents, directing them to refund the amount of excise duty illegally recovered from the petitioner, and, which was due to the petitioner as a result of appellate order passed in his own case.
4A. During the course of hearing, it was brought to notice of the Court that appeal of Deptt. before CEGAT was also dismissed on 31-8-1989. A copy of orders of CEGAT dated 31-8-1989 alongwith orders of its rectification dated 25-10-1989 have also been filed.
5. It appears that some other manufacturers of the like product in whose favour the Collector (Appeals) has passed an order on 20-10-1986 and in whose cases the Assistant Collector, Central Excise, Jodhpur has declined to grant refund in spite of the appellate order being in their favour; have also preferred petitions on the similar grounds before this Court. Some of the petitions are - S.B. Civil Writ Petition No. 1744 of 1989 - Swastik Metals v. Union of India and Ors.; S.B. Civil Writ Petition No. 1745 of 1989 - Salawas Metals v. Union of India and Ors.; and S.B. Civil Writ Petition No. 1753 of 1989 -Mehta Metals v. Union of India and Ors. The petitions filed by Swastik Metals, M/s. Salawas Metals and M/s. Mehta Metals, for claiming refund as a result of very same order in respect of excise duty paid by them as a result of wrongful classification by the Assistant Collector, Central Excise, Jodhpur, stand decided by this Court vide its order dated 6th December, 1989. The petitions were allowed and a mandamus was issued by this Court in the following terms :-
"In the result, I allow this writ petition and S.B. Civil Writ Petitions No. 1744/89 and 1745/89 for the reasons mentioned above and direct the respondents to refund the amount of the excise duty charged with 12% per annum interest from the date of actual payment to the date of refund. The respondents are directed to make payment of the amount with interest as aforesaid within a period of 4 months from today."
6. The petitioner contends that his case is no different in any manner from the cases of M/s. Swastik Metals, M/s. Salawas Metals and M/s. Mehta Metals, stated above and he too is entitled to the same relief.
7. No return has been filed by the respondents. None of the facts stated above are, however, disputed including the fact that this Court has directed refund of amount in respect of aforesaid three petitioners on the identical facts arising out of a common judgment of the Collector (Appeals), which was affirmed by CEGAT vide orders dated 31-8-1989 as rectified by order dated 25-10-1989, referred to above.
8. However, learned counsel for the respondents raised the contention that since the amendment has been effected in the Act of 1944, with effect from 20th September, 1991 by amending Section 11B of the Act and substituting Sections 12A, 12B, 12C and 12D in the said Act, the petitioner is not entitled to any refund.
9. He also contended that the petitioner is not entitled to refund on the principle of unjust enrichment. For this, he relied on an un-reported decision of Delhi High Court in Foremost Dairies Ltd. and Anr. v. The Union of India and Ors. (417 of 1980), decided on 18-12-1991. Learned counsel for Union of India placed reliance on decisions delivered in Nawabganj Sugar Mills Co. Ltd. and Ors. (AIR 1976 SC 1152), Shivshankar Dal Mills etc. v. State of Haryana and Ors. etc. (AIR 1980 SC 1037); State of Madhya Pradesh v. Vyankatlal and Anr. (AIR 1985 SC 901); Saigal Industries v, Central Board of Excise and Customs and Anr. [1980 (6) E.L.T. 547], Roplas (India) Limited and Anr. v. The Union of India and Anr. [1988 (38) E.L.T. 27), New India Industries Ltd. v. Union of India (1990 (46) E.L.T. 23] and on an un-reported decision of the Delhi High Court in Foremost Dairies Ltd. and Anr. v. Union of India and Ors. (decided on 18-12-1991).
10. On the other hand, learned Counsel for the petitioner states that amendments in the Act of 1944 are not retrospective in operation and the question of their applicability in the present case does not arise. He also contended that even on the correct interpretation of the amended provisions, the same are not applicable to the present case, inasmuch as he was entitled to grant of refund directly as a result of the order passed in appeal in his own case and his entitlement to refund did not depend upon determination of any other question as to question of fact or law. The Assistant Collector, Central Excise was under an obligation to refund the amount suo moto, without any application, since the refund had become due before the relevant date on which amendments in the Act came into force, namely, before 20th September, 1991 and, merely because the respondents have failed to discharge their statutory obligation in refunding the amount of duty unlawfully recovered by the respondents under the wrong order passed by the Asstt. Collector of Central Excise, the provisions cannot be made applicable to the petitioner's case. It was also contended that taking any other view would result in discrimination being made to the petitioner vis-a-vis other assessees who were identically placed with each other, merely as a result of inaction on the part of the respondents in discharging their statutory obligation to suo moto refund the duty of excise illegally recovered from the petitioner. It was further contended that the amending provisions, particularly, Sections 12A, 12B and 12C cannot apply to the present case, inasmuch as, the conditions laid down therein cannot be fulfilled by the petitioner at the time when the duty was paid and, therefore, the presumption envisaged under Section 12B under Chapter 2A about passing of incidence of duty to the buyer, cannot be raised in favour of the Department in the present case so as to deny refund to the petitioner with respect to the amended provisions.
11. I first take up the question as to what is the effect of amendments in the Central Excises & Salt Act, that has taken effect with effect from 20-9-1991.
12. In order to understand the controversy raised before me, it is apposite to reproduce the provisions relating to refund, as they existed immediately before the amendment relied upon by the respondents have come into force, as well as the amending provisions. Section 11B, when the claim to refund arose, read as under :-
"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 satisfied that the whole or any part of the duty of excise paid by the 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 this Act refund of any duty of excise becomes due to any person, the Assistant Collector of Central Excise may refund the amount to such person without his having to make any claim in this behalf.
(4) Save as otherwise provided by or under this Act, no claim for refund of any duty of excise shall be entertained.
(5) Notwithstanding anything contained in any other law, the provisions of this section shall also apply to a claim for refund of any amount collected as duty of excise made on the ground that the goods in respect of which such amount was collected were not excisable or were entitled to exemption from duty and no court shall have any jurisdiction in respect of such claim.
Explanation. - For the purpose of this section -
(A) "refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in manufacture of goods which are exported out of India;
(B) "relevant date" means, -
(a) in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods, -
(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India, or
(ii) if the goods are exported by land, the date on which such goods pass the frontier, or
(iii) if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India;
(b) in the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory, the date of entry into the factory for the purposes aforesaid.
(c) in the case of goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been removed from such factory for export out of India, the date of entry into the factory;
(d) in a case where a manufacturer is required to pay a sum, for a certain period, on the basis of the rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction;
(e) in a case where duty of excise is paid provisionally under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof;
(f) in any other case, the date of payment of duty." (Old version) Section 11B, after it was amended with effect from 20-9-1991 is as under :-
"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, in such form as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in Section 12A) as the applicant may furnish to establish that the amount of duly of excise in relation to which such refund is claimed was collected from or paid by him and the incidence of such duty had not been passed on by him to any other person.
Provided that where an application for refund has been made before the commencement of the Central Excise and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this Sub-section as amended by the Act and the same shall be dealt with in accordance with the provisions of Sub-section (2) as substituted by that Act;
Provided further 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 satisfied that the whole or any part of the duty of excise paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund :
Provided that the amount of duty of excise as determined by the Assistant Collector of Central Excise under the foregoing provisions of this Sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to -
(a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;
(b) unspent advance deposits lying in balance in the applicant's account current maintained with the Collector of Central Excise;
(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act;
(d) the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person;
(e) the duty of excise borne by the buyer, if he had not passed on the incidence of such duty to any other person;
(f) the duty of excise borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify :
Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government, the incidence of duty has not been passed on by the person concerned to any other person.
(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in Sub-section (2).
(4) Every notification under clause (f) of the first proviso to Sub-section (2) shall be laid before each House of Parliament, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven days of its re-assembly, and the Central Government shall seek the approval of the Parliament to the notification by a resolution moved within a period of fifteen days beginning with the day on which the notification is so laid before the House of People and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder.
(5) For the removal of doubts, it is hereby declared that any notification issued under clause (f) of the first proviso to Sub-section (2), including any such notification approved or modified under Sub-section (4), may be rescinded by the Central Government at any time by notification in the Official Gazette.
Explanation. - For the purposes of this section -
(A) "refund" includes rebate of duty of excise 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) in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods -
(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India, or
(ii) if the goods are exported by land, the date on which such goods pass the frontier,
(iii) if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India;
(b) in the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory, the date of entry into the factory for the purposes aforesaid;
(c) in the case of goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been removed from such factory for export out of India, the date of entry into the factory;
(d) in a case where a manufacturer is required to pay a sum, for a certain period, on the basis of the rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before expiry of that period such rate is reduced, the date of such reduction;
(e) in the case of a person, other than the manufacturer, the date of purchase of the goods by such person;
(f) in any other case, the date of payment of duty."
(Amended version) Chapter IIA "Section 12A. Price of goods to indicate the amount of duty paid thereon. - Notwithstanding anything contained in this Act or any other law for the time being in force, every person who is liable to pay duty of excise on any goods shall, at the time of clearance of the goods, prominently indicate in all the documents relating to assessment, sales invoice, and other like documents, the amount of such duty which will form part of the price at which such goods are to be sold.
Section 12B. Presumption that incidence of duty has been passed on to the buyer. - Every person who has paid the duty of excise on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods.
Section 12C. Consumer Welfare Fund. - (1) There shall be established by the Central Government a fund, to be called the Consumer Welfare Fund.
(2) There shall be credited to the Fund, in such manner as may be prescribed, -
(a) the amount of duty of excise referred to in sub-section (2) of section 11b or Sub-section (2) of Section 11C or Sub-section (2) of Section 11D.
(b) the amount of duty of customs referred in Sub-section (2) of Section 27 or Sub-section (2) of Section 28A, or Sub-section (2) of Section 28D of the Customs Act, 1962 (52 of 1962).
(c) any income from investment of the amount credited to the Fund and any other monies received by the Central Government for the purpose of this Fund."
13. Let me first examine scheme of Section 11B, as it existed on 22nd January, 1986, the date on which petitioner's appeal against the classification was accepted and as a result of which the petitioner claim entitlement to refund. While under Section 11B(1) any person claiming refund was to make an application for such refund, ordinarily the application was to be made within 6 months from the relevant date; but, in case of payment of excise duty, which was made under protest, the limitation of 6 months did not apply to such application. Under Sub-section (2), the Assistant Collector of Central Excise was required to pass an order where whole or any part of duty paid by the applicant is to be refunded, if he was so satisfied about the assessee's claim. However, Sub-section (3) casts an obligation on the Assistant Collector of Central Excise to make the refund of the amount, without a person having to make any claim in that behalf, where such person becomes entitled to refund as a result of any order passed in appeal or revision under the Act. It may also be noticed that Explanation (B) attached to Section 11B defines exhaustively the 'relevant date', with reference to sub-section (1) of section 11b, which requires a person to make an application before the expiry of 6 months from the 'relevant date'. A close scrutiny of the definition of relevant date given in the Explanation (B) makes it abundantly clear that no relevant date has been prescribed in respect of a refund claim claimed where a person becomes entitled to such refund as a result of order passed in an appeal or revision under the Act. Obviously, the provisions of Explanation (B) read with Section 11B(1) are applicable either in cases where duty was paid rightfully or was paid voluntarily but subsequently, on account of some actions taken in respect of goods which have been charged to duty, the duty becomes refundable, or the assessee deposits the duty provisionally before any assessment is made by the Assessing Authority. The residuary clause (f) of the Explanation (B) obviously cannot apply in cases where refund becomes due as a result of order passed in appeal or revision under the Act inasmuch as the date specified in Sub-clause (f) is 6 months with effect from the date of payment of duty whereas, the refund under Sub-section (3) becomes payable as a result of order passed in an appeal or revision. The two dates have no connection with each other. In my opinion, the provisions of section 11b(1) and (3), as it stood before amendment with effect from September 20,1991; makes it abundantly clear that no application is required to be made where the return of any duty of excise becomes due to any person as a result of order passed in any appeal or revision under the Act. The refund of duty in such cases does not depend upon further adjudication by the Assistant Collector of Central Excise under sub-section (2) of section 11b as to whether the applicant is entitled to refund at all and, if so, entitled; whether he is entitled to whole or any part of excise duty to be refunded to him.
15. This conclusion is in consonance with the soul and spirit of Article 265 of the Constitution of India, which prohibits levy or collection which is not authorised by law, by the State. Article 265 of the Constitution lays down the constitutional policy of taxation. It ordains that levy as well as collection thereof must be authorised by law and tax can neither be levied nor collected, if not authorised. That postulates that the statute must not only impose liability to tax but must also provide authority and procedure to collect such imposition. Levy and collection both depend upon the authorisation. Can it be said that the same principle affects to refund? Putting it straight forward, can it be said that entitlement to refund of tax to a person from whom it has been collected, when the same was not authorised or when the tax collected is more than what was authorised, depend upon any further authorisation under the statute.
16. Obviously, answer must be in the negative. Entitlement is independent of any such provisions. Statute can only provide the procedure, as to how such unauthorized or ultra vires collection be refunded to a person who was put under coercive provisions of statute to part with the same. I am of the firm opinion that such procedural provision do not take within its ambit any authority to retain the same, and, even in the absence of any such provision State is under an obligation to refund such amount which has been recovered from the assessee due to wrong orders passed by Assessing-authority when higher adjudicatory authorities find such orders to be erroneous and refund became due as a result thereof.
17. A levy which is not authorised by law cannot be collected by the State, because, no authority can be conferred for collecting such levy which is not authorised by law, and, if such levy is collected, due to error or otherwise, the State is not entitled to retain and it is under an obligation to refund the same to those from whom such unauthorized levy has been collected.
18. The principle underlined above conclusion is that laws have been worked through human agency and men are liable to err. The Constitution does not guarantee that the person employed who administers the law will not make mistake when exercising powers conferred on them. If they make mistake in exercise of their power, the person affected must ordinarily use remedy of appeal, reference or revision, as the case may be, for correcting such error, and, if it is found during such remedial process that a tax has been collected either in excess of what has been authorised by law or not authorised by law; immediately an obligation arises on the State to refund what has been collected without authority of law to the person from whom the same is collected. If that obligation is not cast upon the assessing authority the very meaning and purport of providing remedies against probable human error at the initial stage would be meaningless and would be a futile exercise.
19. It cannot be accepted that when a tax is collected due to error on the part of the assessing authority in spite of resistance by the tax-payer and ultimately, when the tax-payer succeeds in establishing his view-point, the revenue would be entitled to retain the tax so forcibly collected from the assessee. That will be negating the very right to litigate the question of taxability of the person concerned under any taxing statute.
20. It may also be noticed that there is a difference where levy have been paid voluntarily without raising any protest under some mistake but when that mistake is discovered the claim is made by such assessee for refund of the duty paid by him. Refunding in such cases has been held by the courts of this Land to be due not under the Act, but on account of principle embodied under Section 72 of the Contract Act - that, anything which has been paid under mistake, the person who makes the payment, is entitled to recover it from the person who has received it. lire principle of limitation of 3 years also has been applied in granting refund in such cases. But, it must be remembered that in such cases, the refund does not become due automatically, but it depends upon making a claim and establishing it as a fact that the tax was paid under a mistake. In this connection, reference may be invited to a decision delivered in the Sales Tax Officer, Banaras and Ors. v. Kanhaiya Lal Makund Lal Saraf [AIR 1959 SC 135], wherein their Lordship of Supreme Court observed as under :-
"...and that mistake, if established, entitles the party paying the money to recover it back from the party receiving the same."
21. Thus, the principle that under Section 11B(3), as it existed prior to 20-9-1991, the Assistant Collector of Central Excise was under a statutory obligation to give effect to the appellate order or order passed in a revision, as the case may be, and to refund such entitlement, even if such person does not apply for it, is well established. The refund in such circumstances become a public duty upon the proper officer, which he must discharge 'suo moto'. The word "may" in sub-section (3) of section 11b, therefore, has to be read to mean "shall". Reference in this connection may also be made to decisions in Indian Aluminium Company Ltd. Alupuram v. Superintendent of Central Excise, Alwaye and Ors. [1978 (2) E.L.T. 650 (Ker.)]; Saigal Industries v. Central Board of Excise & Customs and Anr. [1980 (6) E.L.T. 547 (Mad.)]; and in Swadeshi Polytex Ltd. v. Assistant Collector of Central Excise, Division III, Ghaziabad and Ors. [1986 (26) E.L.T. 701 (All.)] and, further to Triveni Sheet Glass Works Ltd. v. Union of India and Ors. [1983 (12) E.L.T. 711].
22. It was held as late as in 1992, in the identical facts and circumstances, as in the present case, in Indo Metal Industries v. Asstt. Collector of Central Excise [1992 (59) E.L.T. 35 (Cal.)], as under :-
"The refund in this case became due to the petitioner by virtue of the order of CEGAT. This was clarified by the order of the Collector (Appeals) on 11-4-1990. The respondents were, therefore, under a statutory duty to refund the amount to the petitioner."
23. To this effect, there is also a circular of the Central Board of Excise and Customs issued on 28-3-1990, whereby the Central Government authorities stated as under :-
"...I am directed to invite your attention to Board's telex F. No. 390/93/88-AU dated 22-9-1988 and 10-11-1989 and letter of even number dated 18-11-1989 and letter of even number dated 18-11-1988 regarding various Court pronouncements for denying refund of Central Excise duties on the ground of fortuitous benefits and undue enrichment.
...In this connection, attention is invited to Board's instructions issued vide F. No. 210/30/81-CX. 6 dated 10-8-1981 wherein it has been clarified that there is no provision in the Central Excises & Salt Act, 1944, or the rules framed thereunder empowering the department to reject refund claims on the ground that sanction of the claim would result in fortuitous benefit to the manufacturer.
...The matter has been examined by the Board once again and it has been decided to reiterate instructions dated 10-8-1981. A telex in this connection was already sent on 21-3-1990 (F. No. 390/80/88-AU) to all concerned.
...All pending refund cases may be decided in the light of the above instructions F. No. 210/30/81-CX.6 dated 10-8-1981."
24. These instructions are also binding on all the Central Excise Officers under Section 37B of the Act.
25. Thus, it can well be said that the petitioner became entitled to refund of the duty paid by him as a result of wrong determination/classification made by the Assistant Collector of Central Excise, when the order of the Assistant Collector was set aside by the Collector (Appeals) and the respondent became under an obligation automatically to refund the amount paid by the assessee under the wrong classification adjudicated by the assessing authority, without any requirement of making an application in law.
26. It is not the case of either of the parties that the amended provisions by which Section 11B had been amended with effect from 20th September, 1991 and Chapter 11A incorporating Sections 12A, 12B, 12C and 12D, has been inserted by the very same amendments; are retrospective in their effect so as to take away the vested right of the petitioner to claim of refund as a result of success in appeal.
27. What has been emphasized by learned Counsel for the respondents is that the new provisions have been made applicable by virtue of the first proviso inserted before the existing proviso in sub-section (1) of section 11b, which states that where an application for refund has been made before the commencement of Central Excise and Customs Laws (Amendment) Act, such application be deemed to have been made under this Sub-section, as amended by the Amending Act and, the same shall be dealt with in accordance with the provisions of Sub-section (2), as substituted by that Act, and, therefore, according to learned Counsel, the application which has been moved by the petitioner, could now be dealt with only in accordance with the provisions of the amended provisions.
28. This contention of learned Counsel for the respondents cannot be accepted, for the reasons, which can be stated as under :-
(A) Firstly; as I have held above, that under the scheme of Article 265 of the Constitution, entitlement to refund that has become due as a result of orders passed in appeal or revision under the scheme of authorised levy and collection, is not depended on any further authorisation under the statute and there lies a statutory obligation on the revenue to refund such levy, without an application being made under law, and, the provisions of Section- 11A(1) are applicable only to such applications of refund where entitlement to refund is not automatic as a result of judicial or quasi-judicial decision, but depend on independent determination of such entitlement with reference to certain eventualities envisaged therein. The position does not appear to have been altered with the amendments in question in this context. No doubt, sub-section (3) of section 11b, as it existed prior to present amendment do not exist. But, it will be noticed that under the present scheme, after amendment, also, an application is required to be made within six months from 'the relevant date'. 'Relevant date' has been defined in Explanation (B) which has been amended only to the extent that, existing clause (e) has been substituted with the following :-
(B) 'relevant date' means :-
The Explanation B defines 'relevant date' to be different in different circumstances, depending on which basis the refund is claimed. This indicates that under Sub-section (2), the concerned officer is required to decide the application with reference to circumstances under which refund is claimed. This process is clear indicative of the fact that application required to be made under Sub-section (1) and required to be determined under sub-section (2) of section 11b, is subject to two enquiries viz., whether the circumstances referred to in Explanation (B) has arisen giving rise to claim of refund, and, whether the application is within limitation with reference to that 'relevant date' with which refund is claimed. No contingency has been envisaged under Explanation (B) for making an application, in case refund, is due as a result of reversal of orders passed by assessing authority by higher authorities under appeal or revision. No 'relevant date' has been fixed with reference to claim of refund that becomes due as a result of appeal or revision. Obviously, in such cases, when levy is collected, it is in accordance with the decision of the assessing authority and no question of its refund arise, until such order is set aside or modified in appeal or revision, as the case may be. Duty to give effect to consequences of appellate order does not depend on making any application.
Section 11B in the present form also does not envisage any application to claim refund as a result of any decision in appeal or revision. No 'relevant date' has been prescribed within which an application is required to be made for claiming refund, as a result of decision in appeal or revision. As I have discussed in the earlier part of the judgment, that while an authority is required for the purpose of imposing levy and collecting the same, no such authority is required for the purpose of refunding the levy which has been collected un-authorisedly but it becomes duty of the State to refund the same on such determination, as, it is prohibited to levy or collect any tax which is not authorised under Article 265 of the Constitution of India. It cannot be said that Section 11B which prescribes mere procedure of refund, intended to deny refund altogether in case of it becoming due as a result of appeal or revision, by omitting Sub-section (3), as it previously existed and commit breach the provisions of Article 265 of the Constitution of India.
In this view of the matter, it has to be held that claim of refund envisaged under Section 11B and its dealing is confined to contingencies on arising of which an application is to be made within six months; however, it does not relate to any claim which becomes due as a result of decision in an appeal or revision, which the State is under an obligation to refund from whom it has been collected.
(B) Secondly, it may be stated that the amended provisions apply only to those cases where an application was required to be made for the purpose of claiming refund and such application was pending disposal by the Assistant Collector of Central Excise for determining the entitlement of the claimant to refund. Even, the newly substituted sub-section (2) of section 11b requires the Assistant Collector of Central Excise to satisfy himself that whether whole or any part of the excise paid by the petitioner-assessee is refundable and then he is required to pass order accordingly. As I have held above, in the case of petitioner, no application was required to be made for refund of the claim and the same was not dependent on passing of any order by the Assistant Collector of Central Excise about his satisfaction that whole or any part of the duty of excise was refundable. This question is not to be determined here, when the Collector (Appeals) upheld the contention of the assessee about the classification claimed by him, the Assistant Collector of Central Excise was under an obligation to give effect to the appellate order by refunding the amount, when the appellate order was passed. Therefore, in the case of petitioner, it cannot be said that any application was required to be made which was required to be disposed of by the Assistant Collector of Central Excise. When entitlement to refund was not required to be adjudicated upon by the Assistant Collector and application was not required to be disposed of in that light; it cannot be said that when amending provisions were brought into force with effect from 20th September, 1991, the application of the petitioner was pending adjudication about his entitlement to refund. As a matter of fact, the petitioner's claim to refund was inherent in the appeal preferred by him, against the erroneous determination of classification for levying the duty and when the appellate authority allowed the appeal of the petitioner, it simultaneously resulted in allowing the petitioner's claim for refund. The Assistant Collector of Central Excise was merely required to compute the actual amount which was refundable to the petitioner in terms of the appellate order and to refund the same amount, for which no claim was required to be made by the assessee for his disposition. Thus, the case of the petitioner so far as entitlement to refund was concerned, was already disposed of and it cannot be said that any application was pending on the date of commencement of the Amending Act, which was required to be disposed off in terms of sub-section (2) of section 11b of the Act, as it stood amended with effect from 20-9-1991; by the Assistant Collector of Central Excise.
(C) Thirdly, it may be noticed that, in the present case, even the application of the petitioner stood disposed off by the Assistant Collector of Central Excise, by rejecting the claim, which order on appeal was set aside and the Assistant Collector was directed by the Collector (Appeals) to refund the amount in persuance of the appellate order Ex. 1. No interim order staying the directive has been obtained. Appeal of the Department was also dismissed by CEGAT on 31-8-1989 and the order Ex. 4 became final, much before the amendment came into force. In that view of the matter also, it can be said that the application filed by the petitioner stood disposed off much before 20-9-1991, and could not have been said to be pending consideration with the Asstt. Collector of Central Excise on the date of commencement of Amending Act.
The question whether the amending provisions are applicable even in cases where directive for refunding the amount has already been issued before the amending provisions came into force, is also subject to the amending provisions; came up before their Lordships of High Court of Judicature for Calcutta in Titagarh Paper Mills Co. Ltd. v. The Union of India [1992 (57) E.L.T. 527 (Cal.)], wherein his Lordship of the Calcutta High Court held as under :-
"This proviso can only apply to applications which have been made before the amendment came into force but was not dealt with and or disposed of in accordance with the law in force at the material time. On or from 20th September, 1991, the applications which were pending, will have to be dealt with in accordance with the amended provisions of law. In my judgment this provision cannot apply to a case where not only an application for refund was made but dealt with and disposed of by a final order. A specific order was passed by the court. The amended provisions of Section 11B of the Central Excise Act does not have the effect of nullifying that order."
The same view was reiterated in Gopal Hosiery v. Assistant Collector of Central Excise [1992 (58) E.L.T. 542 (Cal.)].
As I have already held above, the application was not required to be made and the directive for refund was inherent in the order on appeal (Ex.1), which the Assistant Collector of Central Excise was under an obligation to carry out 'suo moto', in view of that, it must be held that the claim of refund of the petitioner was dealt with and disposed of in accordance with law in force at the material time and such directive which was inherent in the order passed in appeal or revision, at the relevant time, have not been nullified by the amending provisions.
(D) Fourthly, it may further be noticed that even the amending provisions do not put an absolute bar on the refund of the amount to the manufacturer-claimant. It is admitted ground between the parties that the newly inserted provisions are not retrospective in operation but are merely prospective. Under Section 12A, every person who is liable to pay duty of excise for goods, is required to pay the same at the time of clearance of the goods, prominently indicate in all the documents relating to assessment, sales invoice, and other like documents, the amount of such duty which will form part of the price at which such goods are to be sold. As a consequence of such obligation cast on the manufacturer, a statutory presumption has been required to be raised under Section 12B that every person who has paid the duty of excise on any goods under this Act, shall, unless the contrary is proved by him, be deemed to have passed on full incidence of such duty to the buyer of such goods. There is no dispute between the parties that the deliveries of the goods have taken place much before the commencement of the amending provisions, when there was no such provision to indicate separately on all documents of sales invoice and on all other like documents, the amount of such duty which form part of the price. That is a condition which was impossible to be fulfilled and; therefore, this provision cannot apply in the case of deliveries of goods taken place prior to 20th September, 1991. Consequently, the presumption of goods cleared with aforesaid documents as mentioned in Section 12A of the Act, also cannot follow in favour of Deptt. so as to debar refund to the manufacturer.
(E) Fifthly, the provisions of crediting amount of excess duty paid to the Consumer Welfare Fund is applicable only in cases where it is held by virtue of presumption raised in Section 12B or otherwise, that the duty of excise paid by the manufacture had been passed on to the other person. When the aforesaid presumption required to be raised in Section 12B is not available to the respondents to be raised against the petitioner in the present case, which, undoubtedly, relates to clearance of goods prior to insertion of these provisions with effect from September 20,1991. There is no evidence on record on the basis of which it can be said that incidence of duty passed on to other person. There is no counter-affidavit which has been filed to raise any such plea in the petition. On this ground also, the respondents are not entitled to retain the amount by refusing refund with recourse to the provisions newly inserted by the Amendment Act of 1991.
In this connection, a decision of the High Court of Judicature for Madras may be referred to, reported in 1992 (59) E.L.T. 345 (Mad.) - Indo Swiss Synthetic Gem Mfg. Co. Ltd. v. Collector of Customs. Referring to the identical provisions like the one which have been inserted in the Customs Act also, particularly, to sections 28c and 28d of the customs act, which correspond to Sections 12A and 12D inserted in the Act of 1944 by the very same amending Act, their Lordships of Madras High Court held as under :-
"...The provisions like Section 28C cannot be made applicable with reference to the imports that were made before the commencement of the Act, such requirement could be made applicable only to the importers, who are importing goods after the commencement of the Act for the reason that the requirements are necessitated only by the virtue of amended Act and that cannot be applicable retrospectively. If any such requirements are imposed on the importers, who had already imported goods, such imposition of conditions under the statutory provisions are to be construed as discriminatory, arbitrary and unreasonable. It is discriminatory in the sense that those importers who had the benefit of refund before the amendment came into force are to be treated differently from the importers who made claim for refund and obtained an order or decree for refund but not executed and whose claims are still pending adjudication, it is arbitrary in the sense that the importers, who had already imported and made claim for refund are required to furnish documents which the importer was not aware of at the time of import and it is unreasonable in the sense that there is no justification in requiring the petitioner who had imported goods about ten years ago, to produce documents in the absence of any such requirement when the goods were cleared about a decade ago. In other words it can be said that it may be discriminatory between the persons who had already received the refund and others who have not received the refund by reason of the pendency of the proceedings."
I am in respectful agreement with the aforesaid observation.
(F) Lastly, clauses (d) and (e) of proviso to sub-section (2) of section 11b also indicate that the Assistant Collector of Central Excise under the amended provisions is required to pay to the applicant, the amount of duty of excise if the incidence of the same has not been passed on to 'any other person'. It may be noticed that the term "any other person" has been used in the sense "a person other than buyer". Clauses (d) and (e) of proviso to Section 11B(2) provides that if the duty of excise paid by the manufacturer has not been passed on to any other person, it is refundable to the applicant as well as if the duty of excise borne by the buyer if it has not been passed on to another person, is also required to be refunded. Section 12B only raised a presumption that the person who has paid the duty of excise on any goods is deemed to have passed on the full incidence of such duty on the buyer of the goods. The scheme of the amended provisions which provides establishment of a Consumer Welfare Fund, crediting all the excise duty claimed as have been paid otherwise, than in accordance with law, to the Fund; indicate that the Consumer Welfare Fund has been devised as a scheme for protecting end consumers' [who may appropriately be described "any other person", mentioned in clauses (d) and (e) of proviso to Section 11B(2)], interest, and, it is only in cases where it has been established that incidence of duty has been transferred to the consumers, either by the manufacturer or by the buyer, that claim can be denied and the amount is to be credited to the Fund. No presumption has been ordained by the amended provisions that the incidence of duty has been passed on to the end consumer/any other person, for whose welfare the Consumer Welfare Fund has been required to be established. Therefore, unless it can be established that the duty of excise is borne by buyer, about which a presumption has been created under Section 12B of the Act, has been further passed on to other persons, which naturally means person other than buyer, the duty of excise is liable to be refunded. Prima facie, that appears to be the effect of the amending provisions. However, since this question does not arise for consideration in the present case, I do not express any final opinion on this aspect of the matter, and leave it here.
29. In this connection, the decision in Foremost Dairies Limited's case (supra) of the Delhi High Court is of little assistants. In the first place, it is not clear from the facts stated in the judgment, whether the claim of refund was passed as a result of any decision in appeal or revision as in the case of petitioner's claim or, it was a case of voluntary payment of excise duty, under a mistake of law and the assessee was seeking to establish his claim of refund on one or another conditions envisaged under Section 11B. Moreover, in the said decision, reference has been made to the decisions in Nawabganj Sugar Mills case (infra) of Delhi High Court, based on Vyankatlal's case (infra) and the decision in Roplas' case (infra) of Bombay High Court. As will appear from discussion hereinafter, the two decisions of the Supreme Court do not relate to the question of refund of tax which has been collected un-authorisedly. On the other hand, the decision of Supreme Court are directly related to cases where a refund of levy of market-fee was in question, where the manufacturer were obliged to sell goods at the controlled price; and the question arose with reference to beneficial legislation enacted for the benefit of consumers. It will also be noticed that the decision of Bombay High Court in Roplas's case (supra) has been over-ruled by a larger Bench of the same High Court, and has not been followed in subsequent cases of the very same High Court. In that view of the matter, the decision in Foremost Dairies' case (supra) does not lend any assistance to the case of respondents. The first contention of the learned Counsel for the respondents that the petitioner's claim for refund cannot be accepted in view of amended provisions of the Act of 1944, is rejected.
30. Once I have come to the conclusion that the petitioner cannot be denied the relief to refund with reference to the amending provisions, it takes me to the second question raised by the respondents whether the relief under Article 265 of the Constitution of India could be denied on the principle of 'unjust enrichment'. This contention of the respondents also cannot be accepted. Firstly, it is not disputed before me that the person whose appeal were decided by a common judgment, 8 assessees out of 14, whose appeals were decided by a common judgment, were granted refund by the Asstt. Collector of Central Excise himself, and, out of aforementioned 7 persons whose claim demand was rejected by the Asstt. Collector, Central Excise, in the case of 3 persons who approached this Court, this Court has already directed the refund of excise duty paid by them as a result of wrongful classification determined by the Assistant Collector, Central Excise. Moreover, even the application made by the petitioner for refund of excise duty as a result of appellate order in his favour by the Collector (Appeals), after the same was rejected by the Asstt. Collector but was upheld by Collector (Appeals) and CEGAT, as detailed above, the respondents have no ground, whatsoever, to deny the refund to the petitioner, without reference to the amending provisions, because, in my opinion, it would be a clear case of discriminatory treatment qua the refund of tax illegally recovered in the case of the petitioner.
Furthermore, I am of the opinion, that doctrine of unjust enrichment cannot be invoked in the case of refund of tax illegally collected from the petitioner. Reference in this connection may be made to a decision delivered in D. Cawasji and Co. and Ors. v. State of Mysore and Anr. [1978 (2) E.L.T. (J154)], wherein their Lordships of Supreme Court observed as under :-
"Court cannot deny refund of tax paid under mistake of law even if the person who paid it has collected it from his customers and has no subsisting liability or intention to refund it to them."
31. It may be noticed that the aforesaid observation was made in a case where the assessee has paid tax voluntarily by treating it valid and demanded refund only after levy of tax declared invalid. The Court clearly drew distinction between a tax paid under a mistake of law and tax paid under protest by raising his protest against levy of tax. In this connection, their Lordships of Apex Court of this Land referred to practice prevailing in United States concerning voluntary payment of tax under mistake in the following manner :-
"In the U.S.A., it is generally held that in the absence of a statute to the contrary, taxes voluntarily paid under a mistake of law with full knowledge of facts cannot'be recovered back while taxes paid under a mistake of fact may ordinarily be recovered back (See Corpus Juris Secundum, Vol. 84 p. 637). Although Section 72 of the Contract Act has been held to cover cases of payment of money under a mistake of law, as the State stands in a peculiar position in respect of taxes paid to it, there are perhaps practical reasons for the law according to a different treatment both in the matter of heads under which they could be recovered and the period of limitation for the recovery."
It was in the aforesaid context, the Court held that the tax voluntarily paid, though under mistake, also are liable to be refunded; provided the same are claimed within the period of limitation within which a suit for recovery of payment made under mistake can be filed.
32. In Salonah Tea Company Ltd. etc. v. Superintendent of Taxes, Nowgong and Ors., etc. [1988 (33) E.L.T. 249 (S.C.)], their Lordships of Hon'ble Supreme Court observed as under :-
"In this case indisputably it appears that tax was collected without the authority of law, indeed the appellant had to pay the tax in view of the notices which were without jurisdiction. It appears that the assessment was made under Section 9(3) of the Act. Therefore, it was without jurisdiction. In the premises it is manifest that the respondents had no authority to retain the money collected without the authority of law and as such was liable to refund."(emphasis supplied)
33. Justice Krishna Iyyer in Shiv Shankar Dal Mills etc. etc. v. State of Haryana and ors. etc. [1980 (1) SCR 1170] speaking for the Apex Court, referring to the claim to relief of refund to the citizens of the sums wrongfully recovered by the public bodies observed as under :-
"...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. In our jurisprudence it is not palatable to turn down the prayer for high prerogative writs on the negative plea of alternative remedy, since the root principle of law married to justice, is ubi jus ibi remedium."
34. In HMM Ltd. and Anr. v. The Administrator, Bangalore City Corporation, Bangalore and Anr. [AIR 1990 SC 47], Supreme Court again observed while considering the case of refund of octroi when a plea was raised that the octroi must have been recovered from the customers and cannot be refunded on the principle of unjust enrichment, as under :-
"...such amounts, therefore, cannot be retained by the respondent - Corporation (emphasis supplied). There is no dispute as to the quantum in view of the fact that the amount has now been found to be certified to be credited persuant to the direction of the learned Single Judge of the High Court. We see no ground as to why amount should not be refunded. Realisation of tax or money without the authority of law is bad under Article 265 of the Constitution. Octroi cannot be levied or collected in respect of goods which are not used or consumed or sold within the municipal limits. So these amounts become collection without the authority of law. The respondent is a statutory authority in the present case. It has no right to retain the amount, so far and so much. These are refundable within the period of limitation. There is no question of limitation. There is no dispute as to the amount. There is no scope of any possible dispute on the plea of undue enrichment of the petitioners (emphasis supplied). We are, therefore, of the opinion that the Division Bench was in error in the view it took. Where there is no question of undue enrichment, in respect of money collected or retained, refund, to which a citizen is entitled, must be made in a situation like this."
35. It may be observed that in HMM Ltd.'s case (supra), the Court clearly negated the plea of unjust enrichment, for the purpose of refund of a tax on the ground that the same would be clearly violative of Article 265 of the Constitution, which prohibits not only levy but as well the collection of tax, without authority of law.
35A. In this connection, it may also be noticed that though the Excise Duty indirectly affects the price of goods, but it is not a levy on goods nor it is levy, object of which is to regulate price. Excise duty is a levy, in relation to goods leviable on manufacture or production of goods. There is nothing in theory, to prevent the central legislature from imposing a duty of excise on commodity as soon as it comes into existence, no matter what happens to it afterwards; whether it be sold, consumed, destroyed or given away. This principle is well established in the Province of Madras v. Messrs. Boddu Paidanna & Sons [AIR (29) 1942 F.C. 33], wherein the Court observed as under :-
"There is in theory nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed, or given away....It is the fact of manufacture which attracts the duty even though it may be collected later...."
Aforesaid view was approved and re-affirmed by their Lordships of Supreme Court in R.C. Jall Parsi and Anr. v. Union of India and Anr. [AIR 1962 SC 1281] while observing as under :-
"With great respect, we accept the principles laid down by the said three decisions in the matter of levy on an excise duty and the machinery for collection thereof. Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or the producer passes on to the ultimate consumer, that is, its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence, of the taxing authority, the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production, is not lost. The method of collection does not affect the essence of the duty, but only relates to the machinery of collection for administrative convenience. Whether in a particular case, the tax ceases to be in essence an excise duty, and the rational connection between the duty and the person on whom it is imposed ceased to exist, it is to be decided on fair construction of the provisions of a particular Act."
If that be so, the fact that charge of levy comes into existence even before goods are sold. It is even leviable on goods which are not sold. This is possibly the reason for which, while determining the assessable value of the goods, liable to duty, excise duty is excluded from the price; because, charge of duty arises before price is fixed for its marketability. The fact that levy is in fact collected at a later stage due to administrative convenience, does not alter the nature of impost, being in relation to the goods and, not on goods. Excise Duty is excluded for the purpose of valuing goods for evaluating liability or production, and, for the purpose of levying the duty on the end consumer. For the consumer, it remains not a 'tax', but a 'price', and what he pays, bears character of 'price' of the goods only.
Thus, the principle enunciated in HMM Ltd.'s case (supra), is, in my opinion, fully applicable to the instant case.
36. Thus, in my view, it has been well settled that if the collection of duty is without jurisdiction, without the authority of law or illegal, a plea of unjust enrichment of the manufacturer or producer cannot be advanced to deprive the person who paid duty under erroneous order passed by the authority, which has been ultimately found to be not sustainable. The question of passing of incidence in such cases to the 'end consumer' is really not relevant.
It may also be noticed in this connection that the duty is leviable on manufacture or production and the incidence arises at that time. The stage at which collection is authorised, in all cases, may not be necessary at the stage of production but may depend upon the provisions of statute which authorise the levy but, by providing the stage of collection of tax at a different stage does not convert the levy of manufacture into levy on any other transaction, much less on the sale. At what stage the payment of excise becomes part of the cost and whether it is ultimately recovered from the end consumer as a part of price, depends upon the market forces. The fixation of price is not regulated, for the purpose of the purchaser as a result of any provision under the Excise Act. It may also be noticed that the price when charged was not illegal and, as a result of decision of appeal or revision under the Act, the charging of such price does not become illegal subsequently. The manufacturer has every right to fix the price at any level and no part of it can be held to be unlawful, unless it is in breach of a valid price control order. If any part of duty, that is included as cost of production for pricing the goods, which is later on held to be not legally payable by the manufacturer, it cannot be treated that the manufacturer has unlawfully charged the price of his goods from the customer. The manufacturer has not collected any amount as such Duty. No law prevents him from fixing the price at a level at which he could sell his goods. Therefore, really speaking, it is not a case of unjust enrichment but results in reducing the cost of the product, which he has already sold, thereby resulting in enhancement of his profit. Unless there is a ceiling or regulation on earning of profit, it cannot be said that because the goods have been sold at a particular price at a particular time, and later on part of cost has been retrieved by the manufacturer, there is any unjust enrichment of the manufacturer.
Apart from aforesaid decisions to which I have made reference, the consensus of various decisions of the High Courts is that the refund claim of tax cannot be rejected on the ground that the manufacturer had not to refund the same or on the ground of unjust enrichment. There is no provision by which a court can deny refund of a tax even if a person who collected it from the customer and has no subsisting liability or intention to refund it to them or for any reason, which is impracticable to do so. Therefore, it cannot be said that it is the ultimate buyer who is entitled to refund of excise duty.
The High Courts of, Bombay in Arphi Incorporated v. Union of India [1987 (31) E.L.T. 627], Parle Products Ltd. v. Union of India [1987 (30) E.L.T. 180] and in Arphi Incorporated [1989 (40) E.L.T. 311]; Calcutta in Dilichand Shreelal v. CCE [1986 (26) E.L.T. 298 and Indian Rayon & Industries Ltd. v. ACCE [1990 (26) ECC 251 (Cal.); Madras in Soft Beverages P. Ltd. v. Union of India [1982 (10) E.L.T. 119 (Mad.)]; Andhra Pradesh in U. Foam P. Ltd. [1988 (36) E.L.T. 537 (A.P.)]; Punjab & Haryana in Oswal Oil & Soap Industries v. CEGAT [1987 (30) E.L.T. 876 (P & H)]; Delhi in Bermalt (India) P. Ltd. v. Union of India [1986 (23) E.L.T. 411, 421 (Del.)]; Gujarat in Union of India v. Bharat Vijay Mills [1984 (3) ECC 1 (Guj.)]; and Karnataka in Alembic Glass Industries Ltd. v. Union of India [1990 (25) ECC 39 (Kant.)]; have held that refund cannot be denied to the assessee on the ground of unjust enrichment.
37. In this connection, the decisions relied upon by learned counsel for the respondents have no application. In Nawabganj Sugar Mills' case (supra), their Lordships of Supreme Court dealt with a situation where the price of levy on sugar was pegged down by the State. The Mill-owners impeached the validity of control and obtained stay on operation of the order issued under Essential Commodities Act. Under covers of Court's order, which was granted on bank guarantee for the excess price being furnished to the Court, the appellants sold sugar at free market rate. Eventually the High Court upheld the Price Control Order and question of enforcing obligation to restore this to the Court for its equitable distribution in terms of bank guarantees furnished as a condition of stay order arose. In these circumstances, the Supreme Court negated the claim of the sugar mill-owners to retain the amount recovered by them as excess price of sugar which was sold by them at free market price. It may be noticed that it was not a case of levy of tax. It was also not a case where manufacturer was free to sell the goods manufactured by him at any price fixed by him but he was supposed to sell only at the price fixed under Essential Commodities Act, for the benefit of consumers and the consumers were entitled to purchase sugar only at the price fixed under the controlled order. It was in these circumstances when the prices were fixed clearly for the benefit of the consumers of sugar, and, the mill-owners were permitted to sell sugar at a higher price only under the orders of the Court, pending decision on the validity of the Control Order, the question arose, whether the mill-owners were entitled to retain more price than it was permissible for them to charge from the consumers?
38. Analogy of the said case can have no application where the question of tax so levied and collected is purported to be in terms of Statute when collected, but, is ultimately found to be not within the province of the Statute or not in accordance with the provisions of the Statute and, as a result, question of refund arises. In the event of tax, liability to pay the tax is of the tax-payer and it is he who alone in subject to recovery proceedings. The question of selling of his goods at a higher or lower price is not germane in the matter of levy and collection of tax. In such a case, there do not arise a case of retention of any price received in excess to regulated price from the buyer. The payment of indirect taxes directly goes into the cost of manufactured goods and is taken into account while computing the income of the person concerned. If part of the cost is ultimately refunded to the manufacturer, in any form, either by way of refunding of tax or on account of return of goods or for any other reason, the same is added back as its income, chargeable to tax. Section 41(1) of the Income-tax Act, 1961, is clear in this regard, relevant part of which reads as under :-
"41. Profits chargeable to tax. - (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any pre- vious year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not."
39. Thus, apparently, a tax which forms part of the cost of the goods; on selling of the goods whatever is received or recovered from the buyer is the sale price and whatever is recovered in excess of such cost, becomes his profit. Any difference in cost-price and sale-price constitute income of the manufacturer or loss to the manufacturer, depending upon at what price he is able to sell his goods. If such tax is later on refunded to manufacturer, it forms part of his income liable to income-tax under Income-tax Act, which is a Direct Tax.
40. In the next place, learned counsel for the respondents relied on a decision delivered in Shiv Shankar Dal Mills etc. etc. v. State of Haryana and Ors. etc. [AIR 1990 SC 1037]. This was also a case, not of tax but of market-fee under the relevant Agriculture Produce Act, leviable by the Market Committees, and, the order which the Hon'ble Supreme Court was pleased to pass, was based on agreement between the parties and not as a result of any decision on issue raised between the parties.
41. Another case relied upon by learned counsel for the respondents is State of Madhya Pradesh v. Vyankatlal and Anr. [AIR 1985 SC 901]. This again was a case depended on its own facts. The Government of Madhya Bharat (erstwhile) while exercising powers under Madhya Bharat Essential Supplies (Temporary Powers) Act (3 of 1948), issued notification under the Madhya Bharat Sugar Control Order, 1949, whereby all sugar factories in Madhya Bharat were to supply and despatch sugar of Grade E-27 at Rs. 32/- 4/- annas per maund F.O.R. destination. The Madhya Bharat Essential Supplies (Temporary Powers) Act also appears to have come into force only in 1948 and the Government in exercise of powers under the said Act, by issuing notification, delegated its power to issue orders under the Act to the Director, Civil Supplies of Madhya Bharat, who in exercise of that powers, issued order fixing different supply price for different factories and the said supply price was little higher than the ex-factory price fixed by the order dated 14th January, 1950. The suppliers of sugar were required to credit to the Madhya Bharat Government the difference between the supply price and ex-factory price, to be paid against 'the Madhya Bharat Government Sugar Fund'. The provisions for permitting to charge supply price in excess of ex-factory price by breaking uniformity of prices amongst sugar factory, was ultimately found to be invalid and the question arose whether the difference between the ex-factory price and the supply-price was to be refunded to the mill-owners. The circumstances were similar as they existed in Nawabganj Sugar Mills' case (supra). The mill-owners were under a duty to sell sugar at a controlled price to the various distributors and what they have charged from them, was based on the price fixed by the Government. They were not entitled to charge price from the buyers any less or more, because, ultimately, the price was fixed for the benefit of buyers and not for the benefit of sugar manufacturers. This was also not a case of levy of tax. Thus, keeping in view the purpose of the Act and the Order which the difference between the ex-factory and supply prices was ordered to be deposited by the Government; the Court held :-
"...It is really a law returning to the public what it has taken from the public (emphasis supplied), by enabling the committee to utilise the amount for the performance of services required, of it under the Act. Instead of allowing middlemen to profiteer by ill-gotten gains, the legislature has devised a procedure to undo the wrong that has been done by the excessive levy by allowing to committees to retain the amount to be utilized hereafter for the benefit of the very person for whose benefit the marketing legislation was enacted (emphasis supplied)."
42. Thus, for the reasons aforesaid, the ratio of the decision in State of Madhya Pradesh v. Vyankatlal and Anr. (supra) also does not apply in the question of refund, of tax or duty. A legislation to levy, tax or duty cannot be said to be a legislation with object of benefit to a class of persons for giving effect to any such policy.
43. The another case on which reliance was placed by learned counsel for the respondents in Hyderabad Asbestos Cement Products Ltd. and Anr. v. The Union of India and Ors. [1980 (6) E.L.T. 735]. In that case, levy of tax was held to be valid and no question of refund was involved. The observation by learned Judge was on an hypothetical issue and, can at best, be considered an 'obiter' and not a 'decision'.
44. The next case cited by learned counsel for the respondents is Roplas (India) Ltd. and Anr. v. The Union of India and Anr. [1988 (38) E.L.T. 27]. It may be noticed that the aforesaid decision of Bombay High Court has been over-ruled by a Full Bench of Bombay High Court in New India Industries Ltd. v. The Union of India [1990 (46) E.L.T. 23 (Bom.)]. After taking into consideration a large number of earlier decisions, including the decision mentioned above, the Full Bench concluded as under :-
"Payment towards tax or duty which is without authority of law is a payment made under mistake within the meaning of Section 72 of Indian Contract Act. Section 72 is based on equitable principles. Therefore, by claiming to retain the tax which has been collected without the authority of law, the Government cannot enrich itself and it is liable to make restitution to the persons who had made payment under mistake or under coercion. The State has violated Article 265 and, therefore, has a binding duty to refund the duty illegally collected."
The Full Bench further observed as under :-
"...Having collected tax without the authority of law, the State cannot have any preferential claim to decide how the amount of tax which is refundable shall be spent. According to the facts, and circumstances, of each case, the Writ Court would decide whether it is the State or the assessee or any third agency who ought to be entrusted with the duty of extending the benefit of tax refund to those who had ultimately borne the burden. As already stated, if consensus of the parties could be reached, the Writ Court may act on the same. When the same is not possible, the Court has to exercise its own discretion according to the facts of each case for achieving the object of benefiting those who had borne the ultimate burden. Again, we may mention, only some of the instances of forms in which such consequential relief may be granted. A fund may be created under a scheme for welfare of the particular industry and for the benefit of the consumers of the product. In case the excisable product is of mass consumption, benefit of return may be given by way of reduction of its price for a certain period or by promotion of research, rationalisation, etc. It would be always preferable in these cases to leave the discretion with Court to decide how the consequential relief ought to be formulated."
The Bombay High Court in its subsequent decisions has also held that the decision in Roplas (India) Ltd.'s case (supra) is no longer a good law in view of the above Full Bench decision. Reference in this connection may be made to a decision delivered in Kusum Engg. Works v. Union of India [1992 (58) E.L.T. 3 (Bom.)], where their Lordships of Bombay High Court observed as under :-
"...It has been repeatedly pointed out by this Court that the decision in Roplas case is not a good law. Apart from this consideration, the doctrine of unjust enrichment has no application whatsoever in cases where the duty is paid under protest. The recovery of duty by Department in such cases is subject to the right of the petitioners to seek refund and the petitioners having succeeded in establishing that the levy of duty can be only under Heading 85.37, the department cannot deprive the petitioners of excess duty paid by reference to Roplas decision. In our judgment, the issuance of show cause notice is wholly without jurisdiction and is required to be quashed."
The same view was reiterated in Indo-Metal Industries v. Asstt. Collector of Central Excise [1992 (59) E.L.T. 35 (Cal.)].
45. In view of the aforesaid discussion, I am of the view that the claim of the petitioner to refund of excise duty that was recovered from it, cannot be rejected merely on the plea of unjust enrichment, more particularly, when this Court has already issued order of refund in the identical cases, arising out of the very same order.
46. There is yet another reason which compells me to accept the prayer of the petitioner for issuing mandamus to the respondents for refund of the excise duty recovered from it without authority of law. The fact that some of the persons similarly situated were granted under the very same appellate order Ex. 2 refund by the Assistant Collector of Central Excise in the first instance and, thereafter, the persons whose claim was rejected by the Assistant Collector got the same relief from this Court; denying the petitioner the same treatment when even the Collector (Appeals) has directed refund of the amount in appeal much before the commencement of the amending provisions have come into force and appeal of Deptt. was also dismissed much before that date, would directly result in giving discriminatory treatment to the petitioner, merely for the reason on account of inaction on the part of the respondents to discharge their statutory obligation in the case of the petitioner while they have discharged the same obligation in the case of others who are similarly situated with the petitioner. This would clearly result in violation of Article 14 of the Constitution of India. Such a situation cannot be allowed to come into existence as a result of failure on the part of the respondents to discharge their statutory obligation to refund the tax which was illegally collected by them, suo moto, when the Act itself provide for such action at its own.
As a result of aforesaid discussion, the petition is accepted. The respondents are directed to refund the amount of excise duty which became refundable to the assessee-petitioner as a result of order Ex. 1 dated 22nd January, 1986, with interest at the rate of 12 per cent per annum from the date of actual payment to date of refund. The respondents are further directed to make payment of refund with interest as aforesaid, within a period of 2 months from the date of this order.
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