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Bdh Industries Ltd. v. Commissioner Of C. Ex. (Appeals), Mumbai-I

CESTAT

Jul 9, 2008

Judgment

Subsequent
References

CaseIQ

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Structured Summary of the Provided Opinion

Factual and Procedural Background

(Based exclusively on the text of the opinion.)

This opinion was rendered on a reference concerning the narrow question whether an assessee who avails suo moto credit of duty paid in excess may rely on the line of Tribunal decisions represented by Comfit Sanitary Napkins or on the Tribunal decision in Motorola India Pvt. Ltd. (2005 (71) RLT 334).

The Tribunal reproduced facts from the Motorola case: the assessee had mistakenly debited Rs. 1,58,098/- in excess to the PLA/Cenvat account in March 2001 and then sought departmental permission to take credit of that amount. The department advised filing a refund claim; a refund claim filed after a year was rejected by the Assistant Commissioner as time-barred. The Motorola Tribunal held that because the excess amount did not appear on invoices, it could not be treated as duty (it was more like a deposit), and consequently the question of limitation did not arise.

In contrast, the Tribunal in Comfit Sanitary Napkins held that an assessee cannot suo moto take credit without applying for refund when excess duty has been paid.

The reference required the bench to resolve which of these competing approaches should be followed and to answer whether suo moto credit of excess duty is permissible.

Legal Issues Presented

Whether an assessee who avails suo moto credit of duty paid in excess (i.e., credits the amount in PLA/Cenvat accounts without first applying for refund) should be governed by the Tribunal's decision in Comfit Sanitary Napkins (which disallows suo moto credit) or by the Tribunal's decision in Motorola India Pvt. Ltd. (which treated certain excess deposits as not being duty and permitted re-crediting without the time-bar objection).
Whether there is any provision under the Central Excise Act and Rules permitting an assessee to take suo moto credit or to restore credit without the sanction/permission of the proper officer, or whether refund/re-credit must be pursued under Section 11B (and related provisions) of the Central Excise Act.

Arguments of the Parties

Appellant's Arguments

The appellants contended that their situation involved an accounting/clerical error: duty on the same consignment had been debited twice (once at clearance under claim for rebate and again at month-end), and this double debit could be corrected in books of account by a suo moto re-credit.
Counsel relied on standard accounting practice (cited textbook: Reliable Series of Book Keeping Standard XI by Ashok Narkar) to show that cross entries and corrections are normal bookkeeping methods that can be used to rectify a duplicate debit.
The appellants relied on multiple Tribunal decisions to support the proposition that mere correction of book entries (cross-entry to offset an incorrect debit) does not require filing a refund application under Section 11B and does not require prior departmental permission. The decisions relied upon included (inter alia): Birla Copper; Raymond Ltd.; Lakshmi Machine; Indo American Electricals; Punjab Maize; Hind Spinners; Visakhapatnam Steel Plant; Raajratna Metal Inds. Ltd.; Tide Water Oil Company (2005 (52) RLT 463) — all suggesting that accounting corrections/reenactments of credit are permissible and are not refund claims of duty.
Additional Tribunal decisions were cited where suo moto credit was allowed in cases of incorrect payment through one account and subsequent payment through PLA or where excess payment was discovered at finalization of assessment. Examples cited included: Usha Beltron Ltd.; Sanghi Polyesters; Indore Wire Company Ltd.; Anapurna Malleables Ltd.; Flex Industries; Jasch Industries; Veena Diecasters & Engs. (2007 (78) RLT 114); and others, including a CESTAT final order in Ashok Layland Ltd.

Respondent's (Department's) Arguments

The Departmental Representative relied principally on Section 11B of the Central Excise Act, which requires a person claiming refund of any duty of excise to make an application for refund to the Assistant Commissioner along with documents showing the duty was collected from him and the incidence was not passed on to any other person.
It was submitted that debit entries in RG 23A or PLA accounts are entries of duty paid and that any refund of those entries is therefore a refund of duty and must be processed under Section 11B; suo moto taking of credit is not permissible.
Reference was made to Tribunal decisions which disallow suo moto adjustments (e.g., Bima Cables Pvt. Ltd. v. CCE (Tri.) and Straw Board Manufacturing Co. v. CCE (Tri.)). It was also submitted that judicial authority (e.g., Vividh Marbles — Rajasthan High Court) has held that refunds of tax recovered without authority must be filed under Section 11B.
The Department placed reliance on Gujarat High Court decision in Indo Nippon (later upheld by the Supreme Court — 2005 (186) E.L.T. A 117 (S.C.)) holding that Cenvat/modvat credit is a constituent of duty and refund of erroneously reversed credit must be filed under Section 11B.
The Department relied heavily on the Supreme Court decision in Mafatlal Industries Ltd. v. Union of India, particularly paragraphs 68, 69, 82–84, 96 and 97, which emphasize that refund claims for amounts collected as duty (even if later deemed not payable) are to be made under Section 11B (and similar provisions) and not by suit; and that the Central Excise enactments are self-contained with regard to levy, assessment and refund.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court (as stated in the opinion)
Motorola India Pvt. Ltd. — 2005 (71) RLT 334 (Tribunal)	The Tribunal in Motorola held that an amount erroneously debited and not reflected on invoices cannot be treated as duty; it was treated as a deposit rather than duty for limitation purposes.	The opinion reproduces the Motorola facts and view but does not adopt Motorola as overriding the statutory requirement to seek refund under Section 11B; the court considered it in the comparative analysis of competing Tribunal views.
Comfit Sanitary Napkins (I) Pvt. Ltd. (Tribunal)	Held that an assessee cannot suo moto take credit without applying for refund when excess duty has been paid.	The opinion notes this decision as representing the view that suo moto credit is impermissible; the bench ultimately follows the principle that refunds/credits must be processed under statutory provisions (Section 11B).
Birla Copper (Tribunal)	One of several Tribunal decisions holding that cross entry to offset an incorrect debit (with cross references) is a recognised bookkeeping method and does not require a refund application.	The appellants relied on this and similar Tribunal decisions; the court recorded these authorities but held that such bookkeeping-based relief does not override the statutory regime requiring refunds/credits to be sanctioned under the Central Excise Act.
Raymond Ltd. (Tribunal)	Same group principle: accounting correction (cross entry) to rectify incorrect debit need not be treated as refund under Section 11B.	Noted by the court as relied upon by appellants; court nevertheless concluded that statutory provisions (Section 11B) and Supreme Court precedents require refunds/credits to be processed under the statute.
Lakshmi Machine (Tribunal)	Same bookkeeping/correction principle as above (group of Tribunal cases).	Recorded as part of the appellant's reliance; court held that such decisions do not displace the legal requirement of seeking departmental sanction/refund under Section 11B.
Indo American Electricals (Tribunal)	Listed among Tribunal authorities that allowed accounting re-crediting without a refund application.	Considered by the court as part of appellant's case but not followed as binding against the statutory requirements analyzed by the bench and higher courts.
Punjab Maize (Tribunal)	Included in the group supporting bookkeeping correction without refund application.	Noted; court concluded statutory remedy (Section 11B) governs and precludes suo moto re-credit without departmental sanction.
Hind Spinners (Tribunal)	Part of the Tribunal decisions upholding cross-entry corrections as legitimate accounting practice.	Noted; court held that such accounting rationales do not override statutory refund procedures.
Visakhapatnam Steel Plant (Tribunal)	Appears in both groups of referred Tribunal decisions (accounting correction and later as example where duty paid through RG 23A was corrected).	Recorded twice in the opinion; the court treated this as part of the factual matrix of Tribunal approaches but concluded that statutory Section 11B and Supreme Court authority require refunds/credits to be processed under the Act.
Raajratna Metal Inds. Ltd. (Tribunal)	Listed among decisions allowing cross-entry correction in bookkeeping.	Noted by the bench but not treated as displacing the statutory scheme governing refunds.
Tide Water Oil Company — 2005 (52) RLT 463 (Tribunal)	One of the Tribunal authorities stating accounting correction/cross entries are permissible and not to be treated as demand for refund under Section 11B.	Relied upon by the appellants; the court recorded it but held statutory provisions and Supreme Court precedents require refund claims to follow Section 11B procedure.
Usha Beltron Ltd. (Tribunal)	Cited as a Tribunal decision allowing suo moto credit in certain factual contexts (e.g., incorrect payment through RG 23A later rectified through PLA).	Part of appellant's supporting authorities; court acknowledged such cases but proceeded to apply higher authority (Supreme Court) and the statute to disallow general permission for suo moto credit.
Sanghi Polyesters (Tribunal)	Listed among decisions in which suo moto credit was allowed in contexts of incorrect payments being rectified.	Noted by the bench; ultimately the court found the statutory scheme requires refund claims/credits to be sanctioned under Section 11B.
Indore Wire Company Ltd. (Tribunal)	Another Tribunal decision relied on permitting suo moto credit in appropriate circumstances.	Recorded in the opinion as a reliance point for appellants; court determined that Section 11B governs such refunds/credits.
Anapurna Malleables Ltd. (Tribunal)	Included among Tribunal cases permitting suo moto credit/corrections.	Noted; court emphasized statutory refund procedure must be followed notwithstanding these Tribunal decisions.
Flex Industries (Tribunal)	Part of the group of cases where suo moto credit was allowed.	Recorded but not treated as controlling by the court, which relied on the statute and Supreme Court authority.
Jasch Industries (Tribunal)	Included among authorities where suo moto credit was permitted.	Noted by the bench as part of appellants' case; the bench concluded Section 11B procedure is required.
Veena Diecasters & Engs. — 2007 (78) RLT 114 (Tribunal)	Tribunal decision permitting suo moto re-credit in certain factual scenarios.	Noted in appellant's list; the bench did not accept this as a licence for suo moto credit contrary to Section 11B and Supreme Court precedent.
Bill Metal Industries (Tribunal)	One of several Tribunal authorities cited for suo moto credit allowance.	Recorded; court held that these do not override statutory mandate to process refunds under Section 11B.
Gujarat Alkalies & Chemicals (Tribunal)	Included in the appellant's list of supportive Tribunal authorities.	Noted; the court applied statutory/supreme court principles rather than rely on these Tribunal decisions to permit suo moto credit.
Sulekha Works (Tribunal)	Listed among Tribunal decisions permitting suo moto credit.	Recorded; court concluded that refund/credit must nevertheless be governed by Section 11B and departmental sanction.
USV Ltd. (Tribunal)	Included among authorities where suo moto adjustment was allowed.	Noted by the bench; the statutory position (Section 11B) was treated as decisive.
CESTAT Final Order No. A/1555-56/07/CIV/SMB dated 11-1-07 in Ashok Layland Ltd.	Administrative/Tribunal order cited as part of authorities permitting suo moto re-credit in appropriate cases.	Noted; the bench maintained that statutory refund procedures must be followed.
Bima Cables Pvt. Ltd. v. CCE (Tri.)	Tribunal decision cited by the Department that suo moto taking of credit is not permissible.	Relied upon by the Department and noted by the bench as consistent with the statutory position that refund/credit applications must be made under Section 11B.
Straw Board Manufacturing Co. v. CCE (Tri.)	Tribunal decision cited as disallowing suo moto credit.	Recorded by the court in the Department's list of supporting authorities for requiring Section 11B procedure.
Vividh Marbles (Rajasthan High Court)	Held that refunds in case of tax recovered without authority of law have to be filed under the provisions of Section 11B.	Relied upon by the Department; the bench accepted the principle that refund claims of duties must be pursued under the statutory mechanism.
Indo Nippon (Gujarat High Court) — upheld by Apex Court (2005 (186) E.L.T. A 117 (S.C.))	Gujarat High Court held that Cenvat/modvat credit is a constituent of duty and that refund of erroneously reversed credit is covered under Section 11B; this view was upheld by the Supreme Court.	The bench relied on this line of authority (as cited by the Department) to emphasize that credits/refunds constitute refunds of duty and therefore fall under Section 11B procedures.
Mafatlal Industries Ltd. v. Union of India (Supreme Court)	Supreme Court held that refund claims for amounts collected as duty (including those later deemed not payable) must be made under Section 11B/related rules; the Central Excise Act is self-contained regarding levy and refund; suits for refund under contract law are not permissible.	The court treated Mafatlal as a controlling authority establishing that refund claims are to be made under Section 11B and related rules and that no suo moto or extraneous procedure can bypass this statutory scheme.
Sahakari Khand Udyog and Others (Supreme Court decisions referenced)	Referred to by the bench as recent Supreme Court decisions underscoring that refunds should pass through the doctrine of unjust enrichment (i.e., refunds are governed by unjust enrichment principles even if not expressly stated in statute).	The bench relied on these decisions to reinforce that refund claims must be processed under statutory mechanisms and pass the unjust enrichment test; consequently, suo moto credits without departmental adjudication are not permissible.

Court's Reasoning and Analysis

The court conducted a textual and precedent-based analysis, summarized stepwise as follows (all points reflected from the opinion):

The court first set out the competing Tribunal views: Motorola (which treated certain excess debits as deposits/not duty where not reflected on invoices) and Comfit Sanitary Napkins (which disallowed suo moto credit when excess duty was paid).
The appellants' factual position was accepted in terms of their allegation: an accounting/clerical double-debit of duty (duty debited twice) which they corrected in their accounts by taking a suo moto credit and informing the department. They relied on recognized bookkeeping practices and numerous Tribunal decisions to justify such corrections without a refund application.
The Department countered by invoking Section 11B of the Central Excise Act, Supreme Court authority (Mafatlal) and various High Court decisions (e.g., Indo Nippon, Vividh Marbles), arguing that entries in RG 23A/PLA are entries of duty and any refund/credit arising from them is a refund of duty that must be processed under Section 11B with proof that the incidence of duty was not passed on.
The court observed that there is no provision in the Central Excise Act and Rules that permits suo moto taking of credit or refund without the sanction/permission of the proper officer. The appellants' characterization of the matter as a mere accounting error was rejected to the extent that debit entries in the accounts were towards payment of duty and hence their reversal is a refund of duty.
The court emphasized that PLA accounts and credit accounts are submitted to the department and any correction in them requires departmental sanction. It noted that the law on refunds has been analyzed by the Supreme Court in Mafatlal, which makes clear that refunds of any amounts collected as duty must be filed under Section 11B and satisfy the requirement of proving non-passing on of the incidence of duty.
The opinion further referred to later Supreme Court authority (Sahakari Khand Udyog and others) clarifying that refund claims must pass through the doctrine of unjust enrichment, reinforcing the statutory procedures for refunds.
On this basis, the bench concluded that the statutory mechanism (Central Excise Act and Rules, and specifically Section 11B) governs all types of refund claims and that there is no lawful entitlement to take suo moto credit of duty paid in excess without first complying with the prescribed refund procedure and departmental adjudication.

Holding and Implications

Holding: The reference is answered in favour of the view that refunds or re-credits of amounts representing duty cannot be taken suo moto by the assessee; instead, all types of refund claims must be filed and adjudicated under the Central Excise Act and Rules, particularly Section 11B. The bench held that no suo moto credit of duty paid in excess may be taken by the assessee.

Implications (direct effect on the parties and procedure):

The assessee cannot lawfully rectify an alleged double debit by taking a suo moto credit in PLA/Cenvat accounts without making a refund application and obtaining departmental sanction; such corrections are not a substitute for the statutory refund procedure.
The matter was remitted to the referral bench for disposal of the underlying appeal in accordance with this ruling (i.e., applying Section 11B and the statutory refund regime).
The decision applies the existing Supreme Court and High Court authorities and the statutory provision; it enforces the requirement that refund claims pass the proof of not passing on the incidence of duty, and that they be processed under the Central Excise Act. The opinion does not purport to create a new legal doctrine beyond applying the established statutory and appellate court authorities.

Order pronounced in Court on 9-7-2008.

Notes on Scope and Source

This summary is strictly confined to the information contained in the provided opinion. No external facts, case law details beyond what the opinion itself states, or inferences not explicitly drawn by the bench have been added.

Show all summary ...

[Order per : K.K. Agarwal, Member (Technical)]. - We have heard both sides on the issue referred to us viz. “If an assessee avails suo moto credit of the amount of duty paid in excess by him, whether the view taken by the Tribunal in the case of Comfit Sanitary Napkins (I) Pvt. Ltd. - will apply or the views taken by the Tribunal in the case of Motorala India Pvt. Ltd. - (T) = (T) = 2005 (71) RLT 334 will apply.”

2. For considering the above issue, it would be necessary to reproduce the facts of the case and the views taken by the Tribunal in these two cases.

3. In the case of Motorola.

In this case the assessee has by mistake debited an amount of Rs. 1.58,098/- in excess in the PLA/Cenvat account in the month of March 2001 and thereafter asked the department for permission to take credit of the amount paid by mistake. The department however advised him to file a refund claim. The appellant however contended that the amount erroneously debited was not duty. A refund claim was filed after a year which was rejected by Asst. Commissioner on the grounds of time bar. The Tribunal expressed a view that the amount deposited cannot be considered as duty, as duty paid on the goods has to be indicated on their invoices. As the amount erroneously paid in excess does not find mention in any invoices, in that sense it should be considered as deposit and not duty and accordingly the question of time bar, does not arise.

In the case of Comfit Napkins

It was held that the assessee cannot suo moto take credit without applying for refund when excess duty has been paid.

4. It was urged on behalf of the ld. Advocate for the appellants that in their case the goods were supplied under claim for rebate of duty and duty was paid once at the time of clearance of consignment and secondly at the end of the month when the duty is required to be paid in respect of all consignments cleared during the month. Since the duty was debited twice, they suo motto took the credit of the same and informed the department of it. Ld. Advocate took us to the book dealing with accounting procedure viz. Reliable Series of Book Keeping Standard XI by Ashok Narkar to show that error of debiting duty twice on the same product was in the nature of accounting error and this could be corrected by them without seeking prior sanction from the department and in this regard he places reliance on the following decisions of the Tribunal :-

1. Birla Copper - (T)

2. Raymond Ltd. - (T)

3. Lakshmi Machine - (T)

4. Indo American Eleciricals - (T)

5. Punjab Maize - (T)

6. Hind Spinners - (T)

7. Visakhapatnam Steel Plant - (T)

8. Raajratna Metal Inds. Ltd. - (T)

9. Tide Water Oil Company - 2005 (52) RLT 463 (T)

5. In most of the decisions it was held that cross entry of credit taken to offset an incorrect debit entry by keeping cross references is the only prescribed method of accountants in Book Keeping. Such entry cannot be denied on grounds that only TR-6 challan amounts could be credit entries which could be made in the PLA/Cenvat and not others. In these decisions it was held that notice appears to be issued in ignorance of the instructions on maintenance of PLAs and Book Keeping Practices accepted by all over the world. Mere correction in the entries of the account does not require a refund application under Section 1 IB. Further there is no provision under the Central Excise Act and Rules for seeking permission of Asst. Commissioner for re-crediting credit amount wrongly debited. In such case restoration of credit is to be allowed as there is no provision for grant of refund of modvat credit. No permission from the department is required as only accounting adjustment are done and does not involve any question of excess or short payment. Credit entry in accounts is not duty and for an error no permission is required.

6. Ld. Advocate also referred to following decisions of Tribunal in which Suo Moto credit was allowed :-

1. Usha Beltron Ltd. - (T)

2. Sanghi Polyesters - (T)

3. Indore Wire Company Ltd. - (T)

4. Anapurna Malleables Ltd. - (T)

5. Flex Industries - (T)

6. Jasch Industries - (T)

7. Veena Diecasters & Engs. - 2007 (78) RLT 114 (T)

8. Jasch Industries Ltd. - (T)

9. Bill Metal Industries - (T)

10. Visakhapatnam Steel Plant - (T)

11. Gujarat Alkalies & Chemicals -

12. Sulekha Works - (T)

13. USV Ltd. - (T)

14. CESTAT’s Final Order No. A/1555-56/07/CIV/SMB dt. 11-1-07 in Ashok Layland Ltd.

These are the eases where the duty paid through RG 23A account was found to be incorrect and subsequently duty was paid through PLA account or cases, wherein at the time finalization of assessment, the duty was found to have been paid in excess etc.

7. In view of this it was vehemently argued that as long as the duty is not reflected in the invoices issued to the customer and is paid wrongly through clerical, arithmetic or accounting error, suo moto credit can be taken and there is no need of filing a refund application as such payments are not in the nature of duty but in the nature of correction of book entries.

8. Ld. DR referred to the provisions of Section 11B of Central Excise Act which requires any person claiming refund of any duty of excise to make an application for refund of such duty to Asst. Commissioner of Central Excise along with documents to show that the amount of duty of excise in relation to which such refund is claimed was collected from him and incidence of such duty had not been passed on by him to any other person. It was his submission that debit entries made either in RG 23A or PLA account are towards payment of duty and refund arising out of such alleged debit entries are to be considered as refund of duty paid by mistake/inadvertently. In view of this, all such claims have to be filed under the provisions of Section 11B. He submitted that taking suo moto is not permissible as held by Tribunal in the case of Bima Cables Pvt. Ltd. v. CCE - (Tri.) and Straw Board Manufacturing Co. v. CCE - (Tri.). It was submitted that even refunds in case of tax recovered without authority of law has to be filed under Provisions of Section 11B as held by Hon’ble Rajasthan High Court in Vividh Marbles reported in (Raj.). He further stated that even refund of credit of duty are to be filed under provisions of Section 11B as held by Gujarat High Court in the case of Indo Nippon - (Guj.) which was upheld by Apex Court as reported in 2005 (186) E.L.T. A 117 (S.C.). Gujarat High Court has held that Cenvat and Modvat credit is a constituent of duty and refund of erroneously reversed credit cannot be denied on the ground that the credit was not duty and such refunds were covered under Section 11B of Central Excise Act. Ld. DR referred to the decision of Hon’ble Supreme Court in case of Mafatlal Industries Ltd. v. Union of India - (S.C.) especially paragraphs 68, 69, 82, 83, 84, 96 and 97 which clearly brings out that provisions of Section 11B and other similar provisions existing at the relevant time shall apply to claim for refund of any amount collected as duty of excise on the ground that the goods in respect of which amounts collected were not excisable or were entitled to exempt from duty and no court shall have any jurisdiction in respect of such claim. Prior to 1991 Section 11B (5) starts with a ‘non obstante clause’, it took every kind of refund and every claim of refund and it expressly barred the jurisdiction of courts in respect of such claim. Sub section 3 of now Section 11B clearly states that “notwithstanding anything to the contrary contained in any judgment, decree, order of direction of the appellate Tribunal or any court or in any other provisions of this Act or the Rules made thereunder or any law for the time being in force, no refund shall be made except as provided in this sub-section. The judgment says that the Central Excise Act is self-contained enactment. It contains provisions for collecting the taxes which are duty according to law but not have been collected and also for refunding the taxes which have been collected contrary to law. Thus even refunds of amount collected contrary to law are to be governed by Section 11B even though they loose their characters as duty. It is only when levy itself is considered as unconstitutional that the refunds of amount collected under that levy is to be governed limitation Act and not under the provisions of Central Excise Act. Apex Court in para 68 made it absolutely clear that any other claim for refund of excise duty could be made only under and in accordance with Rule 11 or Section 11B, as the case may be, in the form provided by the Act. No suit can be filed for refund of duty invoking Section 72 of the Contract Act. This shall apply even in respect of refund claims which arise as a consequence of appellate/revisional order or consequential order made by High Court/Supreme Court. This is so because every refund claim has to pass the proof of not passing on the burden of duty to others.

9. Reference in particular was invited to the observation made in para 99.

“99(i) Where a refund of tax/duty is claimed on the ground that it has been collected from the petitioner/plaintiff - whether before the commencement of the Central Excise and Customs Laws (Amendment) Act, 1991 or thereafter - by mis-interpreting or misapplying the provisions of the Central Excise and Salt Act, 1944 read with Central Excise Tariff Act, 1985 or Customs Act, 1962 read with Customs Tariff Act or by mis-interpreting or mis-applying any of the rules, regulations or notifications issued under the said enactments, such a claim has necessarily to be preferred under and in accordance with the provisions of the respective enactment before the authorities specified thereunder and within the period of limitation prescribed therein. No suit is maintainable in that behalf. While the jurisdiction of the High Courts under Article 226 and of this Court under Article 32 cannot be circumscribed by the provisions of the said enactments, they will certainly have due regard to the legislative intent evidenced by the provisions of the said Acts and would exercise their jurisdiction consistent with the provisions of the Act. The writ petition will be considered and disposed of in the light of any in accordance with the provisions of Section 11B. This is for the reason that the power under Article 226 has to be exercised to effectuate the rule of law and not for abrogating it.

The said enactments including Section 11B of Central Excises and Salt Act and Section 27 of the Customs Act do constitute “law” within the meaning of Article 265 of the Constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the enactments are self contained enactments providing for levy, assessment, recovery and refund of duties, imposed thereunder. Section 11B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be. It is necessary to emphasise in this behalf that Act provides a complete mechanism for correcting any errors whether of fact or law and that not only an appeal is provided to a Tribunal which is not a departmental organ - but to this Court, which is a civil court.

(ii) Where, however, a refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception : where a person approaches the High Court or Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the derision has become final and cannot be re-opened on the basis of a decision on another person’s case; this is the ratio of the opinion of Hidayatually, C.J. In Tilokchand Motichand and we respectfully agree with it.”

10. It was submitted that the above paragraph clearly state that all refund claim except those mentioned under the Proposition (ii) have to be and must be filed and adjudicated under the provisions of Central Excise and Salt Act or the Customs Act as the case may be. The proposition (ii) relates only to those claims where the levy itself has been held unconstitutional which is not so in the present case. Section 11B has very wide scope inasmuch as it allows even purchaser of goods to claim refund of duty recovered from him if the duty is found to be non-payable and he is able to show that he has not passed on the incidence of duty. Thus not only a manufacturer but even purchaser of goods has to file refund claim under provision of Section 11B and no other law.

11. We have considered the submission.

12. We find that there is no provision under Central Excise Act and Rules allowing suo moto taking of credit or refund without sanction by the proper officer. The appellant’s contention that refund in respect of duty paid twice cannot be considered as refund of duty and is only the accounting error does not appeal to us as the debit entry made in the accounts is towards payment of duty only and therefore refund of these amounts has to be considered as refund of duty only. The PLA account and the credit accounts are required to be submitted to the department and any correction carried therein, need to have department’s sanction. We also note that the law relating to refund has been fully analysed by the Apex Court in the case of Mafatlal Industries (cited supra) which makes it very clear that all types of refund claim be there of excess duty paid or otherwise are to be filed under Section 11B and have to pass the proof of not passing on the incidence of duty to others. The recent decisions of Hon’ble Supreme Court in the case of Sahakari Khand Udyog and Others clearly laid down that all refunds have to pass through doctrine of unjust enrichment, even if it is not so expressly provided for in the statute. From these decisions it clearly emerges that all types of refund have to be filed under Section 11B of the Central Excise Act and no suo moto refund can be taken unless and until the department is satisfied that the incidence of duty has not been passed on.

13. In view of above, we answer the reference made to us by holding that all types of refund have to be filed under Central Excise Act and Rules made thereunder and no suo moto credit of the duty paid in excess may be taken by the assessee. The matter is now sent back to the referral bench for passing appropriate orders on the appeal before it.

(Pronounced in Court on 9-7-2008)