2005 (2) TMI 706 - HC - Indian Laws

Summary

Issues Involved:
1. Classification of Sulphonic Acid under Entry 18 of Schedule H of the Mumbai Municipal Corporation Act, 1888.
2. Refund of octroi duty collected between 9th September, 1989 and 10th December, 1992.
3. Applicability of the principles of unjust enrichment.
4. Compliance with procedural requirements for refund claims.

Detailed Analysis:

1. Classification of Sulphonic Acid under Entry 18 of Schedule H:
Hindustan Lever Limited manufactures soaps and detergents using Sulphonic Acid, a toxic chemical intermediate. The dispute revolves around whether Sulphonic Acid falls under Entry 18 of Schedule H, which covers substances used in washing clothes, floors, and utensils. The Petitioner argued that Entry 18 only includes articles directly used for washing, not intermediates like Sulphonic Acid. This position was supported by a Division Bench's decision in a similar case involving Godrej Soaps Limited, which held that only substances capable of direct use for washing are covered under Entry 18. The Supreme Court upheld this interpretation, confirming that raw materials like Sulphonic Acid do not fall under Entry 18.

2. Refund of Octroi Duty Collected:
The Petitioner sought a refund of octroi duty paid from 9th September, 1989 to 10th December, 1992, arguing that Sulphonic Acid was not exigible to octroi duty under Entry 18. The Municipal Corporation initially classified Sulphonic Acid under Entry 18 but later accepted its classification under the residuary Entry 62, applicable from 2nd February, 1993, at a lower rate of 2% ad valorem. The Corporation granted a partial refund for the period from 10th December, 1992 to 1st February, 1993, and for excess duty paid after 2nd February, 1993. However, it rejected the refund claim for the period between 9th September, 1989 and 10th December, 1992, citing procedural delays.

3. Applicability of the Principles of Unjust Enrichment:
The Municipal Corporation argued that the Petitioner would not be entitled to a refund due to unjust enrichment, claiming that octroi is an indirect tax passed on to consumers. However, the Petitioner provided an affidavit stating that no part of the octroi duty was recovered or passed on. The Court noted that there was no evidence to suggest that the company had charged octroi separately on its bills, similar to the findings in Tata Engineering and Locomotive Company Ltd. v. The Municipal Corporation of the City of Thane.

4. Compliance with Procedural Requirements for Refund Claims:
Rule 26 of the Octroi Rules of 1965 requires claims for refund to be lodged within three months of recovery, accompanied by necessary documents. The Court held that while procedural compliance is important, it is not a condition precedent for the right to a refund. The Court referenced Supreme Court decisions, emphasizing that refunds should be granted for taxes collected without authority, provided there are no avoidable laches or abandonment of claims. The Court found that the Petitioner had consistently contested the classification and sought refunds through multiple representations, indicating no abandonment of claims.

Conclusion:
The Court concluded that the Petitioner is entitled to a refund of octroi duty collected between 9th September, 1989 and 10th December, 1992, provided all necessary documentary proof is submitted within eight weeks. The Municipal Corporation is directed to process the refund within three months of receiving the documents. The Petition is disposed of with no order as to costs.