1989 (11) TMI 317 - HC - Central Excise

Summary

Issues Involved:
1. Refusal to refund the amount allegedly collected unlawfully.
2. Classification of Electrical Insulators under the Central Excise Tariff.
3. Limitation period for refund claims under Section 11B of the Central Excises & Salt Act, 1944.
4. Legality of assessments made under Item 23B of the Tariff Schedule.
5. Jurisdiction of the Excise authorities in granting refunds.
6. The doctrine of unjust enrichment in the context of refund claims.

Issue-wise Detailed Analysis:

1. Refusal to Refund the Amount Allegedly Collected Unlawfully:
The writ application challenges the respondents' refusal to refund the amount collected unlawfully from the first petitioner, Indian Rayon Corporation Ltd. The petitioners argued that the Excise Duty levied on Electrical Insulators was unlawful as the insulators were not classifiable under Item 23B of the Tariff Schedule.

2. Classification of Electrical Insulators under the Central Excise Tariff:
The petitioners contended that the Electrical Insulators manufactured by them were wrongly classified under Item 23B of the Central Excise Tariff, which pertains to Chinaware and Porcelain-ware. The Collector (Appeals) accepted the company's submission regarding the classification but limited the refund period to six months.

3. Limitation Period for Refund Claims under Section 11B of the Central Excises & Salt Act, 1944:
The primary issue was whether the Collector (Appeals) was justified in restricting the refund to a period of six months as prescribed under Section 11B of the Act. The court held that once the assessment orders are quashed, the entire matter is at large, and fresh assessments must be made. Consequently, the duty, if paid in excess, should be refunded without the limitation of six months.

4. Legality of Assessments Made under Item 23B of the Tariff Schedule:
The court quashed all assessments of Excise Duty upon Electrical Insulators made under Item 23B from April 1970 to February 6, 1978. It directed the respondents to pass fresh orders of assessment or refund for the entire period. The Assistant Collector's subsequent order held the insulators were not Porcelain-ware and should be assessed under Item 68, but the refund claims would be decided separately.

5. Jurisdiction of the Excise Authorities in Granting Refunds:
The court noted that the Excise authorities were acting in violation of the judgment and order of the court, which had become final and binding. The court held that the respondents were bound to refund the amounts collected unlawfully and could not limit the refund period to six months.

6. The Doctrine of Unjust Enrichment in the Context of Refund Claims:
The respondents argued that granting the refund would amount to unjust enrichment of the petitioners. The court rejected this argument, stating that the duty of excise is payable by the manufacturer, and any excess amount collected must be refunded. The court cited the Supreme Court's decision in Hindustan Sugar Mill Ltd. v. State of Rajasthan, which clarified that the buyer does not pay excise duty directly; it is part of the consideration for the goods.

Conclusion:
The court allowed the writ application, making the Rule absolute and issuing appropriate writs. It held that the limitation period of six months for refund claims under Section 11B of the Act does not apply when the assessments are quashed, and fresh assessments are ordered. The court also rejected the argument of unjust enrichment, stating that the refund due to the assessee cannot be withheld on this ground. The respondents were directed to pass fresh orders of assessment or refund in compliance with the court's judgment.