1980 (6) TMI 120 - HC - Central Excise

Summary

Issues Involved:
1. Legitimacy of Excise Duty collection on post-manufacturing expenses.
2. Bar of limitation u/r 11 of the Excise Rules.
3. Adequacy of alternative remedy by way of a civil suit.
4. Potential unjust enrichment of the petitioners.

Summary:

1. Legitimacy of Excise Duty Collection on Post-Manufacturing Expenses:
The petitioners challenged the inclusion of packaging, freight, marketing, and distribution expenses in the price of Vanaspati for Excise Duty purposes. The Court referenced its earlier decision in Union of India v. Mansingka Industries Private Limited, which held that such post-manufacturing expenses could not be included in the price for Excise Duty. Consequently, the petitioners were entitled to a refund of the excess duty paid.

2. Bar of Limitation u/r 11 of the Excise Rules:
The respondents argued that the claim was barred by the limitation prescribed under Rule 11 of the Excise Rules. The Court referred to its decision in Associated Bearing Company Limited v. Union of India, which held that a levy without jurisdiction does not attract the bar of limitation under Rule 11. Thus, the petitioners' claim was not barred by limitation.

3. Adequacy of Alternative Remedy by Way of a Civil Suit:
The respondents contended that the petitioners should have filed a civil suit instead of a writ petition. The Court held that the existence of an alternative remedy is not an absolute bar to entertaining a petition under Article 226, especially when the constitutional validity of a levy is in question. The Court emphasized that forcing the petitioners to pursue a lengthy trial would be unjust, given the well-established constitutional position.

4. Potential Unjust Enrichment of the Petitioners:
The respondents argued that a refund would result in the unjust enrichment of the petitioners, as they had passed on the Excise Duty to consumers. The Court noted that unjust enrichment would not be a valid defense in a civil suit for refund. Additionally, the controlled price of the goods made it impossible to determine if the petitioners had fully reimbursed themselves. Therefore, the argument of unjust enrichment was rejected.

Conclusion:
The Court allowed the petition, directing the authorities to refund the excess amounts recovered by including post-manufacturing expenses in the price chargeable to Excise Duty. The exact quantum of the refund was to be determined by the appropriate authorities. The petition was allowed with no order as to costs, and the department was instructed to dispose of the claim within four months. The application for leave to appeal to the Supreme Court was rejected.