2016 (7) TMI 1342 - HC - Central Excise

Valuation - includibility - Whether additional (differential) Central Excise duty paid by adding Royalty and Stowing Excise Duty as components for determining the transaction value defined in Section 4(3) of the Central Excise Act, 1944 by the WCL to the Excise Department of the Union of India can be recovered by it from the Petitioners? Held that - we, at this stage, do not find that any illegal recovery is being forced upon the petitioners before us as its legality or otherwise is contingent upon the nature of royalty - an issue still pending before the Hon ble Apex Court itself. The amount of differential Excise duty is already paid on behalf of the petitioners by the respondent WCL and hence, it has to recover it from them. It does not need any authorization for said purpose from its Holding Company. Amount recovered by WCL is and will always be safe. If the Hon ble Apex Court answers the controversy in favour of the petitioners, they can claim its refund as per law either from WCL or from the Union of India, with such interest from either of them as the law may permit. There is nothing before us to demonstrate that any highhanded action is being resorted to by the respondents for effecting said recovery. Whether in these facts, WCL committed any wrong in paying the differential amount of Excise duty? Whether such payment binds these petitioners? If not, Whether petitioners independent of pending reference before the Nine Judges of the Hon ble Apex Court, can still oppose its recovery from them? - Held that - The only effort of the petitioners has been to demonstrate that pendency of that reference has no bearing and till its adjudication, the law in force needs to be enforced. This effort is apparently misconceived and they cannot succeed with such an argument, in present facts. Moreover, this contention and the plea that they cannot now recover this differential Excise duty from their purchasers or consumers, at the most indicate breach of a contractual term which in present facts, is amenable to arbitration. The understanding of a legal provision and position by the WCL, its notice dated 22/25-3-2011 in this regard, its impact in law on civil rights of parties and claims (if any) arising therefrom, are all the disputes arising under the non-statutory contract and forum of arbitration is accepted therefor by the petitioners. It cannot be said that reliefs sought in these writ petitions do not emanate from the contract between the parties. For period beyond 1-3-2013, Excise duty is being paid by these petitioners accepting Royalty and Stowing Excise Duty as components of the transaction value. We feel that the public money needs to be secured first. We also find that it will be more safe with the respondent WCL than any of the petitioners. If ultimately, this amount of differential Excise duty is held not due or recoverable from them, the petitioners can seek its refund as per law by filing such proceedings in appropriate forum against necessary parties, as they may be advised. They may also seek due interest or suitable damages from them, if claim for the either is sustainable in law. There is no irreparable loss to them & no question of any balance of convenience in their favour. Petition dismissed.

Issues Involved:
1. Whether additional (differential) Central Excise duty paid by adding "Royalty" and "Stowing Excise Duty" to the transaction value can be recovered by WCL from the Petitioners.
2. Validity of retrospective recovery of differential Excise duty.
3. Impact of pending reference before the Larger Bench of the Supreme Court on the current legal position.
4. Jurisdiction of writ petitions in non-statutory contractual disputes involving arbitration clauses.

Issue-wise Detailed Analysis:

1. Recovery of Differential Central Excise Duty:
The central issue was whether the additional Central Excise duty, calculated by including "Royalty" and "Stowing Excise Duty" as components of the transaction value, could be recovered by Western Coal Fields (WCL) from the Petitioners. The court noted that the petitioners had been paying the excise duty on these components from 1-3-2013 onwards, but WCL sought reimbursement for the period from 1-3-2011 to 28-2-2013. The petitioners argued that as per the law, excise duty could not be demanded on these components and that retrospective recovery was impermissible.

2. Retrospective Recovery:
The petitioners contended that retrospective recovery of the differential duty was not permissible. They argued that the burden could not be passed to the next consumer/purchaser/beneficiary retrospectively. The court noted that WCL had issued notices and communications to the petitioners informing them of the need to pay excise duty on "Royalty" and "Stowing Excise Duty" from 1-3-2013 onwards. The court found that WCL's actions were in compliance with directives from Coal India Ltd. and the Excise Department.

3. Pending Reference Before Larger Bench of Supreme Court:
The petitioners argued that the reference of the issue to a Larger Bench of the Supreme Court did not unsettle the existing law, which should be enforced until a contrary view was taken. The court, however, observed that the pending reference created uncertainty and that the law as interpreted by the Supreme Court in earlier judgments needed to be considered. The court referred to judgments from other High Courts (Allahabad, Jharkhand, Chhattisgarh) that had dealt with similar issues and had declined to interfere in writ jurisdiction, emphasizing the need to safeguard public revenue.

4. Jurisdiction of Writ Petitions and Arbitration Clauses:
The respondents argued that the contract between the petitioners and WCL was non-statutory and contained an arbitration clause, making the writ petitions inappropriate. The court agreed, noting that the disputes arose from non-statutory contracts and were subject to arbitration. The court cited judgments that supported the view that non-statutory contractual disputes involving arbitration clauses should not be entertained under writ jurisdiction.

Conclusion:
The court concluded that the public money needed to be secured and was safer with WCL than with the petitioners. It held that if the Supreme Court ultimately decided in favor of the petitioners, they could seek a refund through appropriate legal proceedings. The court dismissed all the writ petitions, vacated the interim orders, and agreed with the views of the Allahabad, Chhattisgarh, and Jharkhand High Courts. The interim orders were continued for eight weeks to allow the petitioners time to seek further relief.

Separate Judgments:
There were no separate judgments delivered by the judges in this case. The judgment was delivered collectively.

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