2013 (6) TMI 417 - HC - Customs

Refund - Levy of Cess on import of coking and non-coking coal - levy of additional duty at the rate of Rs. 3.50 per metric tonne or Rs. 10/- per metric tonne - legal validity - held that - insofar as the collection of so called additional duty is concerned, the same was wholly illegal. With respect to this aspect even the department is unable to raise any contention. This is so because in an identical situation, the Apex Court in the case of Central Excise & Customs, Bhubaneswar-I v. Tata Iron & Steel Co. Ltd. (2003 (4) TMI 104 - SUPREME COURT OF INDIA) held that such additional duty on imported coal could not be levied. The Apex Court noted that Section 6 of the Coal Mines Act pertains to collection of additional duty on excise. Section 7, on the other hand, pertains to collection of additional duty as Customs duty. The Apex Court noted that in absence of any notification under Section 7 of the Coal Mines Act, no such duty could be levied on import of coal made by the importers. The entire collection of additional duty in the name of Customs duty was wholly unauthorized. Refund - period of limitation - held that - The contention of the petitioners that, therefore, in view of Section 17(1)(c) of the Limitation Act, 1963, such refund claim made within three years from the detection of the mistake should be entertained, must be rejected. It is a case where the duty was collected without any authority of law. Such collection of duty is not illegal or unlawful or irregularly collected Customs duty under the Customs Act, but a duty collected without authority of law and therefore opposed to Article 265 of the Constitution of India and is thus unconstitutional. In that view of the matter, the petitioners cannot be bound by the limitation prescribed in the Customs Act, 1962 for claiming refund of excess duty or duty collected illegally. The period of limitation prescribed under the Limitation Act would apply. Unjust enrichment - held that - The Apex Court in the case of Mafatlal Industries & Ors. v. Union of India & Ors. (1996 (12) TMI 50 - SUPREME COURT OF INDIA) having taken note of such decisions, has held that in every case of refund of duty even if the same is on the ground of the provisions under which such duty was collected having been declared unconstitutional, the duty would be on the person, claiming refund, to establish that the incidence of such duty was not passed on to any other person. The petitioners shall be entitled to refund of such duty paid only within three years immediately preceding the date of filing of the petition, which happens to be 18-8-2006. Such refund shall be granted to the petitioners with simple interest at the rate of 9% per annum from the date of payment till actual refund, however, only after ascertaining that the burden of such duty was not passed on to consumer or any other person. - partly decided in favor of assessee.

Issues Involved:
1. Legality of the levy and collection of cess on the import of coking and non-coking coal.
2. Entitlement to a refund of the cess paid.
3. Applicability of the Limitation Act for the refund claim.
4. Examination of unjust enrichment before granting the refund.

Detailed Analysis:

1. Legality of the Levy and Collection of Cess:
The petitioners argued that the levy and collection of cess on the import of coking and non-coking coal by the respondents were unauthorized, illegal, and unconstitutional. They contended that under Section 6 of the Coal Mines (Conservation and Development) Act, 1974, the authorities had the power to collect only additional duty over and above excise duty on excisable goods, not on imported goods. The Supreme Court's decision in Commissioner of Central Excise & Customs, Bhubaneswar-I v. Tata Iron & Steel Co. Ltd. held that in the absence of a notification under Section 7 of the Coal Mines Act, no additional duty could be levied on imported coal. The court concurred, stating that the collection of additional duty as customs duty was wholly unauthorized and without authority of law.

2. Entitlement to a Refund of the Cess Paid:
The petitioners sought a refund of Rs. 67.17 lakhs paid towards the cess from January 1997 to December 2005. The court held that the collection of the duty was illegal and unauthorized, thus entitling the petitioners to a refund. However, the refund would be limited to the amount paid within three years immediately preceding the date of filing the petition (18-8-2006). The court directed that the refund be granted with simple interest at 9% per annum from the date of payment till the actual refund, subject to the condition that the burden of such duty was not passed on to the consumer or any other person.

3. Applicability of the Limitation Act for the Refund Claim:
The petitioners argued that the refund claim could be made within three years from the detection of the mistake, relying on Section 17(1) of the Limitation Act, 1963. The court rejected this contention, citing the Constitution Bench judgment in State of Madhya Pradesh & Anr. v. Bhailal Bhai & Ors., which held that the maximum period fixed by the Legislature for a suit in a civil court could be a reasonable standard for delay in seeking remedy under Article 226. The court also referred to the decision in Mafatlal Industries & Ors. v. Union of India & Ors., which stated that a refund claim on the ground of unconstitutionality must be made within the period of limitation prescribed under the Limitation Act.

4. Examination of Unjust Enrichment Before Granting the Refund:
The court emphasized that the principles of unjust enrichment must be examined before granting any refund. It referred to the decision in Mafatlal Industries & Ors. v. Union of India & Ors., which held that a refund claim could succeed only if the claimant established that the burden of duty had not been passed on to another person. The court directed that the issue of unjust enrichment be examined by the authorities based on the material produced by the petitioners.

Conclusion:
The court allowed the petition in part, declaring the collection of additional duty of customs as unlawful. The petitioners were entitled to a refund of the duty paid within three years preceding the filing of the petition, with interest, subject to the condition that the burden of such duty was not passed on to the consumer or any other person. The petition was disposed of with these directions, and the rule was made absolute to the aforesaid extent.

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