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2015 (4) TMI 386 - HC - Central ExciseDenial of refund claim - Unjust enrichment - Applicability of doctrine of unjust enrichment to State undertaking - Held that - Cursory reading of the order passed by the Tribunal, reveals that the Department itself has accepted that the appellant is a State funded, State controlled and State monitored organisation supplying goods to Civil Supplies Corporation, which is another organ of the State. The order further reveals that the goods supplied by the appellant to the Tamil Nadu Civil Supplies Corporation are used in relation to Public Distribution System. In such a backdrop, this Court is unable to understand as to the basis on which Tribunal has held that there is nothing in the nature of activity of the appellant that is relatable to State for the benefit of the people and, thereby, the scope of unjustly enriching themselves gets squarely attracted and that the appellant falls outside the said purview. It would not be out of context here to state that Public Distribution System is a primary concern of the State and the appellant is supplying goods to the Tamil Nadu Civil Supplies Corporation and that both the entities are State funded, State controlled and State monitored organisations and are discharging duties for the welfare of the people of the country. - appellant will well fall within the definition of State . Since Department itself having admitted the fact that the appellant is controlled, funded and monitored by the State, it cannot be said that the appellant is unjustly enriching itself to the detriment of the people and, thereby, the unjust enrichment attributed to the appellant has to necessarily fail and, accordingly, the finding of the Tribunal on the abovesaid aspect deserves to be set aside. - Decided in favour of assessee.
Issues Involved:
1. Whether the appellant is a "State" under Article 12 of the Constitution of India. 2. Whether the doctrine of "unjust enrichment" applies to a State undertaking managed, controlled, and administered by the State Government. Issue-wise Detailed Analysis: 1. Whether the appellant is a "State" under Article 12 of the Constitution of India: The appellant, a wing of the Government of Tamil Nadu, engaged in manufacturing steel metal products and supplying them to the Tamil Nadu Civil Supplies Corporation, claimed a refund of duty paid on the ground that the goods supplied were exempt from payment of duty under Notification 111/88-CE. The Department rejected the claim, stating the appellant is not a "State" as envisaged under Article 12 of the Constitution of India. The Tribunal held that the appellant, though supplying materials to a State body, does not represent the people in the sense understood by the Supreme Court in the Mafatlal Industries case and thus cannot be equated to a "State." The appellant argued that being a State Government-owned unit, funded, controlled, and monitored by the State Government, it should be considered a "State" under Article 12. The Court referred to the definition of "State" under Article 12 and the principles laid down by the Supreme Court in Pradeep Kumar Biswas and Zee Telefilms cases. The Court noted that the Department accepted that the appellant is a State-funded, State-controlled, and State-monitored organization supplying goods to another State organ. The Court found the Tribunal's basis for rejecting the appellant as a "State" to be in direct conflict with the Department's acceptance of the appellant's status. The Court concluded that the appellant falls within the definition of "State" as propounded by the Supreme Court. 2. Whether the doctrine of "unjust enrichment" applies to a State undertaking managed, controlled, and administered by the State Government: The Supreme Court in Mafatlal Industries held that the doctrine of unjust enrichment does not apply to the State, as the State represents the people. The Tribunal, however, held that the appellant, a company instituted by another company, cannot be equated to the State and thus the doctrine of unjust enrichment applies. The appellant argued that the doctrine of unjust enrichment should not apply as it is a State Government-owned unit, and the Supreme Court's decision in Mafatlal Industries is binding. The Court referred to the Supreme Court's enunciation in Mafatlal Industries that the doctrine of unjust enrichment is inapplicable to the State. The Court also cited similar views taken by the Madras High Court and the Karnataka High Court in relevant cases. The Court noted that the Department accepted the appellant as a State-controlled, funded, and monitored organization. Therefore, the doctrine of unjust enrichment does not apply to the appellant, as it is not unjustly enriching itself to the detriment of the people. The Court concluded that the finding of the Tribunal on unjust enrichment deserves to be set aside. Conclusion: The Court allowed the appeal, set aside the Tribunal's order dated 9.5.06, and answered both substantial questions of law in favor of the appellant and against the Revenue.
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