1981 (6) TMI 33 - HC - Central Excise

Valuation - Refund - Applicability of limitation Act - Precedents - Illegal duty - Obiter dictum - Validity

Issues Involved:
1. Legality of excise duty including post-manufacturing expenses.
2. Adequacy of data provided for claiming refund.
3. Appropriate remedy for petitioners: writ petition vs. civil suit.
4. Applicability of Rule 11 of the Central Excise Rules and limitation laws.
5. Concept of unjust enrichment in granting refunds.

Detailed Analysis:

1. Legality of Excise Duty Including Post-Manufacturing Expenses:
The petitioners challenged the inclusion of post-manufacturing expenses in the excise duty calculation, citing a judgment by a Single Judge in the Bombay Tyres International Ltd. case, which held that excise duty should only include manufacturing costs and profits, excluding post-manufacturing expenses and selling profits. The court concurred with this view, referencing previous judgments, including Voltas and Atic Industries cases, and affirmed that post-manufacturing expenses cannot be included in the assessable value for excise duty. The court stated, "The excise duty is duty levied on manufacturer and can only be imposed on manufacturing operations."

2. Adequacy of Data Provided for Claiming Refund:
The Assistant Collector rejected the refund claim on the grounds that the Chartered Accountant's certificate did not provide sufficient details on selling and distribution expenses. The court found this reasoning unsatisfactory, noting that the certificate was based on the Cost Accounting Records (Vanaspati) Rules, 1972. The court emphasized that the Assistant Collector should have requested additional information if necessary, stating, "It was incumbent upon him to call upon the petitioners to produce additional material." The court directed the Assistant Collector to reconsider the case, allowing the petitioners to provide further evidence.

3. Appropriate Remedy for Petitioners: Writ Petition vs. Civil Suit:
The respondents argued that the petitioners should file a civil suit rather than a writ petition. The court dismissed this argument, emphasizing that once a constitutional position is established, it is unnecessary to drive citizens to lengthy civil trials. The court stated, "It would be futile to drive the citizen to a long drawn trial in the civil Court."

4. Applicability of Rule 11 of the Central Excise Rules and Limitation Laws:
The respondents contended that the petitioners' claim was barred under Rule 11 of the Central Excise Rules and by the law of limitation. The court rejected this, stating that Rule 11 does not apply to illegal and jurisdictionally flawed duty recoveries. The court cited previous decisions, including Associated Bearing Company Limited v. Union of India, to support this view. The court held, "The claim for refund is not governed by the Rules of limitation if the recovery is illegal and without jurisdiction."

5. Concept of Unjust Enrichment in Granting Refunds:
The respondents argued that granting the refund would result in unjust enrichment for the petitioners. The court dismissed this argument, referencing a Division Bench decision in Maharashtra Vegetable Products Pvt. Ltd. v. Union of India, which held that the state must refund money recovered without legal authority. The court quoted the Supreme Court's observation: "Nor is there any provision under which the court could deny refund of tax even if the person who paid it has collected it from his customers."

Conclusion:
The court quashed the impugned order dated October 9, 1980, and directed the respondents to reconsider the refund claim, providing the petitioners an opportunity to submit additional evidence. The court affirmed that the inclusion of post-manufacturing expenses in the excise duty calculation is illegal and that the petitioners are entitled to a refund for the period from October 1, 1975, onwards. The court also dismissed arguments related to unjust enrichment and the necessity of filing a civil suit, emphasizing the appropriateness of the writ petition in this context.

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