1981 (11) TMI 64 - HC - Central Excise

Refund of duty paid under mistake of law Limitation for recovery of excise duty Refund Reasonable diligence Estoppel Writ jurisdiction Limitation Act Powers of High Court Writ petition Words and phrases Coercion Affidavit Precedent

Issues Involved:

1. Basis for calculating excise duty on cigarettes.
2. Refund claim for excess excise duty paid.
3. Deduction of post-manufacturing expenses.
4. Timeliness and validity of the writ petition under Article 226 of the Constitution.
5. Whether payments were made under coercion or mistake of law.
6. Applicability of the Limitation Act to the writ petition.
7. Discretion of the court in granting relief.

Issue-wise Detailed Analysis:

1. Basis for calculating excise duty on cigarettes:

The main issue was whether the excise duty payable on cigarettes manufactured by the Petitioners should be calculated based on the prices received by the Petitioners from their distributors or on the prices received by the distributors from wholesalers. The Assistant Collector of Central Excise had initially clarified that the assessable value should be the cost selling price to independent wholesale dealers shown in the distributors' catalogue. This position was subsequently upheld by various High Courts until the Supreme Court clarified the correct legal position in the Voltas and Atic cases.

2. Refund claim for excess excise duty paid:

The Petitioners sought a refund of Rs. 53,86,474.79, being the difference in the duty payable on the basis of the price charged by the Petitioners to their distributors and the duty actually paid on the basis of the price charged by the distributors to wholesale dealers. The Assistant Collector rejected this claim, but the Appellate Collector allowed it. The Central Government later upheld the refund for the period from September 27, 1971, but rejected it for the period prior to that date.

3. Deduction of post-manufacturing expenses:

The Petitioners contended that the prices in their price-lists should be approved after deducting 3% for marketing expenses, relying on the Supreme Court's decision in Voltas Ltd. The Assistant Collector rejected this claim, leading the Petitioners to file a writ petition, which was allowed along with a similar petition by Indian Tobacco Company Limited.

4. Timeliness and validity of the writ petition under Article 226 of the Constitution:

The Respondents argued that the writ petition should be dismissed on the grounds of gross laches and delays, asserting that the Petitioners should have filed a writ petition in 1958 when they first sought clarification. The Court, however, noted that the Petitioners had acted promptly upon discovering the correct legal position and that the period of limitation for a suit should be taken into account in judging the timeliness of the writ petition.

5. Whether payments were made under coercion or mistake of law:

The Court found that the payments made by the Petitioners were under a mistake of law, not coercion. The Petitioners had accepted the Department's advice in good faith and made payments accordingly, based on the prevailing legal interpretations by various High Courts. The correct legal position only became clear with the Supreme Court's decisions in Voltas and Atic cases.

6. Applicability of the Limitation Act to the writ petition:

The Court held that while the Limitation Act does not directly apply to writ petitions, the period of limitation for a suit should be considered in determining whether there was unreasonable delay. The Petitioners had filed the writ petition within the period of limitation from the date of the Supreme Court's decision in Voltas, making the petition timely.

7. Discretion of the court in granting relief:

The Court emphasized that the jurisdiction under Article 226 is discretionary and that the Court would not exercise its discretion in favor of a party guilty of laches. However, given the circumstances of the case, including the prompt action by the Petitioners upon discovering the correct legal position and the unlawful retention of excess excise duty by the Respondents, the Court decided to grant relief to the Petitioners.

Conclusion:

The Court concluded that the Petitioners were entitled to a refund of the excess excise duty paid, as the payments were made under a mistake of law. The writ petition was filed within the period of limitation, and there were no grounds for dismissing it based on delay or laches. The Court granted the relief sought by the Petitioners, directing the Respondents to refund the excess excise duty collected.

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