1986 (4) TMI 61 - HC - Central Excise

Summary

Issues Involved:
1. Exemption from Excise Duty under Tariff Item No. 68.
2. Legality of Excise Duty Collection.
3. Limitation for Refund Claims.
4. Jurisdiction of the Court to Order Refund.
5. Unjust Enrichment.

Summary:

1. Exemption from Excise Duty under Tariff Item No. 68:
The petitioner, a partnership firm, argued that acid oil and spent earth, by-products of their manufacturing process, were exempt from duty u/s Notification No. 115/75-CE dated 30th April, 1975, as amended by Notification No. 122/75-CE dated 5th May, 1975. The Central Excise authorities initially directed the petitioner to obtain a licence and pay duty on these products, which the petitioner complied with from 12th August 1977. Later, it was confirmed by the authorities that the products were indeed exempt from duty.

2. Legality of Excise Duty Collection:
The court held that the direction by the Superintendent, Central Excise, to pay duty was illegal and contrary to the exemption notifications. The collection of duty was in violation of Article 265 of the Constitution, which mandates that no tax shall be levied or collected except by authority of law. The court concluded that the respondents acted illegally and without jurisdiction in collecting the duty.

3. Limitation for Refund Claims:
The petitioner claimed a refund of Rs. 2,70,000/- paid from 12th August 1977 to 14th May 1982, arguing that the payment was made under a mistake of law. The Assistant Collector rejected the claim as barred by limitation u/s 11B of the Central Excises & Salt Act, 1944. The court, however, held that the limitation period should start from the date the petitioner received definite information about the exemption, which was 18th May 1982. Therefore, the claim for refund filed on 23rd October 1982 was within the limitation period.

4. Jurisdiction of the Court to Order Refund:
The court asserted its jurisdiction to order a refund of the duty illegally collected, citing several precedents where courts have directed refunds of taxes collected without authority of law. The court emphasized that the statutory provisions of limitation do not apply when the collection is wholly illegal.

5. Unjust Enrichment:
The respondents contended that the petitioner had passed on the duty to customers, leading to unjust enrichment if refunded. The court rejected this argument, relying on precedents that held the theory of unjust enrichment does not apply to refunds of taxes collected without authority of law. The court directed the respondents to refund the amounts collected with interest at 12% per annum from the date of collection till the date of payment.

Conclusion:
The court directed the respondents to refund Rs. 2,18,140.71 and Rs. 51,859.29 with interest, within three weeks from the service of the judgment. The application for stay was refused.