1986 (5) TMI 34 - HC - Central Excise

Summary

Issues Involved:
1. Jurisdiction of the Show Cause Notice u/s 36(2) of the Central Excises and Salt Act, 1944.
2. Classification of Cast Iron Rolls and Cast Steel Rolls under the Central Excise Tariff.
3. Maintainability of Writ Petition against Show Cause Notice.
4. Refund of Duty and the Principle of Unjust Enrichment.

Summary:

1. Jurisdiction of the Show Cause Notice u/s 36(2) of the Central Excises and Salt Act, 1944:
The petitioner challenged the show cause notice dated 10th September 1981 issued by the Additional Secretary, Government of India, under Section 36(2) of the Central Excises and Salt Act, 1944. The court held that the validity of the notice must be judged with reference to the provisions of Section 36 as it stood at the time of initiation. The court found that the conditions precedent for assuming jurisdiction under Section 36(2) were not satisfied as there were no materials on record to justify the issuance of the notice. The respondents failed to produce relevant records, and the affidavit in opposition was not affirmed by the issuing authority, making the notice without jurisdiction.

2. Classification of Cast Iron Rolls and Cast Steel Rolls under the Central Excise Tariff:
The petitioner argued that cast iron rolls and cast steel rolls should be classified under Item Nos. 25 and 26AA, respectively, and not under Item No. 68. The court agreed, stating that the machining and polishing processes undertaken by the petitioner did not convert the cast rolls into identifiable machine parts but were merely incidental to making the castings marketable. The court held that the products are known in the market as cast iron rolls and cast steel rolls and not as machine parts, thus falling under Item Nos. 25 and 26AA. The court cited similar findings by the Patna High Court and the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT).

3. Maintainability of Writ Petition against Show Cause Notice:
The respondents contended that the writ petition challenging the show cause notice was not maintainable. However, the court held that if the notice itself is without jurisdiction, the court has the power to set it aside. The court emphasized that requiring the petitioner to go through the revisional authority would only result in multiplicity of proceedings. The court cited various judgments to support the view that if the classification sought by the department is perverse or unreasonable, the High Court can interfere under Article 226 of the Constitution.

4. Refund of Duty and the Principle of Unjust Enrichment:
The respondents argued that the petitioner had collected the duty from the customers and refunding it would result in unjust enrichment. The court rejected this argument, stating that there is no provision in the Central Excise Law that allows the denial of refund on the ground of unjust enrichment. The court held that if the collection is without jurisdiction, the respondents are bound to refund the amount to the petitioner. The court cited several judgments, including those from the Supreme Court and various High Courts, which consistently held that the principle of unjust enrichment cannot be invoked to deny refund of duty collected without authority of law.

Conclusion:
The court set aside the show cause notice dated 10th September 1981 and directed the respondents to give effect to the order dated 30th April 1981 of the Appellate Collector, including refunding the sum of Rs. 92,28,857.03 to the petitioner within eight weeks.