1986 (11) TMI 60 - HC - Central Excise

Dutiability - Pre-budget stock - Manufacturer - Refund - Duty collected without authority of law - Appeal

Summary

Issues Involved:
1. Limitation for filing the writ petition.
2. Applicability of Article 226(3) of the Constitution.
3. Refund of excise duty and the theory of unjust enrichment.

Issue-wise Detailed Analysis:

1. Limitation for filing the writ petition:

The primary issue was whether the writ petition filed by the petitioner was barred by limitation. The department argued that the writ petition should be dismissed due to the long delay of seven years from the date of excise duty collection. However, the petitioner contended that they became aware of the illegality only after the Madras High Court's judgment on 11-3-1977, and the writ petition was filed within a few months thereafter. The court held that the explanation provided by the petitioner was valid and that the payment under protest did not mark the starting point of limitation. The writ petition was filed within three years from the Madras High Court judgment, aligning with the period allowed for filing a civil suit for recovery of illegally collected tax. Thus, the writ petition was not barred by limitation.

2. Applicability of Article 226(3) of the Constitution:

The appellant argued that the writ petition should have been dismissed under Article 226(3) of the Constitution, which debarred the High Courts from entertaining writ petitions where an alternative remedy was provided by statute. The petitioner countered that this plea was not raised before the learned single Judge, and raising it at this stage would cause grave prejudice. The court agreed with the petitioner, noting that the department's failure to raise this argument earlier precluded it from doing so at this late stage. The court held that the appellant's contention on this point must fail.

3. Refund of excise duty and the theory of unjust enrichment:

The most significant issue was whether the court should order a refund of the excise duty collected by the state, considering the theory of unjust enrichment. The appellant cited the Supreme Court judgment in State of M.P. v. Vyankatlal, which held that a refund should not be granted if the burden of the tax had been passed on to the consumers. Conversely, the petitioner relied on the Supreme Court judgment in D. Cawasji & Co. v. State of Mysore, which held that a refund could not be denied on the ground that the tax had been collected from customers. The court found the latter judgment more persuasive, emphasizing that Article 265 of the Constitution prohibits the collection of taxes without legal authority. The court opined that the theory of unjust enrichment does not apply when seeking enforcement of constitutional limitations under Article 265. The court noted the arbitrary nature of the excise duty collection and the finality of the Madras High Court judgment, which entitled other manufacturers to refunds. Denying the refund to the petitioner would be unjust and inconsistent with the principle of equality. Therefore, the court dismissed the writ appeal and ordered the refund of the excise duty to the petitioner.

Certification of Substantial Question of Law:

Given the conflicting observations in the two Supreme Court judgments, the court certified that the case involved a substantial question of law of general importance that needed to be decided by the Supreme Court.