1986 (4) TMI 69 - HC - Central Excise

Summary

Issues Involved:
1. Exemption of by-products under Tariff Item No. 68.
2. Legality of the duty collection.
3. Limitation period for refund claims.
4. Jurisdiction of the Court to grant relief.
5. Unjust enrichment and refund entitlement.
6. Interest on the refunded amount.

Summary:

1. Exemption of By-products under Tariff Item No. 68:
The petitioner, a partnership firm, manufactures vegetable non-essential oils and by-products like acid oil and spent earth. Initially, these by-products were considered exempt under Tariff Item No. 68, as per Notification No. 115/75-C.E. and its amendment Notification No. 122/75-C.E. However, the Superintendent, Central Excise, directed the petitioner to obtain a licence and pay duty on these by-products, which was later contested by the petitioner.

2. Legality of the Duty Collection:
The petitioner complied with the directions and paid the duty from 12th August 1977. Upon discovering that similar by-products were exempt as per the notifications, the petitioner sought clarification and was eventually informed by the Central Excise authorities that the products were indeed exempt. The Court held that the collection of duty was illegal and in contravention of Article 265 of the Constitution, which states that no tax shall be levied or collected except by authority of law.

3. Limitation Period for Refund Claims:
The petitioner filed for a refund of Rs. 2,70,000 for the period from 12th August 1977 to 14th May 1982. The Assistant Collector rejected the claim citing limitation under Rule 11 of the Central Excise Rules and Section 11B of the Central Excises and Salt Act, 1944. The Court, however, held that the limitation period should start from the date the petitioner was definitively informed about the exemption, i.e., 18th May 1982. Therefore, the claim filed on 23rd October 1982 was within the permissible period.

4. Jurisdiction of the Court to Grant Relief:
The Court asserted its jurisdiction to direct a refund of the illegally collected duty, emphasizing that the statutory provisions under which the illegal levy was made do not override the general law or constitutional provisions. The Court can grant relief in cases where the collection is without authority of law.

5. Unjust Enrichment and Refund Entitlement:
The respondents argued that the petitioner had passed on the duty to the customers, and refunding the duty would result in unjust enrichment. The Court rejected this argument, citing several precedents that support the refund of illegally collected taxes irrespective of whether the incidence of tax was passed on to the consumers. The Court emphasized that the duty collected without authority must be refunded to the petitioner.

6. Interest on the Refunded Amount:
The Court held that the petitioner is entitled to interest on the refunded amount at the rate of 12% per annum from the date of collection till the date of payment, as the respondents had retained and benefited from the money unlawfully.

Conclusion:
The Court directed the respondents to refund the sums of Rs. 2,18,140.71 and Rs. 51,859.29 with interest at the rate of 12% per annum from the date of collection till the date of payment, to be made within three weeks after the service of the plain copy of the operative part of the judgment.