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Issues Involved:
1. Liability of padding solutions to excise duty. 2. Refund of excise duty paid under a mistake of law. 3. Jurisdiction of the civil court to entertain the suit. 4. Doctrine of unjust enrichment. Summary: 1. Liability of Padding Solutions to Excise Duty: The plaintiffs, engaged in manufacturing padding solutions, were called upon by the defendants to pay excise duty between 5th July 1972 and 31st March 1974. They paid Rs. 1,68,212.78. However, a trade notice issued in April 1977 clarified that padding solutions were not subject to excise duty under the Central Excises and Salt Act, 1944. The trial court held that the padding solutions were not liable to excise duty during the specified period. 2. Refund of Excise Duty Paid Under a Mistake of Law: The plaintiffs applied for a refund u/r 11 of the Central Excise Rules, 1944, but the application was rejected as it was beyond the six-month limitation period. Subsequently, they filed a suit after giving notice u/s 80 of the Code of Civil Procedure. The trial court decreed the amount in favor of the plaintiffs, holding that the payment was made under a mistake of law and that the defendants were bound to refund the amount despite the plaintiffs having recovered the excise duty from their customers. 3. Jurisdiction of the Civil Court to Entertain the Suit: The defendants contended that the civil court had no jurisdiction to try the suit as the refund could not be claimed outside the provisions of the Central Excises and Salt Act, 1944. The trial court, however, held that the suit was not barred by limitation and that the civil court had jurisdiction to pass a decree in favor of the plaintiffs. 4. Doctrine of Unjust Enrichment: The main contention of the defendants was that refunding the amount would lead to unjust enrichment of the plaintiffs, who had collected the amount from their customers. The court rejected this contention, stating that the doctrine of unjust enrichment cannot be used as a defense against a claim for refund of tax collected without the authority of law. The court referred to previous judgments, including Parle Products Ltd. v. Union of India and Rapidur (India) Ltd. v. Union of India, which established that amounts collected without authority must be refunded, and the doctrine of unjust enrichment does not apply in such cases. Conclusion: The appeal was dismissed with costs, and the court directed that the bank guarantee given by the respondents be discharged with effect from 23rd November 1987. The court reaffirmed that the doctrine of unjust enrichment cannot be invoked to deny the refund of amounts collected without the authority of law.
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