1987 (12) TMI 35 - HC - Central Excise

Summary

Issues involved:
The judgment discusses the period of limitation for refund of duty paid under Section 11B of the Central Excises and Salt Act, the ethics of undue enrichment, and the application of Article 265 in cases of illegal levy or collection of tax.

Period of Limitation for Refund under Section 11B:
The petitioner, a Rice Mill Plant, paid excise duty under mistake of law as it was entitled to exemption. The Assistant Collector accepted the claim but limited the refund to the period six months prior to the refund application date, citing the six-month limitation under Section 11B. Courts have consistently upheld the right to claim refund of tax paid under mistake of law, subject to the constitutional restriction under Article 265. The judgment delves into the debate on the period during which the government can be directed to refund, emphasizing the need for adherence to the limitation period under Article 226. The addition of sub-section (5) to Section 11B is analyzed, with the court concluding that the limitation for applying for refund under the Contract Act should not be substituted by the shorter period under the Act.

Ethics of Undue Enrichment:
The concept of undue enrichment is explored in the context of resisting refund claims, highlighting the moral implications for both the State and the taxpayer. The judgment emphasizes the constitutional limitation on the State's actions, aiming to maintain the balance between individual rights and State obligations. The court rejects the notion that refund should be denied due to lack of intention to reimburse consumers, emphasizing the statutory compulsion of tax payment even in cases of illegal levy.

Interest on Refund:
The judgment addresses the claim for interest on illegally disallowed refunds, citing relevant cases where liability to pay interest arises if the amount is withheld in violation of the law. However, in this case, the department's refusal to refund the remaining amount was due to the bar of limitation, not default. The court rules against directing the payment of interest, considering the circumstances of the case.

Conclusion:
The petition succeeds, and the court directs the refund of duty collected during specific years after deducting the amount already paid, with the petitioner entitled to costs. The judgment underscores the principles of legality, fairness, and constitutional limitations in matters of tax refunds and undue enrichment.