1984 (4) TMI 64 - HC - Central Excise

Summary

Issues Involved:
1. Validity of the levy of excise duty on blended yarn prior to 16/17.3.1972.
2. Limitation period for filing suits for refund of excise duty.
3. Entitlement to refund of excise duty paid under a mistake of law.
4. Claim for interest on the refunded excise duty.
5. Passing on the burden of excise duty to consumers and its impact on restitution.

Summary of Judgment:

1. Validity of the Levy of Excise Duty:
The principal question was whether the Mills were entitled to a refund of excise duty paid on blended yarn, which was held to be illegal by a Division Bench in 1976. The Court concluded that the levy of excise duty on blended yarn prior to 16/17.3.1972 was illegal, as established in the Calico Mills case.

2. Limitation Period for Filing Suits:
The Court addressed whether the suits filed by the Mills were barred by limitation. It was agreed that the suits were governed by Article 113 of the Limitation Act, 1963, which prescribes a three-year limitation period from the date the right to sue accrues. The Mills argued that the limitation period began only from the date they discovered the mistake of law, i.e., 15.1.1976. The Court held that the period of limitation began to run from the date the mistake was discovered, making the suits filed within three years from 15.1.1976 timely.

3. Entitlement to Refund:
The Mills based their claim for refund on Section 72 of the Contract Act, arguing that the excise duty was paid under a mistake of law. The Court noted that the term "mistake" in Section 72 includes both mistakes of fact and law. However, the Court emphasized that to claim restitution under Section 72, it is essential to establish loss or injury. Since the Mills had passed the burden of excise duty to the buyers of the fabric, they did not suffer any loss or injury and were not entitled to restitution.

4. Claim for Interest:
The Mills claimed interest on the refunded excise duty, citing illegal retention of the amounts by the Revenue. The Court examined the claim under Section 1 of the Interest Act, 1839, and concluded that the Mills were not entitled to interest since they failed to establish circumstances attracting equitable jurisdiction. The Court also noted that the Mills did not base their claim for interest on the Interest Act or equity.

5. Passing on the Burden of Excise Duty:
The Court observed that the excise duty paid by the Mills was included in the cost structure of the fabric and passed on to the buyers. Therefore, the Mills did not bear the burden of the excise duty and were not the real owners of the money paid. The Court held that allowing the Mills to receive a refund would result in unjust enrichment, as they had already recovered the duty from the buyers.

Conclusion:
The appeals by the Revenue were allowed, and the decrees passed by the trial Courts were set aside. The suits filed by the Mills were dismissed with costs. The Court directed the Mills to repay the decretal amount with interest at 12% per annum from the date of withdrawal to the date of repayment. The Court also rejected the Mills' prayer for a certificate to appeal to the Supreme Court, as the cases did not involve substantial questions of law of general importance.