1988 (8) TMI 104 - HC - Central Excise

Valuation - Related person - Refund - Unjust enrichment - Duty paid by mistake of law - Estoppel

Summary

Issues Involved:
1. Legality of excise duty based on distributor's sale price.
2. Entitlement to refund of excise duty paid under protest.
3. Availability of alternate remedy and its impact on the writ petition.
4. Effect of withdrawal of an earlier writ petition.
5. Doctrine of unjust enrichment in the context of refund claims.
6. Delay and laches in filing the writ petition.

Detailed Analysis:

1. Legality of Excise Duty Based on Distributor's Sale Price:
The petitioners, manufacturers of photographic printing papers, challenged the excise duty levied based on the sale price of their sole distributor, Agfa, rather than their own sale price to Agfa. The Assistant Collector of Central Excise had levied duty on the price charged by Agfa, considering Agfa as a related person. The petitioners argued that Agfa, though termed as a distributor, was actually a purchaser and not a related person as defined under Section 4(4)(c) of the Central Excises Act. The court referred to the Supreme Court decisions in Bombay Tyres International Ltd. and Atic Industries Ltd., which clarified that a distributor is only a related person if they are a relative of the assessee or if there is mutual interest in each other's business. The court concluded that Agfa was not a related person and the levy based on Agfa's sale price was illegal.

2. Entitlement to Refund of Excise Duty Paid Under Protest:
The petitioners sought a refund of the excess excise duty paid under protest. The court examined whether the petitioners were entitled to a refund considering the illegal levy. The court held that since the levy was illegal, the petitioners were entitled to a refund. The court also noted that the duty was paid under protest, reinforcing the petitioners' claim for a refund.

3. Availability of Alternate Remedy and Its Impact on the Writ Petition:
The respondents argued that the petitioners had an alternate remedy of appeal and revision under the Central Excises and Salt Act, which they did not exhaust. The court, however, held that the availability of an alternate remedy does not bar the petitioners from approaching the court under Article 226, especially when the action taken by the respondents was beyond the scope of the Act, as declared by the Supreme Court. The court cited East India Commercial Co. v. Collector of Customs and Union of India v. Tarachand to support its stance that the writ jurisdiction could be invoked in cases of illegal levy.

4. Effect of Withdrawal of an Earlier Writ Petition:
The respondents contended that the petitioners had previously withdrawn a writ petition (Writ Petition No. 841 of 1976) without liberty to file a fresh petition, thus barring the current petition. The court distinguished the present case from Sarguja Transport Service v. S.T.A. Tribunal, noting that the earlier case did not relate to a tax matter. The court found no merit in the respondents' argument and allowed the petitioners to proceed with the current writ petition.

5. Doctrine of Unjust Enrichment in the Context of Refund Claims:
The respondents argued that granting a refund would unjustly enrich the petitioners as they had passed on the excise duty burden to their consumers. The court acknowledged conflicting decisions on this issue within different benches. The court referred to cases like Rapidur (India) Ltd. v. Union of India and Assistant Collector of Central Excise v. Dipsi Chemicals Pvt. Ltd., which held that the principle of unjust enrichment would not apply. However, the court also noted a contrary view in Writ Petition No. 2204 of 1988. To resolve this conflict, the court decided to refer the issue to a Full Bench.

6. Delay and Laches in Filing the Writ Petition:
The respondents claimed that the petitioners had delayed filing the writ petition, which should be dismissed on grounds of laches. The court rejected this argument, noting that the petitioners had consistently paid the duty under protest and had filed consolidated refund claims promptly after the rejection of their refund applications. The court emphasized that technical pleas of delay should not thwart the claim for refund of a levy found to be without jurisdiction.

Conclusion:
The court declared that the Department was not justified in collecting excise duty based on Agfa's sale price and held that the petitioners were entitled to a refund. However, the issue of unjust enrichment and the final decision on the refund claim were referred to a Full Bench for resolution. The petition was directed to be placed before the learned Chief Justice for further proceedings.