1988 (9) TMI 58 - HC - Central Excise

Summary

Issues Involved:
1. Classification of shutter lathe sections under the correct Central Excise Tariff Item.
2. Legality of the refund granted based on the classification.
3. Jurisdiction of the Collector of Central Excise under Section 35A of the Central Excises and Salt Act, 1944.
4. Impact of unjust enrichment on the refund claim.

Detailed Analysis:

1. Classification of Shutter Lathe Sections:
The petitioner, a manufacturer of iron and steel items including shutter lathe sections, argued that these products should be classified under Tariff Item 26AA(ia). Initially, the Assistant Collector classified the product under Tariff Item 68 in 1976. However, upon appeal, the Appellate Collector remanded the matter, and after a detailed review, the Assistant Collector reclassified the product under Tariff Item 26AA(ia) on 29-4-1980. This classification became final as the department did not seek a review.

2. Legality of the Refund:
Based on the final classification under Tariff Item 26AA(ia), the petitioner filed for a refund of the excess duty paid under Tariff Item 68. The refund was sanctioned on 29-12-1980. The Collector of Central Excise later issued a show cause notice under Section 35A, challenging the refund on two grounds: incorrect classification and potential double refund due to proforma credits availed by purchasers. However, the court noted that the classification by the Assistant Collector had become final and was even accepted by the respondents in their counter-affidavit.

3. Jurisdiction of the Collector under Section 35A:
The court observed that the Collector of Central Excise initiated action under Section 35A after the one-year limitation period from the date of the Assistant Collector's order (29-4-1980). Therefore, the Collector lacked jurisdiction to interfere with the classification order. The court emphasized that the Collector could not indirectly reopen the classification issue through proceedings against the refund order.

4. Impact of Unjust Enrichment:
The respondents argued that refunding the petitioner would result in unjust enrichment since the petitioner had already passed on the duty to consumers. The court distinguished this case from others where unjust enrichment was a concern, noting that there was no statutory provision like Section 9B of the Orissa Sales Tax Act preventing the refund. The court held that the petitioner's statutory right to a refund under Section 11B of the Act could not be defeated by considerations of unjust enrichment.

Conclusion:
The court quashed the order of the Collector of Central Excise dated 6-2-1982, upholding the petitioner's right to the refund based on the final classification under Tariff Item 26AA(ia). The court found that the Collector's action was without jurisdiction and unsustainable. The petitioner's statutory right to a refund could not be nullified by extraneous considerations or the principle of unjust enrichment in the absence of a specific statutory provision to that effect.