1990 (7) TMI 123 - HC - Central Excise

Issues Involved:
1. Interpretation of Condition No. 2 in Ext. A1 regarding excise duty payment.
2. Applicability of Section 72 of the Indian Contract Act for recovery of excess payment.
3. Legality of retaining excess excise duty collected by the defendant.

Issue-wise Detailed Analysis:

1. Interpretation of Condition No. 2 in Ext. A1:

The primary issue was the interpretation of Condition No. 2 in Ext. A1, which stated: "Excise duty, Central Sales Tax, Delivery charges, Insurance charges and all other duties/taxes as applicable will be paid extra at actual by the Port Trust." The plaintiff argued that this condition meant they were liable to pay only the excise duty actually paid by the defendant. Conversely, the defendant contended that the phrase "as applicable" referred to the statutory rate of excise duty, not the concessional rate paid by the defendant.

The court concluded that the phrase "at actuals" in Condition No. 2 could only mean the actual amount paid by the defendant, including any concessional rate. The court reasoned that if the plaintiff were liable to pay the statutory rate, the phrase "at actuals" would be redundant. Therefore, the court held that the plaintiff was only liable for the actual excise duty paid by the defendant, including any concessional rate.

2. Applicability of Section 72 of the Indian Contract Act:

The next issue was whether the plaintiff could recover the excess amount paid under Section 72 of the Indian Contract Act, which deals with payments made by mistake or under coercion. The plaintiff argued that the excess amount was paid by mistake, making them eligible for a refund under Section 72.

The court noted that although the term "mistake" was not explicitly used in the plaint, the necessary averments to attract Section 72 were present. The court cited several precedents, including the Privy Council's decision in Sri Shiba Prasad Singh v. Mahra Is Srish Chandra Namdi, which stated that a payment made under the belief that it was legally due, when it was not, qualifies as a mistake under Section 72. The court also referenced the Madras High Court's decision in Lekshmanarased and Sons v. S.V. Kamal Bai, which held that excess payment based on false representation is recoverable under Section 72.

The court concluded that the plaintiff was entitled to a refund of the excess amount paid under a mistake, as per Section 72 of the Indian Contract Act.

3. Legality of Retaining Excess Excise Duty Collected by the Defendant:

The final issue was whether the defendant could legally retain the excess excise duty collected from the plaintiff. The defendant argued that they were entitled to retain 25% of the excise duty payable on motor vehicles cleared in excess of a certain quantity, as per a statutory notification.

The court rejected this argument, stating that the plaintiff was only liable to pay the actual excise duty paid by the defendant, including any concessional rate. The court emphasized that the defendant could not retain the excess amount collected from the plaintiff, as it was not legally due under the contract.

The court also dismissed the defendant's contention that the plaintiff was aware of the actual excise duty paid and only sought a refund due to an audit objection. The court held that once it was established that the plaintiff was not bound to pay the higher rate, they were entitled to a refund of the excess amount paid under a mistake.

Conclusion:

The court allowed the appeal, setting aside the judgment and decree of the lower court. The plaintiff was granted a decree to recover the amount claimed in the plaint, with interest at 6% per annum from the date of the suit. Both parties were directed to bear their respective costs.

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