1990 (11) TMI 148 - HC - Central Excise

Summary

Issues:
- Delay in disposing of a refund application by the Assistant Collector of Central Excise
- Issuance of show cause notices to explain why the refund should not be refused on the ground of unjust enrichment

Analysis:
1. Delay in Disposing of Refund Application:
The petitioners, a company manufacturing paper-based decorative laminates, filed a refund application seeking the return of excess duty paid under protest. The Assistant Collector's erroneous classification of goods led to the overpayment of duty. The Collector of Central Excise (Appeals) allowed the petitioners' appeal, confirming the correct classification. Despite this, the refund application filed on August 1, 1989, remained unresolved for a significant period. The petitioners were entitled to a refund as per Section 11B(3) of the Act. The dismissal of the appeal by CEGAT finalized the classification issue. The Department's failure to process the refund application prompted the petitioners to file a writ petition.

2. Show Cause Notices on Unjust Enrichment:
The Department served two show cause notices, citing the doctrine of unjust enrichment and referring to a previous case. The petitioners argued that the reliance on the earlier case was incorrect, as subsequent judgments had clarified the position. They contended that Excise authorities are bound by statutory provisions and cannot deny refunds based on unjust enrichment. CEGAT's decision in Collector of Central Excise v. Weldekar Laminates Pvt. Limited emphasized that authorities cannot refuse refunds based on unjust enrichment. The Division Bench of the High Court had also upheld this principle in a related case. The petitioners had paid the duty under protest and were entitled to a refund as a matter of right under Section 11B(3) of the Act.

3. Judgment and Relief Granted:
The High Court ruled in favor of the petitioners, declaring the show cause notices as illegal. The Department was directed to process the refund application without considering unjust enrichment and in line with previous court decisions. The respondents were ordered to refund the amount by December 31, 1990. Failure to comply would result in the Department being liable to pay interest at 18% per annum. The costs of the petition were to be borne by the respondents. A request for a stay of the judgment was refused.

This judgment highlights the importance of adhering to statutory provisions in granting refunds and emphasizes that Excise authorities cannot deny refunds based on the doctrine of unjust enrichment when the statutory requirements for refund are met.