1992 (9) TMI 88 - SC - Central Excise

Whether it was the duty of the Assistant Collector to satisfy himself that no part of the duty in respect of which the refund was claimed, was recovered by the respondents from any other person, before making any order of refund? Held that -It is difficult to appreciate the reasoning of the High Court that it was the Government which ought to have considered the application of the amended provisions of the Act to the present case. Under the Act, the duty is cast upon the specified statutory authority, viz., the Assistant Collector, Excise to consider the said question. It cannot be disputed that the amount which was deposited by the respondents in the court and was withdrawn by the appellant-Union of India was towards the duty which was assessed by the Assistant Collector, Excise. As pointed out earlier, when the amended provisions of the Act came into force on 20-9-1991, the respondents application for refund filed on 31-5-1991 was pending before the Assistant Collector and, therefore, as provided in the Act, the amended provisions were applicable to the said application. Even if we disregard the said fact, on the ground, as urged vehemently on behalf of the respondents, that independently of the said application they were entitled to the refund by virtue of the order dated 19-2-1986 of the High Court, the amended provisions of the Act would still be operative and prevent the refund, since the provisions are retrospectively applicable, as stated in sub-section (3) of Section 11B of the Act, to orders passed by the court as well. The High Court s order of 19-2-1986 under which alone the refund was claimed could not be an exception to the said provisions nor could the High Court have made such order after 20-9-1991 directing the payment contrary to the said provisions. Appeal allowed.

Issues Involved:
1. Classification of Cellulosic Spun Yarn under Tariff Item No. 18-III(i) or 18-III(ii).
2. Provisional approval and subsequent finalization of concessional duty.
3. Issuance of show cause notice for misclassification.
4. Filing of writ petitions and appeals by the respondent-Company.
5. Interim stay and conditional deposit orders by the High Court.
6. Refund application and subsequent resistance by the Union of India.
7. Applicability of the amended Section 11B of the Central Excises and Customs Laws (Amendment) Act, 1991.
8. Contempt petitions filed by the respondent-Company.
9. High Court's orders and their compliance.
10. Adjudication of refund claims by the Assistant Collector.
11. Final judgment by the Supreme Court.

Detailed Analysis:

1. Classification of Cellulosic Spun Yarn under Tariff Item No. 18-III(i) or 18-III(ii):
The respondents, manufacturers of Cellulosic Spun Yarn containing man-made fibre of non-cellulosic origin, filed classification lists under Tariff Item No. 18-III(i) showing various proportions of cellulosic and non-cellulosic fibres. The Assistant Collector initially granted provisional approval for the classification under Tariff Item No. 18-III(i).

2. Provisional Approval and Subsequent Finalization of Concessional Duty:
The classification claimed by the respondent-Company was subsequently finalized, granting a concessional rate of duty under Notification No. 275/82 dated 13-11-1982. However, the Deputy Chief Chemist's report indicated that the yarn contained fibres of non-cellulosic origin, leading to fresh proceedings.

3. Issuance of Show Cause Notice for Misclassification:
A show cause notice was issued on 12-7-1984, questioning the classification under Tariff Item No. 18-III(i) and suggesting that the product should be classified under Tariff Item No. 18-III(ii). The respondent-Company approached the High Court, which rejected their writ petition, leading to adjudication by the Assistant Collector.

4. Filing of Writ Petitions and Appeals by the Respondent-Company:
The Assistant Collector confirmed the demand of Rs. 1,10,81,405.94 and imposed a penalty of Rs. 500/-. The respondent-Company filed a writ petition and an appeal before the Collector of Central Excise (Appeals), Bombay, seeking a stay on the Assistant Collector's order.

5. Interim Stay and Conditional Deposit Orders by the High Court:
The High Court granted an interim stay on the condition that the respondent-Company deposits Rs. 56 lakhs in two instalments and provides a bank guarantee for future clearances. The High Court also permitted the withdrawal of the writ petition, subject to the condition that the Union of India would refund the amount with interest if the respondents succeeded ultimately.

6. Refund Application and Subsequent Resistance by the Union of India:
Following the appellate order in favor of the respondents, they filed an application for refund of Rs. 56 lakhs plus interest. The Union of India resisted the application, arguing that the respondents had already recovered the duty from others, thus leading to unjust enrichment.

7. Applicability of the Amended Section 11B of the Central Excises and Customs Laws (Amendment) Act, 1991:
The amended Section 11B, effective from 20-9-1991, required the Assistant Collector to ensure that the claimant had not passed on the incidence of duty to others before granting a refund. This amendment applied retrospectively to all pending applications and court orders.

8. Contempt Petitions Filed by the Respondent-Company:
The respondent-Company filed contempt petitions, alleging non-compliance with the High Court's orders. The High Court granted the Union of India additional time to consider the applicability of the amended provisions.

9. High Court's Orders and Their Compliance:
Despite the Assistant Collector's order rejecting the refund claim based on the amended provisions, the High Court directed the Union of India to deposit the amount with interest, disregarding the Assistant Collector's decision.

10. Adjudication of Refund Claims by the Assistant Collector:
The Assistant Collector, in an exhaustive order, concluded that the respondents had passed on the incidence of duty to others, thus disqualifying them from receiving the refund. The respondents indicated their intention to challenge this order.

11. Final Judgment by the Supreme Court:
The Supreme Court held that the High Court's orders, which ignored the amended provisions of Section 11B, were invalid. The Court emphasized that the amended provisions applied retrospectively and required the respondents to prove that they had not passed on the duty to others. The Supreme Court allowed the appeals, setting aside the High Court's orders, and directed adherence to the statutory provisions to prevent unjust enrichment.

Conclusion:
The Supreme Court's judgment underscores the retrospective applicability of the amended Section 11B of the Central Excises and Customs Laws (Amendment) Act, 1991, and the necessity for statutory authorities to ensure that claimants have not passed on the incidence of duty to others before granting refunds. The judgment also highlights the importance of judicial caution in issuing interlocutory orders that may conflict with statutory provisions.

← Previous Next →