1996 (8) TMI 113 - SC - Central Excise

Claim of refund Held that - The writ petition was not a run-of-the-mill case. It was a case where the respondent-State had not acted as this Court had expected a high constitutional authority to act, in furtherance of the order of this Court. That is something that this Court cannot accept. The respondent-State was obliged by this Court's order to refund to the writ petitioners, including the appellants, the amounts collected from them in the form of the levy that was held to be illegal. If there was good reason in law for rejecting the refund claim, it should have been stated. Not to have responded to the appellants' refund claim for 11 years and then to have turned it down without reason is to have acted disrespectfully to this Court. Even assuming, therefore, that this was a writ petition only for money, the writ petition fell outside the ordinary stream of writ petitions and, acting upon it, the High Court should have ordered the refund. Appeal allowed.

Summary

Issues:
1. Claim for refund of tax under Excise Acts.
2. Maintainability of writ petition for refund.
3. Expectation of State Governments to honor Supreme Court decisions.

Analysis:

Issue 1: Claim for refund of tax under Excise Acts
The case involved a group of appellants who were part of a larger group of writ petitioners challenging the taxation of certain ayurvedic preparations under State Excise Acts. The Supreme Court had previously ruled that the preparations could only be taxed under specific legislation. The appellants sought a refund of taxes paid between August 1960 and September 1962, amounting to Rs. 91,723.80. The respondent-State rejected the refund claim without providing any reasons, leading to the appellants filing a writ petition in the High Court at Patna.

Issue 2: Maintainability of writ petition for refund
The High Court initially found the writ petition seeking a refund to be essentially a claim for a money decree, which it deemed not suitable for determination in writ jurisdiction. The court suggested that the appellants should file a civil suit to recover the refund amount. However, the appellants argued that the rejection of their refund claim lacked valid reasons and questioned the validity of the rejection.

Issue 3: Expectation of State Governments to honor Supreme Court decisions
The Supreme Court highlighted the expectation that State Governments would comply with its decisions, especially concerning refunds of illegally collected taxes. The Court criticized the respondent-State for rejecting the refund claim without providing reasons for over a decade, despite the clear illegality of the tax collection. The Court emphasized that the State's failure to act in accordance with the Supreme Court's order was unacceptable and ordered the State to refund the amount with interest.

In conclusion, the Supreme Court allowed the appeal, set aside the order refusing the refund, and directed the respondent-State to pay the appellants the refund amount with interest. The Court also awarded costs to the appellants. The judgment underscored the importance of State authorities honoring legal decisions and acting promptly to rectify any illegal actions, especially in matters of tax refunds.