1991 (10) TMI 66 - HC - Central Excise

Summary

Issues Involved:
1. Claim for interest on refund of excise duty.
2. Legality of the Assistant Collector's order rejecting interest.
3. Applicability of Section 40 of the Central Excises and Salt Act, 1944.
4. Powers of the High Court under Article 226 of the Constitution of India.
5. Remoteness of damages and entitlement to compensation.

Summary:

1. Claim for Interest on Refund of Excise Duty:
The petitioner, a partnership firm, sought compensation in the form of interest at 18% on the refund of excise duty paid due to wrong classification of goods. The department had classified the goods under incorrect tariff items, leading to the wrongful collection of excise duty. The petitioner argued that the wrongful collection was akin to tort and claimed interest as quantified damages.

2. Legality of the Assistant Collector's Order Rejecting Interest:
The Assistant Collector of Central Excise rejected the claim for interest, stating there was no provision in the Central Excise Law for paying interest on wrongful collection of duty. The court upheld this order, noting that officers under the Act are bound by its provisions and cannot go beyond the statute. The court found the Assistant Collector's order lawful and not arbitrary.

3. Applicability of Section 40 of the Central Excises and Salt Act, 1944:
Section 40 of the Act protects the Government and its officers for actions taken in good faith under the Act or its rules. The court noted that the petitioner did not allege a lack of good faith in the department's actions. The classification error was seen as a bona fide mistake, not an act lacking good faith. Therefore, the protection under Section 40 applied, and the claim for interest was not maintainable.

4. Powers of the High Court under Article 226 of the Constitution of India:
The petitioner urged the court to exercise its powers under Article 226 of the Constitution to grant interest. The court clarified that Article 226 is an extraordinary remedy meant to enforce rights and prevent injustice, not to override statutory provisions or provide unwarranted benefits. The court found no breach of rights or legal injury to the petitioner and declined to exercise its discretionary powers to award interest.

5. Remoteness of Damages and Entitlement to Compensation:
The court discussed the principle of remoteness of damages, stating that the petitioner's claimed losses due to excess excise duty payment were too remote to be directly linked to the wrongful collection. The court also noted that the petitioner likely passed on the excise duty burden to customers, making the claim for compensation unjustified. The court emphasized that business involves risks, and losses cannot always be attributed to government actions.

Conclusion:
The court rejected the petition, discharged the rule, and upheld the Assistant Collector's order denying interest on the refund of excise duty. The court found no legal basis for the claim and emphasized the statutory protections and principles of justice, equity, and good conscience.