1998 (12) TMI 94 - SC - Central Excise

Whether in view of the Andaman and Nicobar Islands (Amendment) Regulation, 1984 the respondents are entitled to claim refund of the excise duty levied and paid? Whether by application of the principle of unjust enrichment the said respondents can be denied of getting the refund in question? Held that - On consideration of the entire materials on record that it is nobody s case that the excise duty was recovered from the purchaser by the wine merchants. Since the burden has not been passed on to the purchaser as found by the High Court and the levy having been held to be unconstitutional, the State would not be entitled to resist the claim of refund by application of doctrine of unjust enrichment . We, therefore, do not find any infirmity with the directions of the High Court to refund the illegal levy collected from the respondents. The appeals accordingly fail and are dismissed.

Summary

Issues:
Challenge to the validity of excise duty levy under Andaman and Nicobar Islands (Amendment) Regulation, 1984; Application of the principle of 'unjust enrichment' in denying refund.

Analysis:
The case involved a challenge to the excise duty levy under the Andaman and Nicobar Islands (Amendment) Regulation, 1984, and the application of the principle of 'unjust enrichment' in relation to refund claims. The respondents, licensees for Indian made foreign liquor, had obtained licenses through public auction. The Chief Commissioner issued a notification regarding excise duty, which was later held invalid by the High Court. Despite the contention that the licensees had already recovered the amount from customers, the High Court allowed the refund. Subsequently, the Amendment Regulation of 1984 authorized the imposition of excise duty, leading to a rejection of refund claims by the Excise Authorities. The respondents then filed writ petitions challenging the legality of the amendment and seeking a refund.

The High Court held that certain sections of the Amendment Regulation were invalid and that the principle of 'unjust enrichment' did not apply as there was no evidence that the excise duty was passed on to customers by the licensees. The High Court directed the Excise Authorities to refund the collected amount. The appellants argued that the duty collected could be considered a special duty under the amended provisions, but this argument was not pursued due to the lack of a necessary notification specifying the levy. The appellants also contended that even if the levy was unauthorized, the principle of 'unjust enrichment' should prevent refund. However, the Court cited precedents to explain that if the burden of payment was not transferred to customers, the doctrine of 'unjust enrichment' did not apply.

Ultimately, the Court found that as the burden had not been passed on to customers and the levy was unconstitutional, the State could not resist the refund claim based on 'unjust enrichment.' The appeals were dismissed, and the High Court's direction to refund the illegal levy was upheld. It was noted that if the amount had been deposited in court, the licensees would be entitled to receive it from there.