2004 (4) TMI 82 - HC - Central Excise

Limitation Period for Refund Claims - Levy of Excise Duty on Cotton Fabrics - Unjust enrichment - HELD THAT - The instant case has a significant feature. Before the Revenue authority the period of limitation was not gone into and was not considered. The concerned authority rejected part of the claim which arose prior to September 26, 1963 on a misconceived impression that while considering the refund application the date of the board's clarification should be the cut off date. Hence, the authority also accepted the fact that the period of limitation had no application in the instant case. Hence, the argument that the claim was barred by laws of limitation was nothing but an afterthought and was based on misconception of law. Unjust enrichment - We have also carefully gone through the minority view and the logic behind such view was nicely explained by Suhas Chandra Sen J. (as His Lordship then was). However, we are bound to follow the majority view expressed by the Apex Court and following the subject paragraph quoted supra we are of the view that the claim of the writ petitioner cannot be allowed. It is true that the subject issue was never raised, either before the learned Single Judge or in the grounds of appeal. However, after the Constitutional Bench judgment we cannot ignore the law laid down by the Apex Court and we permitted the Revenue to take the plea of unjust enrichment. Although we are in total agreement with the learned Single Judge on the other score we disallow the claim of the writ petitioner on the ground of unjust enrichment following the decision of the Apex Court in the case of Mafat-lal Industries Ltd. 1996 (12) TMI 50 - SUPREME COURT ). Hence, the appeal is allowed - The order of the learned Single Judge is set aside.

Summary

Issues Involved:
1. Levy of Excise Duty on Cotton Fabrics
2. Limitation Period for Refund Claims
3. Doctrine of Unjust Enrichment

Summary:

1. Levy of Excise Duty on Cotton Fabrics:
The respondent, a shoe manufacturing company, required cotton fabrics for manufacturing shoes. Prior to August 1, 1960, excise duty was not levied on these fabrics. However, a notification dated August 1, 1960, issued by the Deputy Superintendent of Central Excise, Batanagar, levied excise duty on the cotton fabrics under the tariff item "friction cloth." The respondent paid this duty under protest. A circular from the Ministry of Finance dated December 22, 1965, clarified that no duty was payable on "friction cloth," and a subsequent communication on June 21, 1966, confirmed this. The respondent applied for a refund for the period April 24, 1962, to June 17, 1966, but the claim was partially allowed only for the period after September 26, 1963.

2. Limitation Period for Refund Claims:
The Revenue contended that the refund claim was barred by limitation u/r 11 of the Central Excise Rules. The learned Single Judge held that the claim was not barred by limitation since the payment was made under compulsion, not under mistake or misconception. The court agreed that Rule 11, which provided a three-month period (extended to one year for self-removal assessee u/r 173J), did not apply as the payment was compulsive. The court also noted that the period of limitation was not considered by the Revenue authority initially, and the rejection of the claim prior to September 26, 1963, was based on a misconception of law.

3. Doctrine of Unjust Enrichment:
The Revenue argued that the refund claim was hit by the doctrine of unjust enrichment, as the respondent had collected the duty from consumers. Although this issue was not raised before the learned Single Judge or in the grounds of appeal, the court considered the Constitutional Bench judgment in Mafatlal Industries Ltd. v. Union of India. The court held that the respondent could not claim a refund as the burden of duty had been passed on to the consumers, thus invoking the doctrine of unjust enrichment. The court emphasized that the doctrine prevents a person from collecting duty from both the purchaser and the State.

Conclusion:
The appeal was allowed, and the order of the learned Single Judge was set aside on the ground of unjust enrichment. There was no order as to costs, and urgent xerox certified copies were to be provided if applied for.