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TMI Blog2011 (6) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly allowed - Special Civil Application No. 12196 of 2002, - - - Dated:- 14-6-2011 - Harsha Devani and Bela Trivedi, JJ. M/s. K.B. Trivedi Gupta, Standing Counsels, for the Petitioner. Ms. Sejal K. Mandavia, Advocate, for the Respondent. [Judgment per : Bela Trivedi, J.]. The petitioner by way of this petition under Article 226 of the Constitution of India has challenged the action of the respondents in not making the payment of interest to the petitioner at the rate of 12% per annum on the amounts deposited by the petitioner, and has sought further interest at the rate of 24% per annum on the amount of interest. The petitioner has also challenged the legality and validity of the show cause notice dated 10th March, 1997 issued by the respondent no. 3, as also of the letter dated 3-10-2002 of the respondent no. 4 - Board, informing the petitioner that its request for the payment of interest on the deposits made by it could not be acceded to. 2. The brief facts giving rise to the present petition, as transpiring from the chronology of events submitted by the learned Advocates for the parties, as also from the documents on record, are as under : 2(i). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est at 12% per annum. On behalf of the revenue an undertaking will be filed that in the event the assessee finally succeeds in his challenge and is found not liable to pay excise duty on his product, the revenue will refund the amount with interest at 12% per annum. 2(ii). Pursuant to the said order, the petitioner deposited Rs. 30 lakhs on 5-9-1988 and filed the Appeal before the Collector of Central Excise (Appeals), Bombay. The Collector (Appeals) remanded the case of the petitioner to the Assistant Collector for de novo adjudication holding that the Assistant Collector had the jurisdiction to decide the issue involved, vide order dated 17-3-1989. Being aggrieved by the said order, the petitioner preferred an Appeal before the CEGAT, New Delhi, however, the same came to be rejected by the CEGAT, vide order dated 20-7-1989. Thereafter, in view of the remand of the case, the Assistant Collector conducted the de novo proceedings being No. O.I.O.49/VC/90 and confirmed the classification of the petitioner s product under the sub-heading 2107.91 and also confirmed the demand for Rs. 2,06,13,0131.01ps, towards the dues, vide order dated 14-3-1990. The petitioner thereafter challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, appears to have written a letter dated 15-1-1997 to the Assistant Commissioner of Central Excise, requesting him to pay the amount of interest at the rate of 12% per annum on the said amounts of deposits as per the directions given by the High Court vide order dated 28-7-1988 in Special Civil Application No. 2505 of 1988. In reply to the said letter, the Assistant Commissioner of Central Excise, Rural Division, Ahmedabad, issued a show cause notice dated 10-3-1997 calling upon the petitioner to show cause as to why the refund for interest should not be rejected on the grounds mentioned in the said notice. The petitioner, in response thereto, appears to have submitted the reply on 3-4-1997 praying to quash and set aside the said show cause notice for the reasons mentioned therein. According to the petitioner, thereafter, the petitioner kept on making various representations to the different authorities, and lastly wrote the letter dated 12-8-2002 to the Board regarding non-payment of interest. In response thereto, the Under Secretary, Government of India, Ministry of Finance and Company Affairs, vide letter dated 3-10-2002, conveyed the petitioner that it was not found possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its product, the revenue was liable to refund the amounts deposited by the petitioner from time to time, with interest at the rate of 12% per annum in view of the said order dated 28th July 1988 passed by the High Court in Special Civil Application No. 2505 of 1988, however, the petitioner was paid only the amounts of deposits and the securities, and not the interest amounts thereon. Relying upon the decision of Hon ble Supreme Court in case of Tata Refractories Ltd. another v. Sales Tax Officer and other, (2003) 1 SCC 65, Mr. Trivedi submitted that when the deposits were made as per the directions of High Court, the Revenue was liable to pay interest as per the condition imposed in the said order, as the petitioner had finally succeeded in its challenge. 4. The learned counsel Mr. Trivedi also relied upon the number of judgments of our High Court, other High Courts and Hon ble Supreme Court to buttress his submission that even in absence of any specific order of the Court for the payment of interest on the delayed refunds, the Courts have awarded the interest on the equitable grounds, considering the fact that the revenue had used the amount of deposits made by the assessee, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals) remanded the case, the Assistant Collector passed the order dated 14-3-1990 in O.I.O. No.49/VC/90, confirming the classification of the petitioner s product under the sub-heading 2107.91 and directed the petitioner to pay the duty of Rs. 2,06,13,031.01ps., and therefore it could not be said that the petitioner had finally succeeded in its challenge. According to Ms. Mandavia, on the contrary, the petitioner had failed in its challenge before the concerned Assistant Collector, and the petitioner, instead of complying with the said order, had challenged the same by filing another writ petition being Special Civil Application No. 2759 of 1990, in which the petitioner was directed by this Court to deposit a sum of Rs. 50 lakhs in addition to Rs. 30 lakhs earlier deposited by the petitioner. Hence, it was submitted by Ms. Mandavia that the petitioner neither paid the amount of duty as directed by the Assistant Collector nor paid any interest thereon though it had failed in its challenge before the Assistant Collector. She also submitted that the petitioner kept on challenging the orders passed by the various authorities from time to time and did not make the payment as directed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest on interest amount as claimed in this petition. 7. Before dealing with the rival contentions raised by learned Advocates for the parties, it would be necessary to decide the issue regarding the maintainability of petition, as raised by learned Standing Counsel Ms. Mandavia for the respondent. In this regard it may be stated that the legal position has been settled by the Hon ble Supreme Court in various judgments pronounced from time to time, and more particularly, in case of Suganmal v. State of M.P. Ors. reported in AIR 1965 Supreme Court 1740, wherein it was held that a writ petition under Article 226 of the Constitution of India solely praying for the issue of writ of mandamus directing the State to refund the money allowed to have been illegally collected by the State as tax would not ordinarily be maintainable. While distinguishing the petition seeking direction for refund given by way of consequential order in a case, where the legality of assessment was questioned, and the petition filed only for the purpose of seeking refund, it was observed in the said case as under : We do not consider it proper to extend the principle justifying the consequential ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner has prayed to quash and set aside the impugned show cause notice dated 10-3-1997 and the decision of the Board contained in letter dated 3-10-2002. If the substance of the prayers is seen, it clearly transpires that the petitioner having prayed for the issuance of writ of mandamus seeking direction against the respondents for the payment of interest on the refunded amounts of deposits, as rightly submitted by Ms. Mandavia, such a claim for interest amount should have been made in the civil Court by filing a civil suit, and ordinarily the writ petition would not be maintainable as per the ratio of above referred decisions of the Hon ble Supreme Court. However, it is pertinent to note that now, since, the petition has been finally heard after a lapse of about 9 years of its admission, it would not be appropriate to relegate the petitioner to the Civil Court for filing a civil suit in respect of its claim of interest amount. Under the circumstances, instead of stretching the issue of maintainability of petition any further, the petition is being decided on merits. 10. In the instant case, the main controversy revolves round the order dated 28th July, 1988 passed by this Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, a sum of Rs. 30 lakhs in the office of Assistant Collector and to file appeal before the Collector of Central Excise (Appeals) against the order under challenge of Assistant Collector. The Court also further directed the petitioner to file an undertaking to the effect that in the event of the petitioner finally failing in his challenge and being held liable to pay excise duty, he would pay the difference with interest at 12% per annum. The Court also directed the revenue to file an undertaking to the effect that in the event of the assessee finally succeeding in his challenge, and being found not liable to pay excise duty on his product, the revenue would refund the amount with interest at 12% per annum. The said order is annexed as Annexure-A to the petition. After passing of the said order, it appears that the petitioner deposited Rs. 30 lakhs and filed the appeal before the Collector (Appeals). The Collector (Appeals) by the order dated 17-3-1989 remanded the case of the petitioner to the Assistant Collector for de novo adjudication holding that the Assistant Collector had the jurisdiction to decide the issue involved. Against the said order, the petitioner preferred an appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CEGAT should decide the stay applications expeditiously. This Court, vide order dated 12-2-1992, while disposing of the said petition No. 691 of 1992, permitted the petitioner to clear its goods up to Rs. 25 lakhs on the petitioner s depositing Rs. 30 lakhs, till the CEGAT decided the petitioner s stay application. It was specified in the said order that the Court had not decided the contentions of the petitioner as to whether on the product of the petitioner, excise duty was leviable or not. The other Special Civil Application No. 40 of 1992 came to be withdrawn by the petitioner. The CEGAT, thereafter, decided the stay application of the petitioner directing the petitioner to deposit Rs. 4,20,00,000/- under Section 35F of the Act in five installments of Rs. 84 lakhs each and to furnish the bank guarantee for the balance amount, vide order dated 31-8-1992. However, the petitioner again filed a petition, being C.W.P. No. 3516 of 1992 before the Delhi High Court challenging the said order of the CEGAT. The High Court of Delhi, vide order dated 23-10-1992, directed the petitioner to deposit Rs. 3.5 crores and to furnish a security of immovable property for the balance amount. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, and considering the said circular dated 20-12-1993 of the Board, remanded the cases to the concerned Assistant Collector of Central Excise, Ahmedabad for de novo adjudication, as per the order dated 30-11-1994 (Annexure-C). Finally, the Assistant Collector, vide order dated 12-7-1995 (Annexure-E), held that the product Rasna Soft Drink Concentrate was required to be classified under the sub-heading 2107.99 for the period from March 1986 to April 1987 and January 1988 to September 1991 and was chargeable to nil rate of duty as per CETA, 1985. Accordingly, all the demands raised by the revenue were dropped in the said proceedings. Subsequently, the Assistant Commissioner, Central Excise, Rural Division, Ahmedabad, vide orders dated 21-8-1995 and 30-5-1996, directed to return the amount of deposits to the tune of Rs. 5.56 crores and of Rs. 4.56 crores respectively to the petitioner. (Annexure F Collectively). 16. From the above stated series of proceedings filed by the petitioner, and the orders passed by the judicial and quasi judicial authorities from time to time, it emerges that the proceedings initiated against the petitioner by the respondents, initially by issuing the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest should not be rejected, the same being inadmissible and barred by time in view of Section 11B of the Central Excise Act, 1944. It appears that the petitioner gave reply to the said show cause notice on 3-4-1997 and also made written submission on 14-4-1997 requesting the Assistant Commissioner to withdraw the show cause notice and make payment of interest on the deposits as per the order dated 28-7-1988 passed by the High Court. However, thereafter nothing was heard from the Assistant Commissioner and therefore the petitioner kept on making various representations to the different authorities. Ultimately, the petitioner made a representation dated 12-8-2002 to the respondent No. 4 regarding non-payment of interest, however, same was also not acceded to by the respondent No. 4 as per its letter dated 3-10-2002 (Annexure-L). 18. It is not disputed that at the relevant time, there was no statutory provision in the Central Excises and Salt Act, 1944, for the payment of interest on the refunds. The Division Bench of this Court, dealing with the provisions of the said Act as regards question of payment of interest on refunds, in the case of Satellite Engineering Ltd. v. Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly, the revenue was directed to file undertaking to the effect that in the event, the assessee finally succeeds in the challenge and is found not liable to pay excise duty on his product, the revenue will refund the amount with interest at 12% per annum . Now, as discussed hereinabove, the Assistant Collector, in the de novo proceedings adjudicated upon the said show cause notice covering the period from March-1986 to April-1987, and the other seven show cause notices covering the period from 1-1-1988 to 31-1-1990. The said orders came to be challenged before the Collector (Appeals), and before the CEGAT and before this Court and Delhi High Court, etc. as already stated hereinabove. Therefore, though the petitioner was directed in the said petition being No. SCA 2505 of 1988 to deposit Rs. 30 lakhs against the demand of about Rs. 2.06 crores made in the order dated 19-4-1988 by the Assistant Collector and to file appeal before the Collector (Appeals), the Assistant Collector, after the remand of the said proceedings from the Collector (Appeals) and CEGAT, heard and adjudicated upon the said proceedings arising out of the show cause notice dated 17-6-1987, along with the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udication, it was numbered as O.I.O. No. 49/VC/90. The Assistant Collector, thereafter, had passed the Orders-in-Original in other seven proceedings arising out of seven other show cause notices and the said orders of Assistant Collector were challenged by the petitioners before the Collector (Appeals), which were numbered as Orders-in-Appeal Nos. 738 of 1991 to 745 of 1991. The Collector (Appeals), vide order dated 15-10-1991 (Annexure-B), while rejecting the said appeals, had observed inter alia that the appellants i.e. the petitioners were required to pay the balance amount along with the interest at the rate of 12% in pursuance of the undertaking given by them before the High Court of Gujarat as directed in its order dated 28-7-1988 in Special Civil Application No. 2505 of 1988. Thus, it clearly emerges that the Collector (Appeals) had also treated the said order dated 28-7-1988 passed in Special Civil Application No. 2505 of 1988 as applicable in the other proceedings having arisen pursuant to the other show cause notices issued against the petitioners subsequent to the said order. If the said order passed in Special Civil Application No. 2505 of 1988 was confined only to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f restitution is not the act of the court being wrongful or a mistake or error committed by the Court; the test is whether on account of an act of the party persuading the court to pass an order held at the end as not sustainable, has resulted in one party gaining an advantage which it would not have otherwise earned, or the other party has suffered an impoverishment which it would not have suffered but for the order of the court and the act of such party. Therefore the successful party finally held entitled to a relief assessable in terms of money at the end of the litigation, is entitled to be compensated by award of interest at a suitable reasonable rate for the period for which the interim order of the Court withholding the release of money had remained in operation. 22. In the instant case, the petitioners had made deposits of the amount as per the directions given by the Court from time to time during the pendency of proceedings before the Collector (Appeals) and the CEGAT, wherein the petitioner s challenge was that they were not liable to pay any excise duty. The petitioners having finally succeeded in that challenge, the said amount of deposits were required to be retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court passed in Special Civil Application No. 2505 of 1988, and on equitable grounds. The said disputed claim of the petitioner for the interest on the deposits has been decided for the first time by the Court in the instant order. Since the said issue as regards payment of interest on the deposits was very much debatable, and was not adjudicated earlier, it could not be said that there was any lapse or in action on the part of the respondent authorities in not making payment of interest amount on the deposits made by the petitioners. It is also relevant to note that in none of the representations made by the petitioner to the respondent authorities, the claim of interest on interest amount has been made by the petitioner and that it is for the first time in the present petition such a claim has been made. It is also further required to be noted that though the notice was issued by the Assistant Commissioner as back as on 10-3-1997 calling upon the petitioner to show cause as to why their claim for interest on deposits should not be rejected, the petitioner kept on making representations before the various authorities for about five years and thereafter filed the present p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned, it is evident that insofar as the order dated 28-7-1988 passed in Special Civil Application No. 2505 of 1988 is concerned, the same pertains to deposit of rupees thirty lakhs which the petitioner was required to deposit in terms of the said order. However, thereafter, pursuant to show cause notices issued from time to time similar proceedings were taken and the petitioner was required to deposit various sums as detailed hereinabove. On behalf of the petitioner, it has been contended that the direction to pay interest covers all the amounts deposited till the culmination of the proceedings vide the order dated 12-7-1995 passed by the Adjudicating Authority. On behalf of the revenue it is submitted that the petitioner did not succeed finally in the proceedings instituted under the directions of this Court before the Commissioner (Appeals). That on the contrary, the jurisdictional Assistant Collector s Order in Original classifying the product Rasna under Chapter Sub-heading No. 2107.91 and confirming the demand therein was upheld by the Collector (Appeals) in the order-in-appeal dated 15-10-1991. According to the respondents the directions issued by this Court in SCA No. 250 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the refund which may become payable will be governed by the provisions of the State Act. In the instant case, since the very order which directed the deposit itself has directed the refund with 18% interest, we have no doubt in holding the said order as to mean that the refund should be made with interest at the rate of 18% from the date on which the amount was deposited pursuant to the order of the High Court dated 15-3-1995. 28. In the light of the principles enunciated in the said decision, either of the parties who failed finally would be liable to pay interest at the rate of 12% in terms of the order of this High Court. 29. In the present case it is not as if the petitioner has come to this court with a prayer to grant interest simpliciter as was the case in Union of India v. Orient Enterprises (supra) on which reliance has been placed by the respondents. Though the claim is not based on any statutory provision, the same is based upon an order passed by this Court. Hence, the case cannot be equated with a case where a petition is filed seeking interest on delayed refund directly before this court based on general principles without any statutory or other basis. The pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the order dated 28-7-1988 of this High Court it appears that the liability to pay interest on the part of the revenue under the said order is confined to the amount deposited in terms of the said order. However, as noticed earlier the said order was passed with the consent of the parties. Another significant aspect is as to how the parties to the proceedings have interpreted the said order. In this regard it may be relevant to refer to the order dated 15-10-1991 passed by the Collector (Appeals) and more particularly to the penultimate paragraph thereof wherein it has been held thus : 43. Accordingly, the eight appeals are rejected. As such, the appellants are directed to immediately pay all the outstanding dues of Central Excise duty, adjudged against them by the AC vide his impugned orders, in pursuant of their undertaking and guarantees furnished before the High Court of Gujarat at Ahmedabad in SCAs filed by them. It is relevant to mention here that in terms of the last order dated 19-4-90 of Gujarat High Court in SCA No. 2759 of 1990, all the 3 trustees of Khambhatta Family Trust were required to file undertaking in the court to the effect that in the event the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was a serious dispute between the parties, which was ultimately ordered to be paid pursuant to the order passed by this Court on 30-4-1997. Undisputedly, the amount pursuant thereto was paid on 27-3-1998.... The Court further held that since the amount was paid once the controversy was resolved there was no wrongful retention of monies. No authority can ever accept an obligation to make payment and simply refuse to pay. In each and every case an authority must at least claim to act in accordance with law and hence claim that it has no obligation to pay for some reason or another. When the claims of the authority are found to be unsustainable or erroneous by the courts, it follows that the authority has acted wrongfully in the sense of not in accordance with law and compensation to the party deprived must follow. If the decision of the High Court is upheld it would mean that there can never be any wrongful retention by an authority until this Court holds that their stand is not in accordance with law. Therefore, that on this issue as well, the impugned judgment cannot be sustained and ought to be reversed. 46. The facts and the law referred to in paragraph (supra) would clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame entitled to refund of the amounts deposited by it along with interest at the rate of 12% in terms of the order of the High Court once the proceedings attained finality by the order dated 12-7-1995 passed by the Adjudicating Authority. However, interest has not been paid to the petitioner till date due to the erroneous view taken by the officials of the respondents. Since interest of the refund has not been granted for a considerable time, in the light of the view taken by the Court in the aforesaid decision on general principles the petitioner ought to be compensated for the delay in receiving monies properly due to it. However, as noticed hereinabove, the petitioner s claim is not based on any statutory provision inasmuch as at the relevant time the Central Excise Act, 1944 did not make any provision for payment on interest on late payment of refund. Hence, had it not been for the order dated 28th July, 1988 passed by this court in Special Civil Application No. 2505 of 1988 the petitioner would not even be entitled to claim interest on the amounts so deposited in a writ petition under Articles 226 of the Constitution. Any claim for interest could then be made on general princi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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