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TMI Blog1985 (4) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... ure and sell cigarettes and tobacco products. They sell their products to the wholesale buyers who in turn sell the same to the secondary wholesalers of their choice. The secondary wholesalers in turn sell the said products to the retailers who ultimately sell them to the consumers. Between 1st September 1970 and 6th October 1972 I.T.C. effected sales of cigarettes bona fide in usual course of business at arms length on principal-to-principal basis to wholesale buyers. I.T.C. did not derive any extra benefit from the wholesale buyers and dealers and all the sales made by the I.T.C. did not have any consideration other than the price of the products. During the aforesaid period I.T.C. followed the self removal procedure provided in Chapter VIII-A of the Central Excise Rules. Till September 1972 I.T.C. were removing their goods under self removal procedure after paying excise duty thereon on the basis of prices charged by the wholesale buyers to the secondary wholesalers. Between September 1, 1970 and October 6, 1972, I.T.C. declared the assessable value under Section 4 of the Central Excises and Salt Act, 1944, in the price list according to the prices charged by the wholesalers to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. However, ultimately all the four refund-applications were rejected by the Assistant Collector on May 4, 1974. On July 31, 1974, the I.T.C. filed appeals against the orders of the Assistant Collector rejecting their refund applications before the Appellate Collector. On November 25, 1974, the Appellate Collector passed two separate orders stating that I.T.C- s appeals pertaining to the refund of ₹ 13,20,083.47 (for the period May 29, 1971, to February 19, 1972) and ₹ 10,05,944.99 (pertaining to the period September 1, 1970, to May 20,1971) were allowed, that the orders of the Assistant Collector were set aside and that consequential relief was granted to the I.T.C. within the time limit of Rule 11 of the Central Excise Rules. 6. In the same day similar orders were passed by the Appellate Collector pertaining to the refund of ₹ 10,16,417.83 (for the period March 17, 1972 to October 6, 1972) and ₹ 1,83,685.67 (for the period February 15, 1972 to March 16, 1972). These two amounts were refunded by the department to the I.T.C. 7. By their two letters both dated December 11, 1974, addressed to the Assistant Collector the I.T.C. requested for refund in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the judgment delivered by the Supreme Court in Voltas case, indisputably the amount of ₹ 23,26,028.46 was collected by the department without authority of law which the department was bound to refund to I.T.C., (ii) Rule 11 of the Excise Rules has no application; (iii) I.T.C. were entitled to take appropriate action within three years from the delivery of the Supreme Court judgment in Voltas case on 1st December 1972 which in fact I.T.C. did within one year, by way of making the refund applications dated 23rd February 1973 and 26th February 1973; and (iv) in any event, I.T.C. s refund applications were within time. 11. On the other hand the contentions urged on behalf of the respondents were (i) the appropriate remedy of I.T.C. was by way of a suit so that it could be ascertained at what point of time I.T.C. discovered their mistake in making the over-payments, (ii) starting point of limitation was three years from 14th August 1970 when the Bombay High Court delivered its judgment in Voltas case, (iii) the writ petition filed on 30th September 1975 was barred by limitation as it had been filed more than three years after the Bombay High Court delivered its judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained to have been paid by the I.T.C. as excise duty. Sawant J. disagreed with Lentin J. and dismissed the appeal on two grounds viz. that the petitioners are not entitled to invoke the equitable and discretionary jurisdiction under Article 226 of the Constitution and also that their claim is barred by limitation. 14. Mr. Desai appearing for the I.T.C. submitted before me that (a) in view of the judgment in Voltas case finally decided by the Supreme Court, the excess amounts collected by the department from I.T.C. were without the authority of law and it is the obligation of the State to refund tax collected without the authority of law, (b) Rule 11 of the Central Excise Rules does not apply to the collection of tax without authority of law, (c) the mistake was discovered by I.T.C. when the Supreme Court finally decided the Voltas case and assuming that the mistake must be deemed to have been discovered by I.T.C. in March 1971, when Bombay Judgment in Voltas case was reported the claim for refund of excess amount collected from I.T.C. was lodged with the department well within the period of three years from that day, (d) though Rule 11 as such does not apply, the department can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition is barred by limitation (ii) that assuming that the Rule of Limitation of three years cannot be said to strictly apply to High Court s jurisdiction under Article 226, the facts and circumstances of the case disclose that there is gross delay in filing this petition and further the I.T.C. is also guilty of laches since they failed to file the petition expeditiously after they discovered the mistake, whether one takes into consideration the date when the High Court Judgment in Voltas case was reported in Bombay Law Reporter, or the date when according to I.T.C. it came to know of the said decision or the date when the I.T.C. came to know of the judgment of the Supreme Court in Voltas case as the relevant date, (iii) that the I.T.C. had chosen to avail of the remedy provided by Rule 11 of the Excise Rules and the orders passed in these departmental proceedings are not shown to suffer from any illegality since indisputably refund under Rule 11 can be granted only if the claim is made within one year of the actual payment of the duty, the date of the discovery of the mistake being not relevant. I.T.C s resorting to the departmental remedy under Rule 11 was wholly misconceived. I.T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seeking a refund of the excess duty paid by it and having deliberately pursuaded such a wrong remedy cannot be heard to say that the period spent in those proceedings should be taken into account while considering the question of limitation and delay in filing the petition. 17. In Patel India, A.I.R. 1973, Supreme Court 1300, it has been held that section 40 (which provision is in pari-materia with the provision in Rule 11) applies only to cases where duties have been paid through inadvertence, error or misconstruction, and where refund application has to be made within three months from the date of such payment. In that case the facts were that M/s. Patel India (Pvt.) Ltd., used to import View-master stereoscope, reels etc. acting as the sole distributing agent in India for the products of M/s. Sawyer s Inc., Portland, U.S.A. The customs authorities used to levy; import duty on the basis or the invoice price under Section 29 read With Section 30 of the Sea Customs Act, 1878, as being the real value of the goods so imported. During the year 1954-55, the appellant company imported several items set out in Annexure D to the appellant s Special Leave petition. When items 1 and 2 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in excess of jurisdiction. The Supreme Court further observed - This position, indeed, was accepted by the customs authorities when they ordered refund of excess duty charged by them in relation to items 22 to 29 and 33-35. Such refund could only have been ordered on the footing that the excess duty on those consignments had been charged without the authority of law and, therefore, without jurisdiction. The fact that no application had been made therefor under Section 40 was irrelevant to the point that the excess duty was assessed and recovered without the authority of law. Section 40 on which the Union of India relied in its return, provides that no customs duties or charges which have been paid, and on which payment wholly or in part, is claimed in consequence of the same having been paid through inadvertence, error or misconstruction, shall be returned, unless such claim is made within three months from the date of such payment. The section clearly applies only to cases where duties have been paid through inadvertence, error or misconstruction, and where refund application has to be made within three months from the date of such payment. After observing as above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ground of mistake, the period of limitation does not begin to run until the plaintiff had discovered the mistake or could, with reasonable diligence, have discovered it. In a case where payment is made under a mistake of law as contrasted with a mistake of fact, generally the mistake becomes known to the party only when a court makes a declaration as to the invalidity of the law. Though a party could, with reasonable diligence, discover a mistake of fact even before a court makes a pronouncement, it is seldom that a person can, even with a reasonable diligence discover a mistake of law before a judgment adjudging the validity of the law. 21. In State of Madhya Pradesh v. Bhailal Bhai, A.I.R. 1964 Supreme Court 1006, while holding that the High Courts have power for the purpose of enforcement of fundamental rights and statutory rights to give consequential relief by ordering repayment of money realised by the Government without the authority of law, said that the special remedy provided in Article 226 is not intended to supersede completely the modes of obtaining relief by an action in a civil court or to deny defences legitimately open in such action and that among the sev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable diligence, discover a mistake of fact even before a court makes a pronouncement, it is seldom that a person can, even with a reasonable diligence, discover a mistake of law before a judgment adjudging the validity of the law. Therefore, where a suit will lie to recover moneys paid under a mistake of law, a writ petition for refund of tax within the period of limitation prescribed i.e. within 3 years of the knowledge of the mistake, would also lie. For filing a writ petition to recover the money paid under a mistake of law, this Court has said that the starting point of limitation is from the date on which the judgment declaring as void the particular law under which the tax was paid was rendered, as that would normally be the date on which the mistake becomes known to the party. If any writ petition is filed beyond three years after that date, it will almost always be proper for the court to consider that it is unreasonable to entertain that petition, though, even in cases where it is filed within three years, the court has a discretion, having regard to the facts and circumstances of each case, not to entertain the application. 23. In Trilokchand Motichad v. H.B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution, it is appropriate ordinarily to construe that any unexplained delay in the filing of the writ petition after the expiry of the period of limitation prescribed for filing a suit as unreasonable. This rule, however, cannot be a rigid formula. There may be cases where even a delay of a shorter period may be considered to be sufficient to refuse relief in a petition under Article 226 of the Constitution. There may also be cases where there may be circumstances which may persuade the court to grant relief even though the petition may have been filed beyond the period of limitation prescribed for a suit. Each case has to be judged on its own facts and circumstances touching the conduct of the parties, the change in situation, the prejudice which is likely to be caused to the opposite party or to the general public etc. 25. In Golden Tobacco, 1983 E.L.T. 2238 (Bombay), Madon J. as he then was, after referring to the decision of the Supreme Court in M/s. Trilokchand Motichand, A.I.R. 1970 S.C. 898, M/s. D. Cawasji Co., 1978 E.L.T, (J 154) (S.C.) = 1975 S.C. 813, M/s. Shiv Shankar Dal Mills v. State of Haryana, A.I.R. 1980 S.C. 1037 and M/s. Hindustan Sugar Mills v. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall presently show that neither of these contentions is well founded. In the course of the hearing of the appeals by the Appellate Collector, Central Excise, the I.T.C. had filed the affidavit of Mr. S. Krishnamurthy, an Officer of I.T.C. dated October 3, 1974. It has been stated in this affidavit that on February 18, 1972, he came across a report in the Times of India about a decision of the Bombay High Court in Queens Chemist in which report the earlier decision of the Bombay High Court in Voltas case was mentioned and indicated that price charged by the manufacturer must be taken to be wholesale cash price . Thereafter, he contacted I.T.C. s Calcutta Solicitor Mr. S.K. Banerjee in their registered office at Calcutta and during his visit to Bombay handed over a copy of the press report to him. He was then advised by Mr. Banerjee to obtain a copy of the judgment in Voltas case and to forward the same to him at Calcutta for his consideration. He then contacted I.T.C. s Solicitors in Bombay and asked for a copy of the Bombay High Court s Voltas Judgment which copy was received by him in March 1972 and forwarded to Mr. Banerjee. He was also informed by I.T.C. s Bombay Solicitors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed above it is not possible to hold that the I.T.C. was guilty of delay in talking steps to claim refund of the excess duty. Under the Limitation Act the starting point of limitation is the date of the knowledge and limitation prescribed for filing the suit is three years from the date of the discovery of the mistake. Having regard to the facts stated in the affidavit of Mr. K. Krishnamurthy the claim to the department was made within less than a year of the date of the knowledge of the Bombay judgment in Voltas case. Even if the date when the judgment of the Bombay High Court in Voltas case was reported in Bombay Law Reporter is taken as the date of discovery of the mistake, the claim for refund to the department was made within two years from the date and if one were to go backwards to the date of the judgment on August 14, 1970, as the relevant date the applications made to the department were within three years from that date. I.T.C. s step in applying for refund to the department soon after the decision of the Supreme Court in Voltas case has to be taken into consideration for the purpose of considering the question whether the I.T.C. is guilty of delay in filing the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by I.T.C. since they did not receive any reply. It was for the first time on March 12, 1975, that the Assistant Collector wrote a letter to the I.T.C. saying that their claim has been referred to the Collector. Since nothing was heard thereafter, either from the Assistant Collector or the Collector, I.T.C. sent reminders and by his letter dated September 15, 1975, the Assistant Collector informed the I.T.C. for the first time that the department desired to have the Appellate Collector s order reviewed by the Government of India and that the claim for refund will be considered after the receipt of the Government of India s decision in the matter. Then followed the notice dated September 26, 1975, and thereafter writ petition on September 30. 1975. It is to be noted that the I.T.C. did receive refund for the period 15th March 1972 to 6th October 1972 and presumably the department had second thoughts about the remaining two claims which formed the subject matter of this petition. The fact that the department wanted a review prima-facie indicates that it understood the orders in appeal in respect of these claims as having been granted by the Collector in Appeal, notwithstanding the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that while exercising jurisdiction under Article 226 restrictions as to limitation would not come in the way of the petitioner for getting appropriate relief. The Division Bench has explained the said two decisions of the Supreme Court in para-8 of its judgment as follows : It was a case (i.e. M/s. Madras Rubber Factory Ltd. v. The Union of India, AIR 1976 S.C. 638) under the Customs Act. Section 27 of the Act has made a provision for refund of duty. That section is similar to R. 11 or S. 11B of the Central Excises and Salt Act. Section 27 has also prescribed a period of limitation for making an application and when the matter went to the Supreme Court, the Supreme Court has held as follows: The appellant s case was governed by sub-section (1) of section 27. No case of any running account was set up by the appellant nor was there anything in the records of this case to substantiate it. Customs duty was paid in respect of each of the five consignments on the date of its respective bill. Ultimately, this position could not be disputed before us. The appellant, however, contended that the duty was paid always under general protest which covered the cases of these five consignment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e if a claim is made within a prescribed period of 24 months. The petitioner, did not lodge such a claim within time. It was rejected. The petitioner, therefore, filed a writ petition in the Orissa High Court. It was also rejected and when he took the matter before the Supreme Court the Supreme Court found that the petitioner was not entitled to a refund. There are certain observations in the judgment of the Supreme Court suggesting that the rejection of the claim on the ground of bar of limitation was quite legal. Mr. Neurenkar relied upon these observations for the purpose of contented that even in a writ petition the provisions of limitation contending in a statute would be binding upon the claimant. No doubt prima-facie such an impression is likely to be created. However, it is material to note that in the writ petition that was filed before the High Court, the petitioner has claimed for the enforcement of a liability of the Sales Tax Authorities imposed on them by a statute to refund the tax as per the provisions of the Act. Thus, though the matter was under Article 226 of the Constitution, the jurisdiction of the High Court that was invoked was for a limited purpose of asking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law. The question for consideration in the present case is whether I.T.C. can be said be guilty of delay and laches in making the applications for refund to the department merely because Rule 11 was not applicable. It is not at all possible to accept the argument that the time spent by the I.T.C. In the department proceedings should not be taken into account for the purpose of explaining the delay in approaching this Court under Article 226 of the Constitution. There is no reason why the tax payer should not expect a fair deal from the department when it is discovered that the amount has been recovered without any authority of law. What is more, notwithstanding the fact that all the applications for refund were made under Rule 11 and may not strictly fall within the four corners of Rule 11, not only all the four appeals were allowed, but also in respect of two of the appeals the amount was actually refunded for the period mentioned therein. The department took its own time for concluding the departmental proceedings and also to take a decision to make a review application to the Government. Surely, I.T.C. could not in the circumstances be blamed for not rushing to the Court for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this rule cannot be regarded as the rigid formula and it all depends on the facts and circumstances of each case. While in a given case even a delay of shorter period may be considered to be sufficient to refuse relief in a petition under Article 226 of the Constitution, in another case there may be circumstances which may persuade the court to grant relief even though the petition is beyond the period of limitation prescribed for a suit. In other words, the question of delay and the discretion to be exercised by the court has to be dealt with in the light of the facts and circumstances of each case. The facts in this case are that the period for which the refund was claimed in the applications for refund fell within the period of three years prior to the date of making the applications for refund. The affidavit of Mr. Krishnamurthy disclosed the events till the filing of the refund applications. The affidavit explains the circumstances in which the I.T.C. came to know of the judgment and the reasons for their waiting for the verdict of the Supreme Court in Voltas case. It is not that the I.T.C. with some mala fide motive resorted to the departmental remedies instead of immediately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the usual course of business, (c) I.T.C. do not make any retail sales or sales in small quantities, (d) I.T.C. do not derive any extra benefit from the wholesale buyers, (e) the transactions between the I.T.C. and wholesale buyer were effected at arms length. In the normal course of business and do not have any consideration other than the price for the products, (f) all the sales made by the I.T.C. during the relevant period for which the refund is claimed were as aforesaid. It is also not in dispute that I.T.C. have a integrated price system which includes such excise as is payable in law and not any specific amount .of excise. It is also seen that before and after the self-removal procedure introduced under Chapter VII of the Rules, the price list was submitted by I.T.C. and were approved by the department on the basis of the prices charged and realised by the secondary wholesalers from the retailers, which after the discount was the price charged and realised by I.T.C. s wholesale buyers from the secondary wholesale buyers. It is not possible to predicate that the I.T.C. is recovering a particular or specific amount of excise and it is only by working out backwards on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7) (8) India 20HL 215.00 1.00 214.00 150.686391 63.313609 212.70 214.00 Kings FT 35. Besides the above statement (Exh. 1) prepared by the department, Mr. Sethna also relied on certain statements made in the affidavits made on behalf of the department which he contended were not controverted by filing any rejoinder by I.T.C. He also relied on the averments in para 16 of the petition. Based on the above, it was Mr. Sethna s submission that I.T.C. must have collected the excess excise duty and granting them refund would result in unjust enrichment of I.T.C. In any event, he submitted that I.T.C. had not produced material to show that they had not collected the excess excise duty in full, it being a disputed question of fact, they cannot claim the exercise of discretion in their favour under Article 226. What is stated in para 16 of the petition is as under :- The petitioners say th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case requires that the petitioners would not be entitled to be paid the amount, much less in law which does not belong to them. It was contended that the said averments in the said two affidavits of the Assistant Collector were not denied by filing rejoinders. In my view, reliance placed on the statements in the said two affidavits of the department are misplaced having regard to the undisputed facts which have been already adverted to above. Firstly, the I.T.C. has an integrated price system which includes such excise as is payable in law and not any specific amount of excise. It cannot be predicated that any particular amount of excise is included in the price charged by I.T.C. to their wholesale buyers. They did not derive any extra benefit from their wholesale buyers and the transactions between them are bona fide arms length and did not have any consideration other than the price of the products. In view of the integrated pricing system and the fact that the duty was calculated on the basis of the sale price charged by I.T.C. s wholesalers to the secondary wholesalers, the excess excise duty recovered from I.T.C. has to be borne by I.T.C. In the circumstances, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute and the facts stated in the written statement filed by I.T.C. with the department as also the fact that I.T.C. had an integrated price for its products which included excise duty payable in law and not any specific amount of excise, it is not possible to uphold Mr. Sethna s contention that I.T.C. is guilty of unjust enrichment. In my view, the absence of denials of statements made in the two affidavits filed on behalf of the department can have no significance in view of the undisputed facts discussed above. 38. In the result, I.T.C. cannot be refused refund on the ground that granting relief of restitution would have resulted in their unjust enrichment. 39. The next question is whether unjust enrichment is a valid defence to the restitution in respect of the excess duty collected by the department without the authority of law. This question is squarely answered by the observations of the Supreme Court in D. Cawasji Co., A.I.R. 1975 S.C. 813 = 1978 E.L.T. (J 154), (S.C.). In para 10 the Supreme Court pointed out- Nor is there any provision under which the court could deny refund of tax even if the person who paid it has collected it from his customers and has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of India, -1981 E.L.T. 468. The Division Bench consisting of Chandurkar J. as he then was and Bhonsale J. after pointing out to the facts of M/s Ogale Glass Works case observed in paras 12 and 13 as under : It is no doubt true that in Ogale Glass Works case the Division Bench declined to grant any relief in respect of amounts recovered prior to December 18, 1972. That was the date on which a representation was made in writing to the Assistant Collector of Central Excise on behalf of the petitioners in that case that no excise duty could be validly levied on packing charges. In the judgment of Deshpande J. he had observed that the counsel for the petitioners in that case was right in contending that the Supreme Court never .considered the inexpediency and justice pin pointed in D. CawasJi Cos case - 1978 E.L.T. (J 154) = A.I.R. 1975 S.C. 813, as themselves being fatal to the claim for the refund, and it was pointed out that in Cawasji s case the Supreme Court had ultimately upheld the order of the High Court refusing to exercise its discretion on the ground of laches. 42. In the Judgment of Mukhi J. the learned Judge seems to have reached a conclusion that the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had not prayed in the earlier writ petition for refund of amounts paid by way of sales for the years 1951-52 to 1965-66 and they gave no reasons before the High Court in the writ petitions against the dismissal of which the appeal was filed, as to why they did not make a prayer for the refund of the amounts paid during the years in question. The main ground on which the dismissal of the writ petitions by the High Court was upheld in paragraph 18 of the judgment of the Supreme Court is as follows : Avoiding multiplicity of unnecessary legal proceedings should be an aim of all courts. Therefore, the appellants could not be allowed to split up their claim for refund and file writ petitions on this piecemeal fashion. If the appellants claim refund earlier could have, but did not, without any legal justification, of the amounts paid during the years in question, in the it writ `petitions, we see no reason why the appellants should be allowed to claim the amounts by filing writ petitions again. In the circumstances of this case, having regard to the conduct of the appellants in not claiming these amounts in the earlier writ petitions without any justification, we do not think we wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision of the Supreme Court in R. Abdul Quader Co. v. Sales Tax Officer - AIR 1964 S.C. 922. In that case the vires of Sections 11(2) and 20(c) of Hyderabad General Sales Tax Act were challenged. In the course of the judgment the Supreme Court observed- If a dealer has collected anything from a purchaser which is not authorised by the taxing law, that is a matter between him and the purchaser, and the purchaser may be entitled to recover the amount from the dealer. But unless the money so collected is due as a tax, the State cannot by law make it recoverable simply because it has been wrongly collected by the dealer. I do not think that the question which arose in our case has been dealt with in Abdul Quader Co. case and the said decision would be of little assistance in deciding the question posed before me. 47. Mr. Sethna, however, submitted that the ratio laid down in the D. Cawasji as also the above mentioned decisions of this Court no longer holds good in view of later decisions of the Supreme Court in Navabganj Sugar Mills, AIR 1976 S.C. 1152, Shiv Shankar Dal Mills v. State of Haryana, AIR 1980 S.C. 1037, and U.P. State Electricity Board, Lucknow v. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... died as the mill-owners had secured an unfair advantage as a result of the Court s order and (3) bank guarantee given by the mill owners as a part of the interim order had to be encashed and there was no question of denying that liability. In my opinion, therefore, the decision in Nawabganj Sugar Mills case turns on its own facts particularly because the main question before the Court in that case was to devise the mode by whether wrong done to the consumers by reason of the judicial order passed in favour of the traders should be remedied. 50. Shiv Shankar Dal Mills, AIR 1980, S.C. 1037, also was not a case of claim for refund of tax and the question of mandate of Article 265 did not arise. In that case the petitioners who were dealers had paid market fees at the increased rate of 3% (raised from original 2%) under the Haryana Act of 1937. The excess of 1% over the original rate having been declared ultra vires by the decision of the Supreme Court in Kewal Krishna v. State of Punjab, AIR 1980, S.C. 1008, became refundable to the respective dealers from whom they were recovered by the market committee. The demand for refund of the excess amount illegally recovered from them not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it lay down that in every case the claim for refund of amount illegally collected should be refused on the ground that the petitioner has or must have passed on his burden to the consumer. 53. Mr. Sethna strongly relied on the decision of the Supreme Court in U.P. State Electricity Board, Lucknow v. City Board, Mussoorie and Others and contended that the view taken by the Supreme Court in that case clearly supports his contention that the High Court in exercise of its discretion under Article 226 should not direct refund if it would result in unjust enrichment of the petitioner. The case before the Supreme Court arose under the Indian Electricity Act, 1910, read with the Electricity (Supply) Act, 1948. The facts of that case were that the City Board of Mussoorie, a local authority as a licensee under the Indian Electricity Act, 1910, used to get bulk supply of electric energy from the Electricity Board from the G.S. Grid and in its turn was distributing it to the customers. By a Notification dated April 24, 1962, issued under Section 46 the tariff payable by the City Board and the other licensees in the Grid was fixed by the Electricity Board. The tariff so fixed, was enhanced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... energy at a lower voltage of 6600 volts when the Grid Tariff had fixed rates for supplying electric energy at 11000 volts. The High Court held that it was open to the Electricity Board to make an additional charge only to the extent of the actual expenditure incurred by supplying electric energy of 6600 volts. The High Court also quashed the Government Order dated April 20, 1968 by which the City Board was permitted to increase the charges payable by the consumers in some respects and subsequent action taken on the above basis. The Division Bench directed the respondents to consider afresh the question of the rates at which electric energy can be supplied. The Supreme Court held that having regard to the provisions of the Act and the facts of the case it would not be proper to reopen the case of the City Board in regard to the period prior to the filing of the writ petition arising on the basis of the alleged invalidity of the Notification dated April 24, 1962, and accordingly refused to grant relief to the City Board for the period till March 30, 1968. The Supreme Court, however, allowed the decision of the High Court to remain only for the period between March 23, 1968, and July ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter giving the local authority a reasonable opportunity of being heard, considers expedient for the purposes of the Act; and the licensee, being a local authority, the provisions of any other law or of any rules made or directions given thereunder notwithstanding, shall give effect to any such directions of the Board or the State Government, as the case may be : Provided that the Board shall not issue any directions under this section except after obtaining the prior approval of the State Government. It is in the light of these provisions and the context in which the observations made by the Supreme Court must be understood. It would be useful to quote the passage from the judgment of the Supreme Court giving the reasons for rejecting the relief to the City Board for the period up to the date of the Writ Petition. The contention relating to the validity of the levy of additional charges could not be raised by the City Board under Article 226 of the Constitution in respect of the period prior to the filing of the Writ Petition. The above additional charge of 7 1/2% was levied in 1962 and the City Board did not question it before the Court till March 23, 1968 when it file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 24, 1962. Hence, we refuse to grant any relief in this regard to the City Board for the period upto the date of the Writ Petition, that is, till March 23, 1968. The above passage would show that the Supreme Court considered the effect of Section 58 of the Act whereunder a local authority is bound to implement the directions issued by the Electricity Board or the Government as the case may be with regard to amortisation and tariff policies. Accordingly, the City Board has been given instructions from time to time by the Government regarding the charges it may collect from the consumers in the light of the charges it has to pay to the Electricity Board and its own investment and expenditure on the undertaking. Further as observed by the Supreme Court, the City Board cannot question the Grid Tariff only without at the same time questioning the directions pursuant to which it has been collecting charges from its consumers. Moreover, the City Board even did not place before the Court the material showing that the charges which were being collected by the City Board from the consumers were uneconomical and did not satisfy the reasonable standards which should govern the direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution would have no application. In my view, the decision of the Supreme Court in that case is distinguishable and turns for its own facts and the relevant provisions of the Electricity Act. It is pertinent to note that D. Cawasji case, the ratio of which has been applied by the High Court in various cases has not been referred to by the Supreme Court in the above-mentioned decision of the Supreme Court. The decision of the Supreme Court in Vallabh Glass Works -1984 (16) E.L.T. 171 (S.C.) (cited supra) shows that if the manufacturer had filed suit within the period of limitation of three years provided for by Article 113 of the Limitation Act, 1963, the excess amount of duty would have been refundable by virtue of Section 72 of the Contract Act and further that the High Courts have power for the purpose of enforcement of fundamental rights and statutory rights to make consequential orders for repayment of money realised by Government without the authority of law and that is an alternative remedy provided by the Constitution in addition to and not in suppression of the ordinary remedy by way of suit and while there are different periods of limitation for institution or diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of the product and not sale of the product and the manufacturer is under an obligation to pay duty whether or not goods are sold or consumed by the manufacturer. When the manufacturer pays duty he pays it on his own account and not as an agent of the possible buyer. In the case of a provisional assessment, the final liability of the manufacturer may not be known till a final assessment is made and this process may be time consuming with the result that the manufacturer cannot recover the excess amount which he is required to pay under the final assessment. The levy of duty can be even retrospective and it is no defence to the manufacturer to say that he cannot recover the duty retrospectively levied from his buyers. Further, there are provisions which confer right on the manufacturer to claim refund of excess duty subject of course to the period of limitation prescribed and there is no power to refuse refund on the ground that the duty has been or may have been recovered by the manufacturer from his customers. Indeed Mr. Sethna did not dispute that notwithstanding the possible unjust enrichment in such a case under the provisions the department cannot deny refund of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h retrospective effect, the manufacturer may not be able to recover the excise amount from the buyer. The fact that the manufacturer has no chance to get the tax from the buyer does not affect the legality of tax. It would thus appear that the scheme of the Act and the Rules show that it is the manufacturer who is bound to pay the duty or make up for a short levy and the manufacturer cannot recover the amount or excess amount from the customer would be no defence to the recovery of duty from the manufacturer. The theory of unjust enrichment is invoked on the basis of justice preventing the manufacturer from retaining a benefit from the customer and at the same time claiming a refund of the amount from the Government. Such a theory would necessarily also invite the application of the countervailing theory of unjust impoverishment and since such a theory of unjust impoverishment cannot apply having regard to the provisions of the Act and Rules framed thereunder as also Article 265 of the Constitution, it was contended that the theory of unjust enrichment cannot be made applicable to the claim for refund of duty recovered from the manufacturer without authority of law. The counsel als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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