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TMI Blog2016 (5) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... 4(2) of the Customs Act, 1962 ('the Act' for short). Case of the petitioner was that at the time of import of the goods by the petitioner, the notification issued by the Government of India, fixing tariff value under section 14(2) of the Act had not come into effect and that therefore, the petitioner was liable to pay duty only in terms of the provisions contained in provision 14(1) of the Act. 3. Since there was no resolution of the dispute between the parties, the petitioner filed Special Civil Application No.9308 of 2002, in which, the petitioner challenged the validity of the notification issued by the Government of India, fixing the tariff value for the commodity in question as also its date of coming into effect. One of the grounds pressed in service by the petitioner was that the notification was not available for sale and was therefore, not in public domain. The High Court by order dated 07.10.2002, while admitting the petition, granted interim relief to the petitioner in following terms: "2 We have heard the learned Advocates on the question of grant of interim relief and after hearing them, it is directed that for clearance of the goods in question, the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the claim is not hit by the principle of unjust enrichment. We are not concerned with the first issue, since, the petitioner subsequently filed a proper application in the prescribed format. Regarding the issue of unjust enrichment in the communication dated 17.06.2015, the authority has conveyed to the petitioner as under: " no documents such as, Balance sheet, Ledgers, P & L Account etc. for the relevant F.Y. wherein the said amount of Refund has been shown as 'receivables', duly certified by the independent Chartered Accountant, have been filed with refund claim to establish that the refund claims is not hit by the principles of unjust enrichment in the present case in terms of section 27(2) read with section 18(5) of the Customs Act 1962." 8. In response to this communication, the petitioner wrote to the Customs Department on 30.06.2015 and contended that the principle of unjust enrichment would not apply. The petitioner relied on various decisions cited in the said communication. 9. Since the department did not pass any order on the petitioner's application for refund, the petitioner filed this petition and prayed that the department be directed to refund t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y such documentary or other evidence as the applicant may furnish to establish that the amount of duty or interest in relation to which such refund is claimed, was collected from or paid by him and the instance of such duty or interest was not passed on to any other person. Subsection (1A) of section 27 thus, codifies the principle of unjust enrichment, under which, an assessee even after succeeding in establishing that levy of duty was illegal, would not be entitled to refund on such duty if he has passed the element of duty to any other person. Under subsection (2) of section 27, upon receipt of an application for refund, if the competent authority finds that the duty paid by the applicant is refundable, he would make an order accordingly. Proviso to subsection (2) of section 27 is in consonance with the provisions of subsection (1A) and lists the instances under which instead of appropriating the duty towards the common fund, the authority would refund it to the applicant. 14. The question of unjust enrichment came up for consideration before the Constitution Bench of Supreme Court in case of Mafatlal Industries v. Union of India, 1997 (5) SCC 536, in which, in the majority opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07.10.2002. Under such interim formula, the petitioner had to furnish bank guarantee for the difference of duty of customs payable under section 14(1) and 14(2) of the Act. The petitioner provided such bank guarantee. The High Court ultimately dismissed the petitions by judgment dated 13.09.2012. By virtue of dismissal of the petitions by the High Court, higher duty in terms of section 14(2) of the Act became payable. When the department therefore, encashed the bank guarantees given by the petitioner, it was towards this duty liability which had arisen by virtue of the judgment of the High Court. In plain terms, therefore, it was recovery of the duty payable. The fact that it was unilaterally done by the department and unwillingly suffered by the petitioner is of no consequence. Contrary to what is canvassed before us by the counsel for the petitioner, the encashment of the bank guarantees was no longer in the form of a security. The bank guarantees were undoubtedly securities to safeguard the interest of the Revenue but, once the High Court dismissed the petitions and vacated the interim relief, the duty became payable as on that date. Encashment of the bank guarantees by the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the interim orders of the Supreme Court, were not refundable having regard to the provisions of section 11(B) of Central Excises & Salt Act 1944. In the meantime, since the bank guarantees were not renewed, the department issued upon the bank a demand, pursuant to which, the bank guarantees were encashed. The Supreme Court had however, passed an order declaring that the directions of the High Court to extend the bank guarantee once the appeal was allowed by the Supreme Court was not legal and had directed the Excise authorities to repay the amount to the bank. In said background, the question of unjust enrichment was discussed by the Supreme Court in the following manner. "8. The judgment in the case of Jain Spinners applies to a case where excise duty has been deposited in court pursuant to an interim order and has been withdrawn by the excise authorities. In such a case, clearly, the assessee has to make an application for refund and to such a case, therefore, the provisions of section 11B squarely apply. 9. section 11B applies when an assessee claims refund of excise duty. A claim for refund is a claim for repayment. It presupposes that the amount of the excise duty has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to repay to the State Bank of Patiala, Overseas Branch, Millar Ganj, Ludhiana, the amount of Rs. 1,18,00,000/collected upon the bank guarantees within two weeks." 18. It can thus, be seen that in the said case of Oswal Agro Mills Ltd. (supra) while recognizing that the concept of unjust enrichment would apply to the case where excise duty was paid in the Court pursuant to the interim order passed by the Court and which was withdrawn by the Excise authorities, in facts of the said case, it was held that for encashment of the bank guarantee, said principle could not be applied. We may recall, it was a case where the Supreme Court had already allowed the appeal of the assessee, despite which, the Punjab and Haryana High Court had directed the assessee to extend the bank guarantee. The Supreme Court declared such directions as bad in law. However, since the assessee had not extended the bank guarantee, the department by writing to the bank, had recovered the amount of bank guarantee and it was in this background that the Supreme Court refused to review its earlier order of directing refund of the amount of bank guarantee. Significantly, in this case, the encashment of the bank guaran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the court is not equivalent to payment of excise duty. It is also held that section 11B applies when an assessee claims refund of excise duty. A claim for refund is a claim for repayment. It presupposes that the amount of the excise duty has been paid over to the excise authorities. The amount of disputed tax or duty that is secured by a bank guarantee cannot, therefore, be held to be paid to the revenue. Therefore, the question of refund under section 11B is not attracted." 21. To this proposition, particularly, when the Court observed that the amount of disputed tax or duty that is secured by a bank guarantee, cannot be held to be "paid" to the Revenue, we are in respectful agreement. However, these observations were made in the background of the facts where the High Court had directed the assessee to furnish bank guarantee for the differential duty. The writ petition was ultimately dismissed on the ground of alternative remedy. While doing so, the Court directed the assessee to keep the bank guarantee alive till the matter was decided by the Commissioner, (Appeals). After the Commissioner, (Appeals), dismissed the appeal, the department encashed the bank guarantee. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such amount is not paid as duty but has been paid by some interim orders in some proceedings by the Court as predeposit then it is not treated as duty. The endeavour of the appellant is to submit that the aforesaid amount of Rs. 23,98,178/was also a predeposit and, therefore, the High Court has committed error in not directing the refund thereof. 8. We are unable to accept the aforesaid submission. On the facts of the case, as is pointed out above, it is only Rs. 17.50 lakhs which was deposited by the appellant pursuant to the interim orders of the Court. The Court had directed the appellant to deposit Rs. 70 lakhs. As far as the balance amount is concerned that could not be deposited. It resulted in vacation of the stay order. Thus, once the stay order was vacated, it was open to the Department to recover the amount of duty which was payable as per the orders passed at that time. The amount was, thus, recovered on eacashment of the Bank Guarantee by the Department and it was on the basis of the order passed by the Court. The Court had, after vacating the stay order, only permitted the Department to encash the Bank Guarantee. 9. We, thus, are of the opinion that as far ..... X X X X Extracts X X X X X X X X Extracts X X X X
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