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TMI Blog2020 (1) TMI 1654X X X X Extracts X X X X X X X X Extracts X X X X ..... g refund or the instance of such duty had not been passed on by him could the refund be sanctioned. In Mafatlal [ 1996 (12) TMI 50 - SUPREME COURT ], the provision was held to be constitutionally valid, operating only prospectively. Thus, the test of unjust enrichment was held to apply only to those applications for refund filed prior to the date of amendment that were yet pending. In the petitioners' case, the applications had been accepted by the CEGAT even prior to the date of amendment to Section 11B. The order is dated 06.06.1989, prior to amendment to Section 11B of the Act bringing into play the concept of unjust enrichment. With the appeal coming to be allowed, the refund became automatic, as a necessary incident of success in appeal. The subsequent litigation was on the question of whether there was unjust enrichment in the hands of the petitioner - the impugned order applying the provisions of Section 11BB to the facts and circumstances of this case, and granting statutory interest only for the period 26.08.1995 to 23.02.2004 does not take into account the facts and circumstances in proper perspective, either factually or legally. The entitlement of the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. 07.11.1975 01.01.1975 to 30.06.1975 35,81,156.41 6. 28.01.1976 01.07.1975 to 30.09.1975 32,38,787.47 7. 28.01.1976 01.07.1975 to 30.09.1975 62,67,849.69 TOTAL 2,63,69,322.06 2. The adjudicating authority rejected the claims for refund vide orders dated 16.10.1979 and 07.03.1980 and an appeal filed against the same was rejected by the Collector (Appeals), Madras, on 01.12.1980. A second appeal filed before the Customs, Excise and Gold (Control) Appellate Tribunal (in short 'CEGAT') upon transfer of a revision application from the Additional Secretary of the Government of India, was allowed on 06.06.1989 in the following terms: 5. We have carefully considered the submissions made by the learned Sr. Counsel and the learned Jt. C.D.R. It is seen that the impugned order of the Appellate Collector was passed in 1981 before the law regarding valuation was settled by the Supreme Court's decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the Collector to implement the order on or before 10.10.1991 and report compliance failing which, the personal attendance of the Commissioner before the Bench was directed on 21.10.1991. There was no compliance by the Commissioner, but instead a request for extension of time that the Tribunal accepted, extending the time for compliance till 15.11.1991, compliance to be reported on 22.11.1991. 4. Around this time, Section 11B of the Central Excise Act 1844, (in short Act ) was amended bringing into application the principle of unjust enrichment, with effect from 20.09.1991. 5. In the meantime, the petitioner moved the Delhi High Court with W.P. No. 3225 of 1991, praying for a direction to the authorities to implement the order of the Tribunal dated 06.06.1989. The High Court, vide order dated 18.07.1995, directed the petitioners to appear before the authorities for examination of the issue of grant of refund in the light of the amendment to Section 11 B of the Act. 6. As against the aforesaid direction, a Review Petition was filed before the High Court that confirmed its earlier direction. After enquiry as ordered, the authority passed order-in-original dated 28.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cific question raised was answered in the negative i.e in favour of the petitioner and against the Department. 11. Applications for rectification of mistake and seeking stay were dismissed by the CEGAT by order dated 22.02.2000. As against the aforesaid order, a reference application was filed by the Revenue before the Delhi High Court and as against the rejection of the application seeking stay, a Writ Petition was filed by the revenue that came to be allowed by the High Court on 19.12.2000. The Court directed the Tribunal to consider the stay petition filed by the revenue and the same came to be dismissed by the Tribunal on 20.09.2002. The aforesaid order was also challenged by way of Writ Petition, that came to be dismissed on 02.04.2003. A Special Leave Petition challenging the aforesaid order was considered by the Supreme Court and by order dated 09.01.2004 the Bench held as follows: We see no reason to interfere save and except that the respondent is directed to file an undertaking in this Court within two weeks from today, that in the event of the appellant's succeeding finally in the reference proceedings, they shall return the amount with interest at such rate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GSTR 516], the petitioner claims interest in terms of Section 11B only from 26.08.1995, notwithstanding that the provision came into force from 26.05.1995. 17. According to the petitioner, it is entitled for interest under general principles from date of refund claims/applications, i.e. 1973 to 1995 and 26.08.1995 to 23.02.2004 and compensation for non-payment of interest as aforesaid for the period from dates of claim (1973-76) till date of payment. 18. Mr. Venkatraman, learned Senior Counsel appearing for Mr. S.P. Maharajan, learned counsel for the petitioner justifies the claim for interest stating that the assessee has been successful in regard to the issue of payment of duty on equalized freight charges by virtue of order passed on 06.06.1989; and there has been inordinate delay in issuing the refund legally due to it entitling it for interest and compensation for the loss of capital from the period 1973-76 till date. 19. He relies on the following case-law: i) Sandvik Asia Ltd Vs. Commissioner of Income Tax-I, Pune (2006(196) E.L.T 257 (SC) ii) Gujarat Fluoro Chemicals V. Commissioner of Income Tax (Special Civil Application No.12855 of 1994 dated 03.07.2007) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be inequitable if the assessee does not get interest on the amount of advance tax paid, when the amount paid in advance is refunded pursuant to an appellate order. This is not a question of equity. There is no right to get interest on refund except as provided by the statute. The interest on excess amount of advance tax under Section 214 is not paid from the date of payment of the tax. Nor is it paid till the date of refund. It is paid only upto the date of the regular assessment. No interest is at all paid on excess amount of tax collected by deduction at source. Before introduction of Section 244(1A) the assessee was not entitled to get any interest from the date of payment of tax upto the date of the order as a result of which excess realisation of tax became refundable. Interest under Section 243 or Section 244 was payable only when the refund was not made within the stipulated period upto the date of refund. But, if the assessment order was reduced in appeal, no interest was payable from the date of payment of tax pursuant to the assessment order to the date of the appellant order. 24. A Division Bench of the Supreme Court in Union of India and Another Vs Shreeji Colour I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 11 has been passed by CEGAT in appeal only on 15-12-2002, but as the application to claim refund has been filed much earlier before the date when it was required to be filed and the amount having not been made within three months from the date of application, the applicant became entitled to interest with effect from the such date on principal amount to be refunded to him ultimately pursuant to an order made under Section 11B at the rate notified by the Board from time to time, with effect from the date of expiry of three months from the date of application until date of payment of arrears of amount of excess Duty to Consumer Welfare Fund. 40. Since we have noticed above that prior to insertion of Section 11BB there was no statutory provision providing for interest on refund of amount of excess Duty if not paid within a specified date, there is no statutory provision providing for interest on non refund of amount of excess duty within a specified period or on specified date until insertion of Section 11BB. In the absence of any statutory provision for payment of interest no mandamus could be issued for payment of interest for the period prior to one provided in Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. ...... 45. The facts and the law referred to in paragraph (supra) would clearly go to show that the appellant was undisputably entitled to interest under Sections 214 and 244 of the Act as held by the various High Courts and also of this Court. In the instant case, the appellant's money had been unjustifiably withheld by the Department for 17 years without any rhyme or reason. The interest was paid only at the instance and the intervention of this Court in Civil Appeal No. 1887 of 1992 dated 30.04.1997. Interest on delayed payment of refund was not paid to the appellant on 27.03.1981 and 30.04.1986 due to the erroneous view that had been taken by the officials of the respondents. Interest on refund was granted to the appellant after a substantial lapse of time and hence it should be entitled to compensation for this period of delay. The High Court has failed to appreciate that while charging interest from the assesses, the Department first adjusts the amount paid towards interest so that the principle amount of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensure proper and adequate compensation to the assessee for inordinate delay in granting refunds. At paragraphs 5 to 7 of the judgement, the Bench notes the introduction of Section 244A in the Income tax Act providing for statutory interest on refunds under various contingencies and clarifies that only such interest, provided for under statute, may be claimed by an assessee and none other. However, this does not tie the hands of the Court in considering whether, in a case where inordinate delay in effecting refund is established by an assessee, compensation may be ordered for the loss of capital. A categoric distinction is made between a statutory claim of interest and a claim of compensation in law. 30. In my considered view, the issues in this writ petition stand settled by the judgement of the Supreme Court in Gujarat Fluoro Chemicals (supra). 31. The decisions cited by the revenue do not advance their case, as the claim for interest in the present case for the periods prior to insertion of Section 11BB, is considered solely as a measure of compensation, in the light of the admitted facts relating to the substantial, and, in my view, unjustified periods of delay. 32. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to refund and, in particular, Section 11B(2) and (3) as amended in 1991 cannot apply to: 1. 'Refund' made or due as per orders passed by Court, in a suit or in a petition under Article 226 of the Constitution of India, which have become final. 2. refunds ordered by the statutory authority concerned which have become final. It is obvious that in such cases no application can or will be deemed to be pending on the date of the commencement of the Amendment Act. No application praying for refund is to be filed in such cases, either. No further probe, regarding the requisites for obtaining refund specified in the Amendment Act, 1991, is called for in such cases. The above aspects are fairly clear. Section 11B(2) and (3) cannot be made applicable to refunds already ordered by the court or the refund ordered by the statutory authorities, which have become final. It follows from a plain reading of Section 11B, Clauses (1) (2) and (3) of the Act. The provisions contemplate the pendency of the application on the date of the coming into force of the Amendment Act or the filing of an application which is contemplated under law, to obtain a refund, after the Amendme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are no merits in this Reference as the question involved is clearly settled by the 9 Judge Bench decision of the Supreme Court in Mafatlal Industries Ltd and Ors. v. Union of India and Ors. . What has been laid down therein is that if an application for refund has been disposed off, and the order had become final before the 1991 amendment to Section 11B came into force, the principle of unjust enrichment will not apply. 11. It may be mentioned that the main judgment in the case was delivered by Hon'ble Mr. Justice B.P. Jeevan Reddy, who held on behalf of himself and also on behalf of Hon'ble Mr.Justice J.S. Verma, Hon'ble Mr. Justice S.C. Agrawal, Hon'ble Mr. Justice A.S. Anand and Hon'ble Mr. Justice B.N. Kirpal. Since the judgment of Hon'ble Mr. Justice B.P. Jeevan Reddy amounts to a judgment of five Hon'ble Judges in a 9 Judge Bench, hence it is the majority judgment and anything inconsistent with that judgment in the judgment of other Hon'ble Judges has to be disregarded. 12. Thus in para 57 of his judgment Hon'ble Mr. Justice B.P. Jeevan Reddy observed:- Page 0008 The first decision of this Court to consider the amended Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application which is contemplated under law to obtain a refund after the Amendment Act comes into force. I am of the opinion that if the said provisions are held applicable, even to matters concluded by the judgments or final orders of courts, it amounts to stating that the decision of the court shall not be binding and will result in reversing or nullifying the decision made in exercise of the judicial power. The legislature does not possess such power. The court's decision must always bind parties unless the condition on which it is passed are so fundamentally altered that the decision could not have been given in the altered circumstances . 15. The same view has also been expressed by Hon'ble Mr. Justice S.C. Sen in para 255 of the judgment which states:- Page 0009 I shall now examine the other provisions of the newly-added sections. Sub-section (1) of Section 11B requires an application for refund to be made. Sub-section (2) requires the Assistant Commissioner to pass an order of refund provided the conditions set out therein are fulfillled. Subsection (3) merely lays down that no refund shall be made except as provided in Sub-section (2). There is a non obst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation was on the question of whether there was unjust enrichment in the hands of the petitioner. I shall refer to this, for sake of convenience, as the second limb of litigation. It is this second limb of litigation that travelled in appeal all the way to Supreme Court, finally being decided in favour of the petitioner. In my considered view, the petitioner became entitled to the refunds on 06.06.1989 and there is no justification whatsoever for the delay occasioned thereafter. 39. In the light of the narration as set out above, I am of the considered view that the impugned order applying the provisions of Section 11BB to the facts and circumstances of this case, and granting statutory interest only for the period 26.08.1995 to 23.02.2004 does not take into account the facts and circumstances in proper perspective, either factually or legally. 40. Dehors the rigour of Section 11BB, an assessee is always entitled to seekrecompense for inordinate delay in the grant of refunds. The nine Judge Bench in the case of Mafatlal (supra) has referred to availability of alternate remedies, in cases where the assessee is in a position to establish unjustified inordinate delay and procrast ..... X X X X Extracts X X X X X X X X Extracts X X X X
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