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TMI Blog1981 (9) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the legal and factual position, the petitioner used to declare that its products fall under Central Excise Tariff Item 1-D(1) (a) and paid 26 paise by way of excise duty per bottle. The products Coca Cola and Fanta factually and legally would only come under Central Excise Tariff Item 1-D(2) and not under 1-D(1) (a) and by virtue of a notification bearing No. 56/76, Central Excise, dated 16-3-1976, the duty to be payable was only 10 per cent. The mistake was discovered only later and Mr. B.R. Dolia, learned Counsel for the petitioner, states that the mistake was discovered only after the judgment of the Bombay High Court in W.P. 944 of 1973, - Messrs Duke Sons Ltd. v. Superintendent, Central Excise, dated 8/11-10-1976. For the period from 26-7-1976 to 16-6-1977, the petitioner made a claim for refund. The second respondent rejected even that claim by order dated 24-11-1977, though the claim was within time. Aggrieved by that order, the petitioner preferred an appeal before the Appellate Collector of Customs and Central Excise, Madras and the said appeal was also rejected by order dated 16-3-1979. The petitioner preferred a revision before the first respondent, challenging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng indeed. With regard to the first contention that the petitioner is estopped from making a claim for refund, I think this stand of the respondents cannot be countenanced in view of the position in law, which must be deemed to be settled by judicial pronouncements. In Sales Tax Officer v. Kanhaiyalal - AIR 1959 SC 135, the Supreme Court laid down the law as follows :- "The term `mistake' used in S. 72, Contract Act has been used without any qualification or limitation whatever and comprises within its scope a mistake of law as well as a mistake of fact. There is no warrant for ascribing any limited meaning to the word 'mistake' as has been used therein. There is no conflict between the provisions of S. 72 on the one hand and Ss. 21 and 22 of the Contract Act on the other. The true principle is that if one party under a mistake whether of fact or law, pays to another party money which is not due by contract or otherwise that money must be repaid. The mistake lies in thinking that the money paid was due when in fact it was not due and that mistake, if established, entitles the party paying the money to recover it back from the party receiving the same." 4. In State of Madhya Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26 of the Constitution Where a tax is levied by mistake of law, it is ordinarily the duty of the subject to any provision in the law relating to Sales Tax, to refund the tax. No question of estoppel would arise when the mistake of law is common to both the parties. If refund is not made, remedy through court is open subject to the same provisions, if any, and the period of limitation namely three years from the date when the mistake becomes known to the person". 6. A similar view has been taken recently by a Division Bench of this court consisting of Ramanujam, J. and Sengottuvelan J. in Durga Shankar Industries v. Govt. of lndia - 1979 E.L.T. 227, with reference to excise duty wrongly collected under the Customs Act, 1962 and the Bench pointed out that if the excise duty collected from the petitioner was without the authority of law and was contrary to the statutory exemption notifications issued under S.25 of the Customs Act, 1962, it was refundable irrespective of the time limit laid down in S. 27 thereof. 7. V. Ramaswami, J. in Messrs Parry Confectionary Ltd. v. Govt. of India - 1980 E.L.T. 468, also countenanced the position that the party will be entitled to refund of exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obliges me to reject the first contention put forth on behalf of the respondents. 9. The second contention urged, as stated above, is that refund of excise duty, though wrongly collected by the Department, would only go to unjustly enrich the petitioner and that this court should not lend its hand to aid that result. This contention is being expatiated by pointing out that the petitioner had already reimbursed itself from its consumers and purchasers the excess excise duty now claimed by way of refund. It is worthwhile to note the judicial precedents which have dwelt on this aspect, so that it would enable this court to deduce the correct principle that should be applied to the facts of the present case. 10. In D. Cawasji and Co. v. State of Mysore, AIR 1975 S.C. 81319 = 1978 E.L.T. (J 154), the appellant contended before the High Court that the payment of cess in question was made by it under a mistake of law and it discovered the mistake only subsequently when the High Court, by its judgment, declared the provisions of the concerned statutes tax and the amendments thereto as unconstitutional and it filed the writ petitions within three months after the decision and hence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally held that in the absence of a statute to the contrary, taxes voluntarily paid under a mistake of law with full knowledge of facts cannot be recovered back while taxes paid under a mistake of fact may ordinarily be recovered back (See Corpus Juris Secundum volume 84, page 637). Although S. 72 of the Contract Act has been held to cover cases of payment of money under a mistake of law, as the State stands in a peculiar position in respect of taxes paid to it, there are perhaps practical reasons for the law according a different treatment both in the matter of the heads under which they could be recovered and the period of limitation for the recovery. 12. The task of writing legislation to protect the interest of the Nation is committed to Parliament and the legislatures of the States. We are referring in this aspect only to alert their attention to the present state of law." (page 815) The observations in paragraph 10 of the above judgment clearly indicate that the court could not deny refund of tax even if the person who has paid it has collected it from the customers and there is no subsisting liability or intention to refund it to them or for any reason, it is impracticabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d really belongs to the consumers and not to the petitioners, then the court will be justified in refusing to grant refund because it will result in an unjust enrichment of the petitioners by having the benefit of both collection of excise duty from the consumers and the benefit of refund from the Government. The learned Judges referred to two pronouncements of the Federal Court for holding that excise duty, in its nature, is an indirect tax to be borne ultimately by the consumer. They also referred to and relied on three pronouncements of the Supreme Court for holding that excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country and it is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, that is, its ultimate incidence will always be on the consumer. So far as this proposition goes, the ratio of the Division Bench presents no difficulty. The learned Judges of the Division Bench referred to the judgment of the Supreme Court in Orient Paper Mills Ltd. v. State of Orissa - 1962(2) SCR 549, for ultimately holding that the court can refuse refund on the principle of unjust enrichment. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund it to them, or, for any reason, it is impracticable to do so." The above is the law declared by the Supreme Court of India and it is binding on me in preference to the ratio of the Division Bench referred to above. 14. There was a vague suggestion put forth on behalf of the respondents that the above observations cannot be stated to be the ratio of the Supreme Court, but can only be characterised as 'obiter'. I am not able to countenance this suggestion. In Dalbir Singh v. State of Punjab, AIR 1979 SC 1384, the Supreme Court delineated three essential ingredients that would go to constitute a precedent, so as to be a law declared under Art. 141 of the Constitution of India. The second ingredient countenanced by the Supreme Court is 'Statements of the Principles of law applicable to the legal problems disclosed by the facts'. In D. Cawasji and Co. v. State of Mysore, AIR 1975 SC 813 = 1978 ELT (J 154), the Supreme Court was considering the principles that should govern refund of cess collected under a mistake of law. I have no ambiguity in my mind, the observations of the Supreme Court culled out above do pronounce a precedent so as to be binding on this court. Even if we t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n authority for the converse proposition. The Division Bench of the Bombay High Court took note of one salient factor and in my view, a very relevant and convincing factor and that is, if the petitioner had to file a civil suit and if it established that excise duty outside the Act has been recovered, the question as to whether they have passed on the burden to the consumer or not would not have been a relevant factor at all for deciding the liability of the department to refund the duty wrongly collected. It is very doubtful that the position would stand altered merely because resort has been made to the process under Art. 226 of the Constitution of India. 17. Padmanabhan, J. in Standard Batteries Ltd. v. Appraiser, Appraising Deptt., 1981 E.L.T. 257, was obliged to follow the ratio of the Division Bench in Madras Aluminium Co. Ltd. v. Union of India, 1981 E.L.T. 478, to which he was a party and held that the duty paid under a mistake of law will not be refunded to the petitioners therein, but will be refundable to the assessee who have borne the excise duty liability. 18. In Wipro Products Ltd. v. Union of India, 1981 E.L.T. 531, a Division Bench of the Bombay High Court cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. K.M. Balasubramaniam, learned Counsel for the respondents, relies on the dictum of the Privy Council in Shiva Prasad Singh v. Srishchandra Nandi, 1949-2-MLJ 657, that it cannot be stated that every sum paid under a mistake is recoverable, no matter that the circumstances may be and there may, in a particular case, be circumstances which disentitle a plaintiff by estoppel or otherwise. But the question that has arisen for consideration in the present case is as to whether the ground of unjust enrichment could be put against the normal process of refund of duty paid under a mistake of law. The decision of the Privy Council does not provide an answer for this. 22. Learned Counsel for the respondents drew my attention to the Supreme Court in Nawabganj Sugar Mills v. Union of India, 1976 (1) SCC 120. On going through the judgment I find that it does not provide an answer for the issue that has arisen in this case. The Supreme Court was dealing with a case where under cover of the order of stay, on bank guarantee for the excess price having had been furnished to the court, the appellants therein sold sugar at free market rates and ultimately the court upheld the control of prices, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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