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TMI Blog1981 (11) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... s sold the cigarettes manufactured by them to such sole distributors, who in turn sold them to wholesale dealers. Such wholesale dealers would sell the cigarettes to ordinary retailers, who would finally sell them to consumers. The number of such distributors appointed by the Petitioners has varied from time to time but has been generally more than 200. According to the Petitioners, none of these distributors were in any way financially or otherwise related to or connected with the Petitioners or any member of the family of any of the directors of the Petitioners. This fact is not disputed by the Respondents. In 1958 the Petitioners desired to know whether the excise duty payable on cigarettes manufactured by them was to be calculated on the basis of the prices received by the Petitioners from their distributors or on any other basis. The Petitioners accordingly approached the Assistant Collector of Central Excise at Bombay for a clarification on this issue. By his letter dated December 17, 1958 the said Assistant Collector referred the Petitioners to the provisions of Section 4 of the said Act and stated that what was relevant for the purpose of determining the wholesale cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, had submitted price-lists showing in them as the assessable values the prices received by them from their sole distributors and that such price-lists of the said Godfrey Phillips Limited, were going to be approved by the concerned Assistant Collector. Paragraph 11 of the Petition further avers that it was on or about August 25, 1972 that the Petitioners came to know this fact for the first time. The Petitioners thereupon took legal advice, and the legal advice given to them was that the stand of the excise, authorities, as mentioned in the said letter dated December 17, 1958, was not justified or correct in law and that on a true construction of the said Section 4 the excise authorities were bound to take into consideration the prices received by a manufacturer even from a sole distributor, such prices being the wholesale cash price within the meaning of that expression in the said Act, even though such sole distributor was purchasing manufactured goods under an agreement with the manufacturers. In the said paragraph 11 of the Petition it is further averred that "as soon as they (that is, the Petitioners) became aware that there was some doubt as to the stand consistently adopte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of 18 months, that is, for six months more, on the ground that the assessment of their cigarettes had not been finalized since March 1972, and contended that they were, therefore, entitled to refund for a period of one year prior to March 1972. The Assistant Collector of Central Excise rejected the Petitioners' said claim by his order dated February 25, 1974 on the ground that the assessments had been made on the basis of the assessable value declared by the Petitioners and as approved by the Department and by following the prescribed procedure. The Petitioners thereupon filed an appeal to the Appellate Collector of Central Excise. The Appellate Collector by his order dated September 17, 1974 allowed the Petitioners' appeal and set aside the order passed by the Assistant Collector. By a notice dated March 13, 1975 given by the Joint Secretary to the Government of India, Ministry of Finance, the Central Government called upon the Petitioners to show cause why the said order of the Appellate Collector should not be reviewed and set aside. By its order dated July 5, 1975 the Central Government upheld the order of the Appellate Collector so far as it related to refund of duty paid on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition filed by the Indian Tobacco Company Limited. 6. The present Petition was filed by the Petitioners on August 11, 1975. In this Petition the Petitioners have asked for a declaration that the assessable value of the cigarettes manufactured by them should be determined on the basis of the prices recovered by the Petitioners from their distributors after excluding therefrom the post-manufacturing expenses, and for a further declaration that the assessment orders of the excise authorities purporting to determine assessable basis contrary to the above basis are ultra vires and a nullity. The Petitioners have also asked for a writ of certiorari or other appropriate writ or direction to quash the assessment orders from March 1, 1965 to August 31, 1972 and for directions to the Respondents to act in accordance with law on the correct basis of valuation under Section 4(a) of the Central Excises and Salt Act, 1944, and not according to the said assessments made and the payments made under a mistake of law. The Petitioners have also asked for a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ direction or order under Article 226 of the Constitution d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Petitions in August 1972, that is, more than three years prior to the date of the filing of this Petition. A yet further contention of the Respondents was that the Petitioners knew in 1958 that there were two basis for assessing duty, namely, on the basis of the prices charged by the Petitioners to their distributors and on the basis of the prices charged by the Petitioners' distributors to wholesalers, and, therefore, they should have filed a writ petition for refund in 1958. It was further submitted on behalf of the Respondents that the mistake of law, if any, came to the knowledge of the Petitioners not when the Supreme Court delivered the judgment in the Voltas' case but when the Bombay High Court, from whose judgment the said appeal to the Supreme Court had been filed, delivered its judgment, namely, on August 14, 1970. The final submission on behalf of the Respondents was that even if the Writ Petition were within time, the Court should not grant any relief to the Petitioners because the Petition raised serious disputed questions of fact and suffered from insufficiency of particulars and pleadings. 9. Before dealing with the merits of the rival submissions advanced a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssrs Amco Batteries (P) Ltd., Bangalore v. Assistant Collector, Central Excise, Bangalore and Another, A.I.R. 1963 Mysore 216 = 1979 E.L.T. (J 451). In Messrs Queen's Chemists Mfg. Department v. G. Koruthu, (1966) 68 Bom. L.R. 597, Tarkunde, J., sitting singly, held that in determining the value for the purpose of Section 4(a) of the Central Excises and Salt Act, 1944, the higher wholesale price charged by the distributors to the wholesale traders had to be considered and not the wholesale price charged to the distributors by the manufacturers. In arriving at this conclusion Tarkunde, J., followed the judgments of the Calcutta and Mysore High Courts, above referred to. The judgment of Tarkunde, J., was delivered on March 10, 1965. The same view was taken by the Andhra Pradesh High Court in The Union of India v. Vengunta Suryaprakasa Rao and Another, A.I.R. 1967 A.P. 281. In Collector of Central Excise and others v. Shankarlal Agarwalla and Dinanath Agarwalla, A.I.R. 1968 Cal. 154, the view of the learned Single Judge of that High Court in National Tobacco Co.'s case was approved. The same view was taken by the Gujarat High Court in S.C.A. No. 1219 of 1966 decided on March 30, 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... himself. It was held that the word `wholesale' in the phrase "wholesale cash price" in clause (a) had not the meaning of price for bulk sales and quantitative sales and that sales by manufacturers to consumers in large quantities and at price which might in common parlance be described as wholesale prices could not be held to be at `wholesale cash price" within the meaning of clause (a) of the said Section 4. The Division Bench dissented from the view taken by the Calcutta High Court in National Tobacco Co.'s case. This was then the first case in which a view different from that of the Calcutta High Court in National Tobacco Co.'s case was taken by any High Court. Whether by this judgment it can be said that the position in law, so far as is material to the controversy in this Petition, was made clear and the Petitioners could with reasonable diligence have discovered this is a matter which I will discuss later. The Department went in appeal to the Supreme Court against the decision of the Bombay High Court. The decision of the Supreme Court is reported as A.K. Roy and Another v. Voltas Ltd., A.I.R. 1973 S.C. 225 = 1977 E.L.T. (J 177). The judgment of the Supreme Court was pronounc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the relevant period, sold by them in wholesale units to two wholesale buyers only. These two buyers in their turn resold the goods purchased by them from the appellants to textile mills and large consumers and to distributors. The price which was charged by the appellants to the two buyers was a uniform price described as the basic selling price less a trade discount of 18%. When these two buyers sold the goods to textile mills and other consumers, the price they charged as the basic selling price was without any discount, but so far as their sales to distributors were concerned, they were at a higher price, though with trade discount. The distributors in their turn resold the dye-stuffs purchased by them from the two wholesale buyers to small consumers at a slightly higher price called "small consumers price". No discount was given by the distributors to the small consumers. The question which arose for determination was how the value of the dye-stuffs manufactured by the appellants should be determined. The appellants contended before the excise authorities that the value of the dye-stuffs manufactured by them should be taken to be the price at which the appellants sold the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llected by them contrary to law for any period which was beyond the period of limitation provided by the said Rule 11. In Associated Bearing Company Limited v. Union of India and Another 1980 E.L.T. 415 a Division Bench of this High Court consisting of Chandurkar and Kotwal, JJ., held that the jurisdiction of the Central Excise Authorities was to recover duty according to law, and, therefore, if any duty was recovered on post-manufacturing expenses or on a price which was not permissible in law, such a levy clearly amounted to exercising excess of jurisdiction or acting without jurisdiction and could not be held merely to be an error of jurisdiction and it, therefore, could not be construed as resulting from any error or misconstruction as contemplated by the said Rule 11. The Division Bench further held that once the recovery of excise duty by the Excise Department was held to be illegal, the provisions of Rule 11 would not be attracted and a claim for such refund could be entertained within three years from the date when the mistake of law was discovered. The Division Bench further held that the claim of refund of duty illegally recovered by the Department could be entertained ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etent Court to be invalid in law, the payment of tax already made was one made under a mistake within the meaning of Section 72 of the Indian Contract Act, 1872, and, therefore, the Government to whom such payment had been made by mistake must in law repay it. The Supreme Court further held that in this respect the High Court has, in exercise of its jurisdiction under Article 226 of the Constitution, power of 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. The Supreme Court further held that at the same time the special remedy provided by Article 226 of the Constitution was not intended to supersede completely the modes of obtaining relief by an action in a civil Court or to deny defence legitimately open in such actions. The Supreme Court further held that though the Limitation Act did not as such apply to the granting of relief under Article 226 of the Constitution, the maximum period fixed by the Legislature as the time within which the relief by way of a suit must be brought might ordinarily be taken to be a reasonable standard by which dela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had approached the Court within six months of the discovery of that mistake and there was, therefore, no delay and the Petition should be allowed. Bachawat, J., on the point of limitation, held that the extraordinary remedies under the Constitution were not intended to enable the claimant to recover moneys, the recovery of which by suit was barred by limitation, and that the Supreme Court should act on the analogy of the statutes of limitation in respect of a claim under Article 32 of the Constitution. On the merits he held that the case before the Supreme Court was not the case of a payment made under a mistake of law and the Petition should, therefore, be dismissed. On the point of limitation, Mitter, J., took the same view as Hidayatullah, C.J. did. He also agreed with Hidayatullah, C.J., and Bachawat, J., that the petition should fail as it was filed beyond the period of limitation. Hegde, J., however, held that the Limitation Act could not be made to apply directly to litigations under Article 32 of the Constitution and that a relief asked for under Article 32 could not be refused on the ground of laches. 13. The next decision of the Supreme Court on the point is M/s. D. Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd just to the citizens and the State should not seek to defeat the legitimate claims of citizens by adopting a legalistic attitude but should do what fairness and justice demands. Decisions of several High Courts were also cited before me, but in view of the above pronouncements of the Supreme Court I do not think it necessary to refer to them. 16. The position which emerges from the above decisions of the Supreme Court is that though the Limitation Act does not directly apply to writ petitions, the Court in judging whether a petition should be disallowed on the ground of gross delay or laches would take into account the period of limitation, were a suit filed for the same relief. If the petition were filed beyond the prescribed period of limitation for a suit, the Court would ordinarily hold the Petitioner guilty of delay and would not grant his petition. Even where the petition were presented within the period of limitation prescribed for a suit, in the special circumstances of a particular case the Court might refuse to exercise its discretion and grant relief to the Petitioner. In the special circumstances of a case the Court might interfere in the exercise of its writ juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er this is the case of payment under coercion or under a mistake of law or a payment made without any misapprehension of legal rights. In order to make out a case that there were payments made under coercion, certain submissions made in the Petition were relied upon. To refer to these submissions in a manner in which it was sought to be done at the Bar is to tear these particular averments out of the context and to seek to make out as if it was the only basis upon which the Petition was founded. If one reads the petition in full and in a fair manner it is obvious that the main ground upon which the Petitioners have proceeded is that these were payments made under a mistake of law and that the further submissions that they were made under coercion and compulsion by reason of the coercive machinery of the Central Excises and Salt Act, 1944, are really alternative submissions. This is amply clear when we turn to prayers (c) and (d) of the Petition, in which also these payments have been described as payments made under a mistake of law and not as payments made under coercion. There could be no coercion in making payment according to law. Every citizen who pays taxes which are lawfully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his legal rights", to use the words of Mitter, J., in Tilokchand Motichand's case, the passage in which these words occur being the one relied upon strongly by the Respondents in support of this contention. That the view which the Department and the different High Courts had taken was not the correct view came only to be known when the Voltas's case and the Atic's case were decided. Till then both the petitioners and the Department were under a misapprehension as to what the correct legal position was. In The State of Kerala v. Aluminium Industries Ltd., (1965) 16 S.T.C. 689, it was held that there is no question of estoppel when the mistake of law is common to both the parties and that in such a case where tax is levied by mistake of law, it is ordinarily the duty of the State to refund the tax. These payments, therefore, can only be characterized as payments made under a mistake of law. 19. It was next contended that the petitioners discovered, or should with reasonable diligence have discovered, their mistake when the Bombay High Court decided the Voltas's case, namely, on August 14, 1970. In support of this contention paragraph 11 of the Petition is relied upon by the Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgments is the said decision of this High Court in the Voltas's case. I fail to see what relevance this trade notice has to the present case. This notice does not set out what has been decided in any of these cases. It merely offers for sale copies of 12 judgments. In view of the judgment of the Supreme Court in M/s. D. Cawasji and Co's., case where it was observed that it is seldom that a person can, even with a reasonable diligence, discover a mistake of law before a judgment is delivered adjudging the validity of that law, and the decisions of this High Court in Associated Bearing Company's case and in the case of Maharashtra Vegetable Products Pvt. Ltd. and another v. Union of India and others, in which it was held that in such a case the period of limitation of three years would start from the date on which the judgment declaring the law as void was rendered, it must be held that the starting point of limitation would be the date on which the particular judgment was pronounced. If the relevant judgment in this case is the decision of this High Court in the Voltas's case, namely, August 14, 1970, the petition is filed much after the expiry of the period of limitation for filin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, namely, the selling profits, were to be excluded. Even if it may be taken that the observations of the Supreme Court with respect to post-manufacturing cost in the Voltas's case were obiter, this being an obiter of the Supreme Court would be binding on all High Courts, but taking the date of the discovery of mistake, at least with respect to the post-manufacturing expenses, cannot help the Respondents, because the Petition is filed within the period of limitation, taking the starting point of limitation as the date of the Supreme Court's judgment. In fairness to the Petitioners, it must be pointed out that the position really became settled when the Supreme Court delivered its judgment in the Atic Industries' case. It was that case which was almost on all fours with the Petitioners', and the Petitioners have expressly averred in the Petition that it was by this case that the legal position was at last comprehensively clarified, but whether one takes the relevant date to be the date of the judgment of the Supreme Court in Voltas's case or in the Atic Industries case, it would make no difference because in either event it would not be correct to argue that if instead of filing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion suffers from insufficiency of particulars and pleadings and that the payments were voluntarily made. Mercifully, it was not argued that the voluntary payment was pursuant to contractual rights and obligations. Merely because in another case the Supreme Court held that the petition was not filed within time and suffered from insufficiency of particulars and pleadings and that the payments made in that case were voluntary, it does not mean that in all other petitions the same position prevails or that the same position prevails in this Petition. I have already pointed out that these voluntary payments were payments made under a mistake of law and a misapprehension both on the part of the Petitioners and the Department as to what the correct position was. In the case before the Supreme Court the payments which were made were a part of the payments to be made under the term of a permit, under which permit the Petitioners had already taken all the benefits they could. I have also dealt with the question of delay and have held that the Petition has not been filed after the expiry of the period of limitation for filing a suit. The insufficiency of particulars and pleadings, from which ..... 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