9911796707
TMI Blog1986 (4) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... III Division, the respondent No. 3 herein, intimated the petitioner that the manufacture of acid oil out of soap stock obtained from the processing of vegetable non-essential oils in the petitioner's factory was not covered by any other tariff item of the Central Excise Tariff. It attracted duty under tariff item No. 68 being goods not elsewhere specified and duty at the rate of 2% ad valorem is leviable on such goods with effect from 18th June, 1977. It has also been stated in the said letter that in terms of Notification No. 176/77 dated 18th June, 1977, the manufacturers whose capital investment made form time to time on plant and machinery installed in the industrial unit is more than Rs. 10 lacs, are required to pay duty under Tariff Item No. 68. The petitioner was, therefore, directed to take out licence for manufacture of goods covered under Tariff Item No. 68 and observe all Central Excise formalities before any removal of such goods from the factory. The petitioner was also directed to pay appropriate Central Excise duty on such goods before removal. It was also pointed out that any deviation from observing the Central Excise formalities would tantamount to violation of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of "Oil Mill and Solvent Extraction Industry." 8. The petitioner complied with the said requisitions made by the Assistant Collector and produced the relevant records and papers in support of its contention. Thereafter, correspondence passed by and between the petitioner and the Excise authorities, but no definite reply was received from the respondents. The matter was thereafter taken up with the Collector, Central Excise, by the Constituted Attorney of the petitioner who was a Member, Regional Advisory Committee (Organised Sector). It was mentioned in the letter dated 20th Mar.,82 written by the said Member of the Regional Advisory Committee to the Collector of Central Excise that the question of exemption of acid oil from Central Excise duty under Tariff Item No. 68 was discussed in the meeting of Regional Advisory Committee held on 23rd July, 1980. It was again discussed on 8th December, 1980. It was also discussed at the 16th South Zone Tariff Cum General Conference held at Madras on 29th and 30th October, 1981 where it was accepted that since acid oil was obtained only by treatment of soap stock with sulphuric acid, the exemption granted to soap stock would equally apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h August, 1977 to 14th May, 1982 on acid oil and soap stock, allegedly under mistake of law. Thereafter the petitioner reconstructed the refund claim. It submitted its claim for Rs. 51,859.29 for the period from 12th August, 1977 till 31st July, 1979 during which period the duty was paid under alleged mistake of law and for Rs. 2,18,140.71 for the period from 1st August, 1979 to 14th May, 1982 when the duty was paid pending the decision of the Department regarding exemption. 11. On or about 30th April, 1982 the Assistant Collector, Central Excise, Calcutta, issued two several notices dated 30th July, 1982 upon the petitioner asking the petitioner to show cause as to why its claim for refund of Excise duty should not be rejected being barred by limitation under the Central Excise Act. The petitioner duly replied to the said show cause notices. It was stated in the reply that none of the claims of refund was barred by limitation and the provision of section 11B of the Central Excises Salt Act, 1944 was inapplicable to the facts and circumstances of the case. In the reply the petitioner also relied on various decisions of the High Courts and Supreme Court. Both the claims of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Act which has came into force with effect from 17th November, 1980 a claim for refund on the ground that the goods were exempt from payment of duty can only be entertained, provided it is claimed within six months from the date of payment. It is also contended that in view of the amended provisions of section 11A, the contention that refund of duty in respect of exempted goods would be governed by the General law of limitation, does not hold good. Special law as contained in the Excise Act will have over-riding effect. It is further contended that assuming, but not admitting, that the general law of limitation would apply, even then the claim is ex facie barred by limitation as according to the petitioner it came to know about the mistake some time in July or August 1979, but the claim of refund was made only in October, 1982. The writ application having been made after the expiry of more than three years, the present application is not maintainable. Mr. Roy Chowdhury has also relied on several decisions of different High Courts as well as of Supreme Court in support of his aforesaid contentions. 15. The respective contentions of the Learned Counsel have to be considered in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid products manufactured by the petitioner and collection thereof is without, any authority of law and ultra vires the law under which the imposition of collection was made. If the imposition or collection of the duty is illegal and in contravention of Article 265, then acquiescence cannot take away from a party the relief he is entitled to, nor does payment of illegal duty create estoppel against his subsequent challenge. The respondent authorities were fully aware of the said exemption notifications and they could not have collected the duty as they purported to do in this case. In that view of the matter they acted illegally and without jurisdiction. 16. The question, therefore, is whether in such a case the period of limitation for getting a refund would be as prescribed by the statutory provisions under which the illegal levy was made or would be governed by the general law or whether the period of limitation at all would be applicable in a case like this where collection is wholly illegal. In this context it is necessary to consider the several decisions relied on by Mr. Mullick. 17. In Madhya Pradesh and Another v. Bhailal Bhai and Others reported in AIR (1964) S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r misconstruction, and where refund application has to be made within three months from the date of such payment. The present case was not one where the excess duty was paid through any of the three reasons set out in S.40. The excess duty demanded on the ground that the invoice price was not real value of the imported goods and payment under protest was also made on that footing. The ultimate result in the appellant-company's revision was that charging of excess duty was not warranted under the Act, and that the value on which duty should have been assessed was the invoice price and nothing else. That being the position, Section 40 did not apply and could not have been relied upon by the Customs authorities for refusing to refund the excess duty unlawfully levied on the appellant company. The Supreme Court observed: "If the customs authorities were not entitled to levy the excess duty and retain it, they were bound to return to the appellant company who had paid it under protest and only with a view not to incur demurrage charges, unless there was some provision of the Act which debarred the appellant-company from recovering it. The only provision relied on by the customs authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive writs, on the negative plea of 'alternative remedy' since the root principle of law married to justice, is ubi jus ibi remedium. 20. In Sales Tax Officer, Benaras and others v. Kanhaiya Lal Mukund Lal Saraf reported in AIR 1959 S.C. 135 the Supreme Court held that where it is once established that the payment, even though it be of a tax, has been made by the party labouring under a mistake of law the party is entitled to recover the same and the party receiving the same is bound to repay or return it. No distinction can be made in respect of a tax liability and any other liability on a plain reading of the terms of S. 72 of the Contract Act. To hold that tax paid by mistake of law cannot be recovered under S. 72 will be not to interpret the law but to make a law by adding some such words as otherwise than by way of taxes after the word 'paid'. Merely because the State has not retained the monies paid as sales-tax by the assessee but has spent them away in the ordinary course of the business of the State will not make any difference to the position and under the plain terms of S. 72 of the Contract Act the assessee will be entitled to recover back the monies paid by it to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is whether the limitation as prescribed under the Act or the limitation as prescribed under the general law would be applicable. When the duty was imposed by the respondents on the product manufactured by the petitioner under Tariff Item No. 68, it was not known to the respondents that there was an exemption notification which entitled the petitioner to get exemption from duty. There was thus a mistake of law which is common to both the assessee and the taxing authority. In State of Kerala v. Aluminium Industries Ltd. reported in (1965) 16 S.T.C. 689, Supreme Court (Bench consisting of 7 Judges) held that money paid under a mistake of law comes within the word "mistake" in Section 72 of the Contract Act and there is no question of estoppel when the mistake of law is common to both the assessee and the taxing authority. If the tax is levied by mistake of law, it is ordinarily the duty of the State, subject to any provision of law relating to such tax, to refund the tax. If refund is not made, remedy through court is open, subject to the same restriction and also to the bar of limitation under Article 96 of the Limitation Act, 1908, namely, three years from the date when the mistake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim for refund on 23rd October, 1982. Therefore, the claim of the petitioner was not barred and it was preferred within six months from the date of his knowledge. If it was the case that the petitioner was certain that such products were exempt from duty, in that event the petitioner would not have gone on paying the duty. The petitioner wanted to know the correct legal position and it is only when correct legal position was communicated to the petitioner by the Collector of Central Excise that the petitioner know for certain that such by-products are not exigible to duty. I am, therefore, of the opinion that the claim for refund of the petitioner was not barred when it was preferred on 23rd October, 1982. 27. It is contended by Mr. Roy Chowdhury that the claim of the petitioner is barred by limitation both under the Central Excises and Salt Act and/or the Rules made thereunder as well as under the general law. It is his contention that the Assistant Collector of Central Excise in his order dated 11th November, 1982 has held that the petitioner has not paid the duty under protest and as such the claim was barred having been preferred more than six months from the date of payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess a protest is made in respect of each and every consignment, the protest made for one consignment cannot cover the other. In that context it was said that the protest cannot be gathered from the circumstances; if there is a protest in respect of 2 consignments it does not follow that there was protest regarding payment so far as other consignments are concerned. Under the excise law, however, the position is different. One has to go on clearing the goods upon payment of duty, unless it is known to him the duty is not exigible. Only when it becomes known to him that duty is not leviable, he can then clear the goods under protest. Thus for the period 12th August, 1977 to 31st July, 1979, the question of payment under protest did not arise as he was not aware at all that no duty was payable on the goods at all. Whatever might have been the position before 1st August, 1979, it could not be said about the payment made after 1st August, 1979. The petitioner made the payment from 1st August, 1979 till 14th May, 1982 subject to the determination by the appropriate authority of the question whether the products were exempt from duty or not. Payment under protest in this context can only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the general law of limitation would not apply where the limitation has been prescribed by special law. In this case, under the provisions of section 11A of the Act, the period of limitation has been prescribed for preferring the claim for refund. This cannot be over-ridden by the ordinary law of limitation. This connection, however, as I have already held, cannot be accepted in view of the fact that here the duty was collected unlawfully. I have also held that even if limitation applies the limitation will start from the day when the petitioner has definite information that the by-products are not exigible to duty under Tariff Item No. 68. The said definite information came only on 18th May, 1982 when the Collector of Central Excise intimated the petitioner that the by-products manufactured by the petitioner are exempt from duty. Prior to that, whatever might have been the notifications, the petitioner was not certain whether such notification would govern the case of the petitioner. Thus the knowledge cannot be computed from the date when the petitioner came to know about the notification, that is to say, on 1st August, 1979. It would be from the date when the authority compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the petitioner did not fulfil the conditions of refund. In a sense the question of limitation is a question which pertains to the jurisdiction of the concerned officer. If it is erroneously held that the claim is barred by limitation, it is an error of law pertaining to the jurisdiction which can be corrected. 34. The last but not the least contention of Mr. Roy Chowdhury which requires consideration is that the petitioner although paid the duty, had collected the full amount of such duty from the public. Such excise duty paid by the petitioner is included in the sale price. Thus, if now excise duty paid is refunded to the petitioner, it will amount to unjust enrichment and/or double payment to the petitioner. If any amount is refundable it has to be refunded to the customers of the petitioner who purchased the goods from the petitioner. In this connection, several decisions have been relied on by the respondents. The first decision cited by Mr. Roy Chawdhury is in the case of Shiva Shanker Dal Mills v. State of Haryana reported in AIR 1980 S.C. 1037. In that case, the dealers had paid market fees at the increased rate of 3% (raised from the original 2%) under Haryana Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that although refund of excess collections might be legally due to the traders many of the traders had themselves recovered this excess percentage from the next purchasers. So much so, these tiny titles if they are to return to the original payers, should revert to the next purchasers have no more right to keep such small sums than the market committees themselves. To the extent to which the traders had paid out of their own, of course, they were entitled to keep them, but not where they had, in turn, collected from elsewhere. It would be hard to leave every agriculturist to file a suit or other legal proceeding for recovery of negligible sums which cumulatively amount to colossal amounts. Many a little makes a mickle." 35. In Electric Lamp (India) Private Ltd. v. Collector of Central Excise, Calcutta, reported in 1978 E.L.T. 84 it has been held : "Admittedly the petitioner had already collected the excise duty alleged to have been paid in excess by mistake, from its alleged wholesale dealer and as such the petitioner cannot be allowed to have an unjust enrichment by claiming again refund of the same amount. This unjust enrichment amounts to fraud and principles of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Bombay High Court in Maharashtra Vegetable Products Pvt. Ltd. v. Union of India reported in 1981 E.L.T. 486 where it was held that in Ogale Glass Works, the Court declined to grant any relief on the ground of laches, not on the ground of unjust enrichment. The Division Bench observed at page 473 thus :- "We are unable to read the decision in Gawasji's case as an authority for the proposition that in every case, where the manufacturer who has paid the Excise Duty and has passed it on to the consumers and has recovered it, the claim to recover monies from the Government should be rejected." 39. The Division Bench after carefully analysing Gawasji's case observed at page 474 thus :- "It appears from the judgment of the Supreme Court that the fact that the appellants had not given any reason as to why that claim was not made in the earlier writ petition heavily weighed with the Supreme Court when they declined to interfere with this decision of the High Court. We are, therefore, unable to accept the contention advanced on behalf of the Union of India that the petitioners are not entitled to any refund as the levy has already been passed on to the consumer." 40. The ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustomers to whom the finished product namely art silk was sold. In the light of these factors, it can be said that the loss or injury was not caused to the Mills but to the ultimate buyers of fabric to whom the burden of excise duty paid an blended yarn has been passed on. Therefore, if any body is entitled to restitution, it is the buyer of the fabric and not the Mills. Before the Gujarat High Court, the decision of the Supreme Court in Gawasji's case was referred to in another context. It was urged that in view of the decision of the Supreme Court in Gawasji case even it the mills had collected the excise duty from the buyers they cannot be prevented from recovering thereof the revenue. It was also urged that in view of the said decision of the Supreme Court it was not necessary for the Mills to prove any loss or injury. The Gujarat High Court observed that the question whether loss or injury while claiming restitution under section 72 of the Contract Act has to be proved was not raised before the Supreme Court and accordingly the Supreme Court did not express any opinion thereon. In that view of the matter the Gujarat High Court rejected the contention that the Mills are not req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of unjust enrichment is therefore cannot be invoked. 47. The Madras High Court in the case of Soft Beverages (Pvt.) Ltd., Madurai v. Union of India and another reported in 1982 E.L.T. 119 held that the refund of duty paid and collected under the mistake of law cannot be denied even if the duty has already been recovered from the customer. The refund of duty wrongly paid under the mistake of law cannot be denied even if the duty has already been recovered from the customer. In other words, the refund of duty wrongly paid under the mistake of law cannot be denied by the Government on the principle of unjust enrichment. The Madras High Court was of the view that the law declared by the Supreme Court in D. Cawasji Co. (Supra) holds the field and accordingly the contention of the respondents was rejected. 48. The Division Bench of this Court in the case of Khardah Company Ltd. v. Union of India and Ors. reported in 1983 E.L.T. 2159 (Cal.) = (1981) 1 CLJ 433 also considered the contention of the respondents as regards unjust enrichment and observed as follows : "If the liability imposed is of the assessee alone and if the assessee is liable to pay irrespective of whether he can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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