Full Judgment Text
' REPORTABLE'
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3600 OF 2006
COMMISSIONER OF CENTRAL EXCISE,
TIRUCHIRAPALLI
.....APPELLANT(S)
VERSUS
M/S. DALMIA CEMENT (BHARAT) LTD. .....RESPONDENT(S)
J U D G M E N T
A.K. SIKRI, J.
On an application under Section 35G(3) of the Central
Excise Act, 1944 (hereinafter referred to as the 'Act'), the
Customs Excise and Gold (Control) Appellate Tribunal
JUDGMENT
(hereinafter referred to as the 'CEGAT') referred the following
question to the High Court of Delhi for its opinion :-
“Whether Section 11B of the Central Excise Act, as
amended, applies to cases where though an order
has been passed directing refund, implementation
of the order is pending?”
2) The High Court has answered the aforesaid question in favour of
assessee holding that since the proceedings under the old
Section 11B of the Act had attained finality, the amended
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provision of Section 11B of the Act, in particular, proviso to
sub-section (1) shall not apply. In other words, the principle of
'unjust enrichment' which was introduced by way of amendment
of Section 11B in the year 1991 shall not be attracted in the
instant case as the proceedings under the unamended Section
stood finalised with the direction in the application filed under
unamended Section 11B of the Act to refund the excise duty that
was paid by the respondent/assessee. To put it pithily, the High
Court has held that merely because implementation of the
aforesaid order was pending, in the sense that direction to refund
the amount had not been carried out, the authority could not go
into the question of unjust enrichment by invoking the proviso to
sub-section (1) of Section 11B of the Act that had been introduced
by that time by way of amendment in Section 11B of the Act.
JUDGMENT
Therefore, it was not open to the concerned officer, who was only
supposed to carry out the implementation of the order, to go into
the question as to whether there was any unjust enrichment on
the part of the assessee or not. In coming to this conclusion, the
High Court has extensively referred to a 9-Judge Bench of this
Court in the case of Mafatlal Industries Ltd. and Others v.
1
Union of India and Others .
1 (1997) 5 SCC 536
Civil Appeal No. 3600 of 2006 Page 2 of 31
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3) It is not disputed before us that the law laid down in the aforesaid
judgment would be applicable. However, the appellant contends
that there is a small window left open in the said judgment which
would cover the situation that has arisen in the present case. As
per the case set up by the appellant, even where order is yet to
be implemented, though passed under the unamended provision,
at this stage of implementation as well the question of unjust
enrichment can be gone into by the concerned authority.
4) We may point out at this stage itself that Section 11B, as it existed
prior to its amendment in the year 1991, did not contain any
provision of unjust enrichment. Thus, if the assessee was entitled
to refund of duty under the Act, it could make an application for
such a refund to the Assistant Collector of Central Excise before
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the expiry of six months from the refund date and the procedure
how such application is to be dealt with was stipulated in the said
provision. This Section was amended with effect from 20.09.1991
by Central Excise and Customs Laws (Amendment) Act, 1991.
Under the amended provision, while considering the application
for refund, the Assistant Collector of Central Excise is empowered
to go into the question as to whether incidence of such duty has
been passed on by the person claiming refund to any other
Civil Appeal No. 3600 of 2006 Page 3 of 31
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person. If the claimant has passed on the incidence of excise duty
to other person then the application for refund can be rejected on
the ground that it would amount to unjust enrichment to that
person who is not out of pocket even when the excise duty was
paid in excess etc. Proviso to this sub-section (1) further provides
that even when application for refund was filed before the
amendment of this Section and still pending, it shall be deemed
that such an application made under amended sub-section (1) of
Section 11B of the Act and is to be dealt with in accordance with
the provisions of sub-section (2), substituted by the amendment.
Thus, the applications even filed under the unamended Act, if not
disposed of and still pending, are to be treated as filed under the
amended Section 11B and the consequence thereof is that even
in respect of such applications doctrine of “unjust enrichment”
JUDGMENT
would be applicable. In this scenario, when an application was not
pending, in the sense that orders thereon had already been
passed directing refund but the amount had not been refunded so
far, we have to determine as to whether such a situation has also
to be dealt with under the amended section thereby bringing into
operation the doctrine of “unjust enrichment”? As mentioned
above, the High Court has answered this question in the negative
and this Court is called upon to decide the veracity of the said
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view taken by the High Court in the instant appeal.
5) The facts which need to be noted for the purposes of this appeal
do not need a large canvass and are recapitulated in brief, as
under:
6) The period involved for which the respondent wanted refund of
the excise duty paid by it is 1970-1978. It may be mentioned that
there was a dispute regarding the assessable value of cement
cleared by the assessee during the aforesaid period, when excise
duty of cement was ad valorem. The dispute related to freight
involved in the dispatch of the cement to various destinations. The
Department had included the cost of freight as well while
determining the assessable value in terms of Section 4 of the
Central Excise and Salt Act, 1944 (hereinafter referred to as the
JUDGMENT
'Act'). It was decided in favour of the assessee vide order dated
06.06.1989 passed by the CEGAT. In spite of this decision,
amount was not refunded. This prompted respondent to file Civil
Writ No. 3225 of 1991 in the High Court of Delhi seeking writ,
order or direction for initiating contempt of court proceedings
against the Collector of Central Excise, Tiruchirapalli and
Assistant Collector of Central Excise, Tiruchirapalli for not
granting the refund despite the order of the CEGAT. The said writ
Civil Appeal No. 3600 of 2006 Page 5 of 31
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petition was disposed of on 18.07.1995. Taking note of the
statement of counsel for both the parties that a date may be fixed
before the Collector/Assistant Collector to go into the question if
the appellant should be granted refund in spite of Section 11B of
the Act, direction was given to appear before the
Collector/Assistant Collector on 22.09.1995 and the writ petition
was disposed of. Pursuant to the said direction, hearing was
granted by the Assistant Commissioner who passed orders dated
28.03.1996 holding that assessee was not eligible to get the
refund as per amended provisions of Section 11B of the Act and
directed that this amount be credited to the Consumer Welfare
Fund established under Section 12C of the Act. The reason for
rejecting the claim of the assessee was that the case of the
respondent fell within the four walls of the concept of “unjust
JUDGMENT
enrichment”. Feeling aggrieved by this order, appeal was filed
before the Commissioner of Customs and Central Excise
(Appeal) which was dismissed on 20.12.1996. Further, appeal
was preferred before the CEGAT and in this attempt the assessee
triumphed inasmuch as Tribunal decided the case in favour of
assessee holding that since no proceedings were pending before
the Assistant Commissioner as far as application for refund is
concerned and it was only the execution of the order of refund
Civil Appeal No. 3600 of 2006 Page 6 of 31
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that was passed much prior to 1991, amended provision of
Section 11B would not be attracted. The appellant filed
rectification application which was dismissed by the Tribunal on
20.02.2002. Thereafter, appellant filed reference application
before the High Court of Delhi in terms of 35G(3) of the Act raising
the question of law which has already been reproduced in the
earlier part of this judgment. Again, as pointed out above, the
High Court has answered this question in favour of assessee,
recording the following findings:
“(a) It has been held that there are no merits in this
reference, as the question involved is clearly
settled by the 9-Judge Bench decision of this
Hon'ble Court in the case of Mafatlal Industries Ltd.
(supra) wherein this Hon'ble Court held 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
principles of unjust enrichment will not apply.
(b) Section 11-B, after the 1991 amendment,
stated that the party applying for refund had to
establish that the incidence of such duty had not
been passed on by him to any other person. It
follows, therefore, that Parliament did not apply the
principles of unjust enrichment to cases covered by
the unamended Section11B and it was the reason
that the amendment was made in Section 11-B in
1991.”
JUDGMENT
7) On the basis of what is pointed out above, it is clear that the
exercise to be undertaken is to find out the ratio laid down in
Mafatlal Industries Ltd. (supra) in the given situation. Before we
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advert to the same, we deem it appropriate to refer to, at this
stage, unamended and amended provisions of Section 11B.
“ Section 11B: Claim for refund of duty (1) Any
person claiming refund of any duty of excise may
make an application for refund of such duty to the
Assistant Collector of Central Excise before the
expiry of six months from the relevant date.
Provided that the limitation of six months shall not
apply where any duty has been paid under protest.
(2) If on receipt of any such application, the
Assistant Collector of Central Excise is satisfied
that the whole or any part of the duty of excise paid
by the applicant should be refunded to him, he may
make an order accordingly.
(3) Where as a result of any order passed in
appeal or revision under this Act refund of any duty
of excise becomes due to any persons the
Assistant Collector of Central Excise may refund
the amount to such person without his having to
make any claim in that behalf.
(4) Save as otherwise provided by or under this
act, no claim for refund of any duty of excise shall
be entertained.
JUDGMENT
(5) Notwithstanding anything contained in any
other law, the provisions of this Section shall also
apply to a claim for refund of any amount collected
as duty of excise made on the ground that the
goods in respect of which such amount was
collected were no excisable or were entitled to
exemption from duty and no court shall have any
jurisdiction in respect of such claim.”
8) After 1991 amendment, the material part of Section 11B reads as
follows:
“11B. Claim for refund of duty and interest, if any,
paid on such duty.—(1) Any person claiming refund
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of any duty of excise and interest, if any, paid on
such duty may make an application for refund of
such [duty and interest, if any, paid on such duty to
the Assistant Commissioner of Central Excise or
Deputy Commissioner of Central Excise before the
expiry of one year from the relevant date in such
form and manner as may be prescribed and the
application shall be accompanied by such
documentary or other evidence (including the
documents referred to in section 12A) as the
applicant may furnish to establish that the amount
of duty of excise and interest, if any, paid on such
duty in relation to which such refund is claimed was
collected from, or paid by, him and the incidence of
such duty and interest, if any, paid on such duty
had not been passed on by him to any other
person:
Provided that where an After 1991
amendment, the material part of Section 11B
reads as follows: application for refund has been
made before the commencement of the Central
Excises and Customs Laws (Amendment) Act,
1991 (40 of 1991), such application shall be
deemed to have been made under this sub-section
as amended by the said Act and the same shall be
dealt with in accordance with the provisions of
sub-section (2) as substituted by that Act:
Provided further that the limitation of one
year shall not apply where any duty and interest, if
any, paid on such duty has been paid under
protest.
JUDGMENT
(2) If, on receipt of any such application, the
Assistant Commissioner of Central Excise or
Deputy Commissioner of Central Excise is satisfied
that the whole or any part of the duty of excise and
interest, if any, paid on such duty paid by the
applicant is refundable, he may make an order
accordingly and the amount so determined shall be
credited to the Fund:
Provided that the amount of [duty of excise
and interest, if any, paid on such duty as
determined by the Assistant Commissioner of
Central Excise or Deputy Commissioner of Central
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Excise under the foregoing provisions of this
sub-section shall, instead of being credited to the
Fund, be paid to the applicant, if such amount is
relatable to--
(a) rebate of duty of excise on excisable goods
exported out of India or on excisable materials
used in the manufacture of goods which are
exported out of India;
(b) unspent advance deposits lying in balance in
the applicant's account current maintained with the
Commissioner of Central Excise or Commissioner
of Central Excise;
(c) refund of credit of duty paid on excisable goods
used as inputs in accordance with the rules made,
or any notification issued, After 1991 amendment,
the material part of Section 11B reads as
follows: under this Act;
(d) the duty of excise and interest, if any, paid on
such duty paid by the manufacturer, if he had not
passed on the incidence of such duty and interest,
if any, paid on such duty to any other person;
(e) the duty of excise and interest, if any, paid on
such duty borne by the buyer, if he had not passed
on the incidence of such duty and interest, if any,
paid on such duty to any other person;
JUDGMENT
(f) the duty of excise and interest, if any, paid on
such duty borne by any other such class of
applicants as the Central Government may, by
notification in the Official Gazette, specify:
Provided further that no notification under
clause (f) of the first proviso shall be issued unless
in the opinion of the Central Government the
incidence of duty and interest, if any, paid on such
duty has not been passed on by the persons
concerned to any other person.
(3) Notwithstanding anything to the contrary
contained in any judgment, decree, order or
direction of the Appellate Tribunal or any Court in
any other provision of this Act or the rules made
Civil Appeal No. 3600 of 2006 Page 10 of 31
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thereunder or any other law for the time being in
force, no refund shall be made except as provided
in sub-section (2).
(4) Every notification under clause (f) of the first
proviso to sub-section (2) shall be laid before each
House of Parliament, if it is sitting, as soon as may
be after the issue of the notification, and, if it is not
sitting, within seven days of its reassembly, and the
Central Government shall seek the approval of
Parliament to the notification by a resolution moved
within a period of fifteen days beginning with the
day on which the notification is so laid before the
House of the People and if Parliament makes any
modification in the notification or directs that the
notification should cease to have effect, the
notification shall thereafter have effect only in such
modified form or be of no effect, as the case may
be, but without prejudice to the validity of anything
previously done thereunder.
(5) For the removal of doubts, it is hereby declared
that any notification issued under clause (f) of the
first proviso to sub-section (2), including any such
notification approved or modified under sub-section
(4), may be rescinded by the Central Government
at any time by notification in the Official Gazette.
Explanation.--For the purposes of this section,--
JUDGMENT
(A) "refund" includes rebate of duty of excise on
excisable goods exported out of India or on
excisable materials used in the manufacture of
goods which are exported out of India;
(B) "relevant date" means,--
(a) in the case of goods exported out of India
where a refund of excise duty paid is available in
respect of the goods themselves or, as the case
may be, the excisable materials used in the
manufacture of such goods,--
(i) if the goods are exported by sea or air, the date
on which the ship or the aircraft in which such
goods are loaded, leaves India, or
Civil Appeal No. 3600 of 2006 Page 11 of 31
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(ii) if the goods are exported by land, the date on
which such goods pass the frontier, or
(iii) if the goods are exported by post, the date of
dispatch of goods by the Post Office concerned to
a place outside India;
(b) in the case of goods returned for being remade,
refined, reconditioned, or subjected to any other
similar process, in any factory, the date of entry into
the factory for the purposes aforesaid;
(c) in the case of goods to which banderols are
required to be affixed if removed for home
consumption but not so required when exported
outside India, if returned to a factory after having
been removed from such factory for export out of
India, the date of entry into the factory;
(d) in a case where a manufacturer is required to
pay a sum, for a certain period, on the basis of the
rate fixed by the Central Government by notification
in the Official Gazette in full discharge of his liability
for the duty leviable on his production of certain
goods, if after the manufacturer has made the
payment on the basis of such rate for any period
but before the expiry of that period such rate is
reduced, the date of such reduction;
(e) in the case of a person, other than the
manufacturer, the date of purchase of the goods by
such person;
JUDGMENT
(ea) in the case of goods which are exempt from
payment of duty by a special order issued under
sub-section (2) of section 5A, the date of issue of
such order;
(eb) in case where duty of excise is paid
provisionally under this Act or the rules made
thereunder, the date of adjustment of duty after the
final assessment thereof;
(ec) in case where the duty becomes refundable as
a consequence of judgment, decree, order or
direction of appellate authority, Appellate Tribunal
or any court, the date of such judgment, decree,
Civil Appeal No. 3600 of 2006 Page 12 of 31
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order or direction;
(f) in any other case, the date of payment of duty.”
9) We have already narrated the facts and events in the instant case
in detail above. However, it is pertinent to keep in mind that
applications for refund of excise which were preferred by the
assessee had already been allowed finally by the orders of
CEGAT dated 01.06.1989 and 06.06.1989. This obviously
happened before the amendment in the Section in the year 1991.
At the same time, the refund had not been actually paid to the
assessee till 1991 when the provisions of Section 11B came to be
amended. We now advert to the decision in the case of Mafatlal
Industries Ltd. (supra).
10) It is a nine Judge Bench decision. Majority opinion was delivered
by B.P. Jeevan Reddy, J. for himself and on behalf of four other
JUDGMENT
Judges. K.S. Paripoornan, J. and S.C.Sen, J. wrote their separate
opinions. Hansaria, J. agreed with the conclusions and reasoning
of Paripoornan, J. However, insofar as issue at hand is
concerned, they concurred with the majority opinion rendered by
B.P. Jeevan Reddy, J. Thus, eight out of nine Judges have taken
the same view. A.M. Ahmadi, the then Chief Justice, was the only
dissenting Judge, who took contrary view on this particular issue.
Civil Appeal No. 3600 of 2006 Page 13 of 31
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With this background in mind, we reproduce the following relevant
portions from the opinion of B.P. Jeeven Reddy, J.:
“57. The first decision of this Court to consider the
amended Section 11-B is in Union of India v. Jain
Spinners Ltd (1992) 4 SCC 389 The validity of the
1991 (Amendment) Act was, however, neither
raised nor considered by the court. The impugned
orders of the High Court, made before the coming
into force of the 1991 (Amendment) Act, directing
refund of the excess duty collected to the
manufacturers, this Court held, would defeat the
provisions of amended Section 11-B which had
come into force during the pendency of the refund
proceedings. The Court held that so long as the
refund proceedings are pending, the amended
provisions get attracted and disentitle the
manufacturer-payer from claiming any refund
contrary to the said provisions. In other words, the
contention of the manufacturers that the amended
Section 11-B applies only to claims of refund
arising after the coming into force of the said
Amendment Act was rejected.
96. There is yet another circumstance: Section
12-B does not create a new presumption unknown
till then; it merely gives statutory shape to an
existing situation, as explained hereinbefore. At the
most, it can be said that there were two views on
the subject and Section 12-B affirms one of them.
Even without Section 12-B, the true position is the
same, as held by us in the earlier part of this
judgment. The obligation to prove that duty has not
been passed on to another person is always there
as a precondition to claim of refund. It cannot also
be said that by giving retrospective effect to Section
11-B, any vested rights or substantive rights are
being taken away. The deprivation, if at all, is not
real. The manufacturer has already collected the
duty from his purchaser and has thus reimbursed
itself. By applying for refund yet, he is trying to reap
a windfall; deprivation of that cannot be said to be
real or substantial prejudice or loss. A manufacturer
had no vested legal right to refund even when he
had passed on the burden of duty to others. No law
conferred such a right in him — not Article 265, nor
JUDGMENT
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Section 11-B. It was only on account of an incorrect
view of law taken in Kanhaiya Lal 1959 SCR
1350 : AIR 1959 SC 135 : (1958) 9 STC 747 and
that cannot be treated as a vested legal right.
Correction of judicial error does not amount to
deprivation of vested/substantive rights, even
though a person may be deprived of an
unwarranted advantage he had under the
overruled decision . In cases, where the burden is
not passed on, there is no prejudice; he can always
get the refund.
97. There is yet another circumstance: Section
12-B does not create a new presumption unknown
till then; it merely gives statutory shape to an
existing situation, as explained hereinbefore. At the
most, it can be said that there were two views on
the subject and Section 12-B affirms one of them.
Even without Section 12-B, the true position is the
same, as held by us in the earlier part of this
judgment. The obligation to prove that duty has not
been passed on to another person is always there
as a precondition to claim of refund. It cannot also
be said that by giving retrospective effect to Section
11-B, any vested rights or substantive rights are
being taken away. The deprivation, if at all, is not
real. The manufacturer has already collected the
duty from his purchaser and has thus reimbursed
itself. By applying for refund yet, he is trying to reap
a windfall; deprivation of that cannot be said to be
real or substantial prejudice or loss. A manufacturer
had no vested legal right to refund even when he
had passed on the burden of duty to others. No law
conferred such a right in him — not Article 265, nor
Section 11-B. It was only on account of an incorrect
view of law taken in Kanhaiya Lal 1959 SCR
1350 : AIR 1959 SC 135 : (1958) 9 STC 747
and
that cannot be treated as a vested legal right.
Correction of judicial error does not amount to
deprivation of vested/substantive rights, even
though a person may be deprived of an
unwarranted advantage he had under the
overruled decision . In cases, where the burden is
not passed on, there is no prejudice; he can always
get the refund.
JUDGMENT
98. A major attack is mounted by the learned
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counsel for petitioners-appellants on Section 11-B
and its allied provisions on the ground that real
purpose behind them was not to benefit the
consumers by refusing refund to manufacturers (on
the ground of passing on the burden) but only to
enable the Government to retain the illegally
collected taxes. It is suggested that the creation of
the Consumer Welfare Fund is a mere pretence
and not an honest exercise. By reading the Rules
framed under Section 12-D, it is pointed out, even
a consumer, who has really borne the burden of tax
and is in a position to establish that fact, is yet not
entitled to apply for refund of the duty since the
Rules do not provide for such a situation. The
Rules contemplate only grants being made to
Consumer Welfare Societies. Even in the matter of
making grants, it is submitted, the Rules are so
framed as to make it highly difficult for any
consumer organisation to get the grant. There is no
provision in the Act, Shri Nariman submitted, to
locate the person really entitled to refund and to
make over the money to him. “We expect a
sensitive Government not to bluff but to hand back
the amounts to those entitled thereto”, intoned Shri
Nariman. It is a colourable device — declaimed
Shri Sorabjee — “a dirty trick” and “a shabby thing”.
The reply of Shri Parasaran to this criticism runs
thus: It ill-becomes the manufacturers/assessees to
espouse the cause of consumers, when all the
while they had been making a killing at their
expense. No consumers’ organisation had come
forward to voice any grievance against the said
provisions. Clause ( e ) of the proviso to sub-section
(2) of Section 11-B does provide for the buyer of
the goods, to whom the burden of duty has been
passed on, to apply for refund of duty to him,
provided that he has not in his turn passed on the
duty to others. It is, therefore, not correct to
suggest that the Act does not provide for refund of
duty to the person who has actually borne the
burden. There is no vice in the relevant provisions
of the Act. Rules cannot be relied upon to impugn
the validity of an enactment, which must stand or
fall on its own strength. The defect in the Rules,
assuming that there is any, can always be
corrected if the experience warrants it. The Court
too may indicate the modifications needed in the
JUDGMENT
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Rules. The Government is always prepared to
make the appropriate changes in the Rules since it
views the process as a “trial and error” method —
says Shri Parasaran.
105. It would be evident from the above discussion
that the claims for refund under the said two
enactments constitute an independent regimen.
Every decision favourable to an
assessee/manufacturer, whether on the question of
classification, valuation or any other issue, does
not automatically entail refund. Section 11-B of the
Central Excises and Salt Act and Section 27 of the
Customs Act, whether before or after the 1991
Amendment — as interpreted by us herein — make
every refund claim subject to proof of not passing
on the burden of duty to others. Even if a suit is
filed, the very same condition operates. Similarly,
the High Court while examining its jurisdiction
under Article 226 — and this Court while acting
under Article 32 — would insist upon the said
condition being satisfied before ordering refund.
Unless the claimant for refund establishes that he
has not passed on the burden of duty to another,
he would not be entitled to refund, whatever be the
proceeding and whichever be the forum. Section
11-B/Section 27 are constitutionally valid, as
explained by us hereinbefore. They have to be
applied and followed implicitly wherever they are
applicable.
JUDGMENT
108. The discussion in the judgment yields the
following propositions. We may forewarn that these
propositions are set out merely for the sake of
convenient reference and are not supposed to be
exhaustive. In case of any doubt or ambiguity in
these propositions, reference must be had to the
discussion and propositions in the body of the
judgment.
( i ) Where a refund of tax/duty is claimed on the
ground that it has been collected from the
petitioner/plaintiff — whether before the
commencement of the Central Excises and
Customs Laws (Amendment) Act, 1991 or
thereafter — by misinterpreting or misapplying the
provisions of the Central Excises and Salt Act,
Civil Appeal No. 3600 of 2006 Page 17 of 31
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1944 read with Central Excise Tariff Act, 1985 or
Customs Act, 1962 read with Customs Tariff Act or
by misinterpreting or misapplying any of the rules,
regulations or notifications issued under the said
enactments, such a claim has necessarily to be
preferred under and in accordance with the
provisions of the respective enactments before the
authorities specified thereunder and within the
period of limitation prescribed therein. No suit is
maintainable in that behalf. While the jurisdiction of
the High Courts under Article 226 — and of this
Court under Article 32 — cannot be circumscribed
by the provisions of the said enactments, they will
certainly have due regard to the legislative intent
evidenced by the provisions of the said Acts and
would exercise their jurisdiction consistent with the
provisions of the Act. The writ petition will be
considered and disposed of in the light of and in
accordance with the provisions of Section 11-B.
This is for the reason that the power under Article
226 has to be exercised to effectuate the rule of
law and not for abrogating it.
The said enactments including Section 11-B of the
Central Excises and Salt Act and Section 27 of the
Customs Act do constitute “law” within the meaning
of Article 265 of the Constitution of India and
hence, any tax collected, retained or not refunded
in accordance with the said provisions must be
held to be collected, retained or not refunded, as
the case may be, under the authority of law. Both
the enactments are self-contained enactments
providing for levy, assessment, recovery and refund
of duties imposed thereunder. Section 11-B of the
Central Excises and Salt Act and Section 27 of the
Customs Act, both before and after the 1991
(Amendment) Act are constitutionally valid and
have to be followed and given effect to. Section 72
of the Contract Act has no application to such a
claim of refund and cannot form a basis for
maintaining a suit or a writ petition. All refund
claims except those mentioned under Proposition
( ii ) below have to be and must be filed and
adjudicated under the provisions of the Central
Excises and Salt Act or the Customs Act, as the
case may be. It is necessary to emphasise in this
behalf that Act provides a complete mechanism for
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correcting any errors whether of fact or law and
that not only an appeal is provided to a Tribunal —
which is not a departmental organ — but to this
Court, which is a civil court.
( ii ) Where, however, a refund is claimed on the
ground that the provision of the Act under which it
was levied is or has been held to be
unconstitutional, such a claim, being a claim
outside the purview of the enactment, can be made
either by way of a suit or by way of a writ petition.
This principle is, however, subject to an exception:
Where a person approaches the High Court or the
Supreme Court challenging the constitutional
validity of a provision but fails, he cannot take
advantage of the declaration of unconstitutionality
obtained by another person on another ground; this
is for the reason that so far as he is concerned, the
decision has become final and cannot be reopened
on the basis of a decision on another person’s
case; this is the ratio of the opinion of Hidayatullah,
C.J. in Tilokchand Motichand (1969) 1 SCC 110 :
(1969) 2 SCR 824 : AIR 1970 SC 898 and we
respectfully agree with it. Such a claim is
maintainable both by virtue of the declaration
contained in Article 265 of the Constitution of India
and also by virtue of Section 72 of the Contract Act.
In such cases, period of limitation would naturally
be calculated taking into account the principle
underlying clause ( c ) of sub-section (1) of Section
17 of the Limitation Act, 1963. A refund claim in
such a situation cannot be governed by the
provisions of the Central Excises and Salt Act or
the Customs Act, as the case may be, since the
enactments do not contemplate any of their
provisions being struck down and a refund claim
arising on that account. In other words, a claim of
this nature is not contemplated by the said
enactments and is outside their purview.
( iii ) A claim for refund, whether made under the
provisions of the Act as contemplated in
Proposition ( i ) above or in a suit or writ petition in
the situations contemplated by Proposition ( ii )
above, can succeed only if the petitioner/plaintiff
alleges and establishes that he has not passed on
the burden of duty to another person/other
persons. His refund claim shall be allowed/decreed
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Civil Appeal No. 3600 of 2006 Page 19 of 31
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only when he establishes that he has not passed
on the burden of the duty or to the extent he has
not so passed on, as the case may be. Whether
the claim for restitution is treated as a constitutional
imperative or as a statutory requirement, it is
neither an absolute right nor an unconditional
obligation but is subject to the above requirement,
as explained in the body of the judgment. Where
the burden of the duty has been passed on, the
claimant cannot say that he has suffered any real
loss or prejudice. The real loss or prejudice is
suffered in such a case by the person who has
ultimately borne the burden and it is only that
person who can legitimately claim its refund. But
where such person does not come forward or
where it is not possible to refund the amount to him
for one or the other reason, it is just and
appropriate that that amount is retained by the
State, i.e., by the people. There is no immorality or
impropriety involved in such a proposition.
The doctrine of unjust enrichment is a just and
salutary doctrine. No person can seek to collect the
duty from both ends. In other words, he cannot
collect the duty from his purchaser at one end and
also collect the same duty from the State on the
ground that it has been collected from him contrary
to law. The power of the Court is not meant to be
exercised for unjustly enriching a person. The
doctrine of unjust enrichment is, however,
inapplicable to the State. State represents the
people of the country. No one can speak of the
people being unjustly enriched.
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( iv ) It is not open to any person to make a refund
claim on the basis of a decision of a court or
tribunal rendered in the case of another person. He
cannot also claim that the decision of the
court/tribunal in another person’s case has led him
to discover the mistake of law under which he has
paid the tax nor can he claim that he is entitled to
prefer a writ petition or to institute a suit within
three years of such alleged discovery of mistake of
law. A person, whether a manufacturer or importer,
must fight his own battle and must succeed or fail
in such proceedings. Once the assessment or levy
has become final in his case, he cannot seek to
Civil Appeal No. 3600 of 2006 Page 20 of 31
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reopen it nor can he claim refund without reopening
such assessment/order on the ground of a decision
in another person’s case. Any proposition to the
contrary not only results in substantial prejudice to
public interest but is offensive to several
well-established principles of law. It also leads to
grave public mischief. Section 72 of the Contract
Act, or for that matter Section 17(1)( c ) of the
Limitation Act, 1963, has no application to such a
claim for refund.
( v ) Article 265 of the Constitution has to be
construed in the light of the goal and the ideals set
out in the Preamble to the Constitution and in
Articles 38 and 39 thereof. The concept of
economic justice demands that in the case of
indirect taxes like Central Excises duties and
Customs duties, the tax collected without the
authority of law shall not be refunded to the
petitioner-plaintiff unless he alleges and establishes
that he has not passed on the burden of duty to a
third party and that he has himself borne the
burden of the said duty.
( vi ) Section 72 of the Contract Act is based upon
and incorporates a rule of equity. In such a
situation, equitable considerations cannot be ruled
out while applying the said provision.
( vii ) While examining the claims for refund, the
financial chaos which would result in the
administration of the State by allowing such claims
is not an irrelevant consideration. Where the
petitioner-plaintiff has suffered no real loss or
prejudice, having passed on the burden of tax or
duty to another person, it would be unjust to allow
or decree his claim since it is bound to prejudicially
affect the public exchequer. In case of large claims,
it may well result in financial chaos in the
administration of the affairs of the State.
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( viii ) The decision of this Court in STO v. Kanhaiya
Lal Mukundlal Saraf must be held to have been
wrongly decided insofar as it lays down or is
understood to have laid down propositions contrary
to the propositions enunciated in ( i ) to ( vii ) above. It
must equally be held that the subsequent decisions
Civil Appeal No. 3600 of 2006 Page 21 of 31
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of this Court following and applying the said
propositions in Kanhaiya Lal have also been
wrongly decided to the above extent. This
declaration — or the law laid down in Propositions
( i ) to ( vii ) above — shall not however entitle the
State to recover the taxes/duties already refunded
and in respect whereof no proceedings are pending
before any authority/Tribunal or Court as on this
date. All pending matters shall, however, be
governed by the law declared herein
notwithstanding that the tax or duty has been
refunded pending those proceedings, whether
under the orders of an authority, Tribunal or Court
or otherwise.
( ix ) The amendments made and the provisions
inserted by the Central Excises and Customs Law
(Amendment) Act, 1991 in the Central Excises and
Salt Act and the Customs Act are constitutionally
valid and are unexceptionable.
( x ) By virtue of sub-section (3) to Section 11-B of
the Central Excises and Salt Act, as amended by
the aforesaid Amendment Act, and by virtue of the
provisions contained in sub-section (3) of Section
27 of the Customs Act, 1962, as amended by the
said Amendment Act, all
claims for refund
(excepting those which arise as a result of
declaration of unconstitutionality of a provision
whereunder the levy was created) have to be
preferred and adjudicated only under the provisions
of the respective enactments. No suit for refund of
duty is maintainable in that behalf. So far as the
jurisdiction of the High Courts under Article 226 of
the Constitution — or of this Court under Article 32
— is concerned, it remains unaffected by the
provisions of the Act. Even so, the Court would,
while exercising the jurisdiction under the said
articles, have due regard to the legislative intent
manifested by the provisions of the Act. The writ
petition would naturally be considered and
disposed of in the light of and in accordance with
the provisions of Section 11-B. This is for the
reason that the power under Article 226 has to be
exercised to effectuate the regime of law and not
for abrogating it. Even while acting in exercise of
the said constitutional power, the High Court
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Civil Appeal No. 3600 of 2006 Page 22 of 31
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cannot ignore the law nor can it override it. The
power under Article 226 is conceived to serve the
ends of law and not to transgress them.
( xi ) Section 11-B applies to all pending proceedings
notwithstanding the fact that the duty may have
been refunded to the petitioner/plaintiff pending the
proceedings or under the orders of the
Court/Tribunal/Authority or otherwise. It must be
held that Union of India v. Jain Spinners and Union
of India v. ITC have been correctly decided. It is, of
course, obvious that where the refund proceedings
have finally terminated — in the sense that the
appeal period has also expired — before the
commencement of the 1991 (Amendment) Act
(19-9-1991), they cannot be reopened and/or
governed by Section 11-B(3) [as amended by the
1991 (Amendment) Act]. This, however, does not
mean that the power of the appellate authorities to
condone delay in appropriate cases is affected in
any manner by this clarification made by us.
( xii ) Section 11-B does provide for the purchaser
making the claim for refund provided he is able to
establish that he has not passed on the burden to
another person. It, therefore, cannot be said that
Section 11-B is a device to retain the illegally
collected taxes by the State. This is equally true of
Section 27 of the Customs Act, 1962.”
JUDGMENT
11) It is clear from the above that in no unambiguous terms and with
utmost clarity and certainty, the majority interpreted amended
provisions of Section 11B including proviso to sub-section (1)
thereof to hold that so long as refund proceedings are pending,
the amended provision would get attracted and would disentitle
the manufacturer/payer from claiming any refund contrary to the
said proviso. However, in those cases where the refund
proceedings had finally been terminated, in the sense – that the
Civil Appeal No. 3600 of 2006 Page 23 of 31
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appeal period has also expired – before the commencement of
the amended provision, these cannot be re-opened and/or
governed by the amended provision. Concurring with the
aforesaid view, K.S. Paripoornan, J. expressed his opinion in the
following manner:
“342.…..Sections 11-B(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 11-B, 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 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.........”
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12) The same view has been expressed by S.C. Sen, J.:
“255. I shall now examine the other provisions of
the newly-added sections. Sub-section (1) of
Section 11-B 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 fulfilled.
Sub-section (3) merely lays down that no refund
shall be made except as provided in sub-section
(2). There is a non obstante clause that this will
operate notwithstanding anything to the contrary
contained in any judgment, decree, order etc. It is
Civil Appeal No. 3600 of 2006 Page 24 of 31
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obvious that new provisions will apply in cases
where applications for refund were made before
the new provisions came into force and also
subsequently. Sub-section (3) has no retrospective
effect. When a case has been finally heard and
disposed of and no application for refund need be
made, sub-section (3) cannot apply. If there is a
judgment, decree or order which has to be carried
out, the legislature cannot take away the force and
effect of that judgment, decree or order, except by
amending the law retrospectively on the basis of
which the judgment was pronounced.”
13) Notwithstanding, the aforesaid dicta, Mr. Panda, learned senior
counsel appearing for the appellant, still sees some light coming
through a small window as he wants pending proceedings to
include a situation where refund had not been granted, even
when the order was passed, with the submission that the
Assistant Commissioner even at this stage was competent to go
into the question of unjust enrichment as order regarding grant of
refund was post 1991 event. To buttress this submission, he
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argued that the principle of unjust enrichment was in the domain
of public interest and intention by incorporating provisions like
proviso to sub-section (1) of Section 11 was clear, namely, so far
as amount is not actually refunded, the authorities were
competent to invoke this doctrine of “unjust enrichment”. It was
argued that it will be totally inequitable and unfair to the public as
the party (assessee herein) would be unjustly enriched. He also
relied upon the orders dated 18.07.1995 by the High Court in Civil
Civil Appeal No. 3600 of 2006 Page 25 of 31
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Writ No. 3225 of 1991 specifically permitting the Assistant
Collector to go into the question whether the assessee is to be
granted the refund in spite of amended Section 11B of the Act
with the following observation :
“Both the Counsel agree that a date may be fixed
when the petitioner shall appear before the
collector/Assistant Collector, Central Excise,
Trichiapalli, to go into the question if petitioner
should be granted the refund in spite of Section
11B of the Central Excise and Salt Act. We,
accordingly, direct that petitioner shall appear
before the concerned Collector/Assistant Collector,
nd
Central Excise, Trichirapalli on 22 September
1995. no further orders are required in this petition,
which stands disposed of.”
14) After examining the matter in its entirely, we find that it is not
possible to countenance the aforesaid submission of Mr. Panda.
In the first instance, it requires to be remarked that only after
amendment in Section 11B of the Act in the year 1991, any
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person applying for refund has to establish that incidence of such
duty has not been passed on by him to any other person. The
unamended provision did not contain any such stipulation.
Therefore, under the old provision, the only obligation of the
person claiming refund was to make such an application before
the expiry of six months from the relevant date and to show how
the refund was admissible to the applicant. In such a case, the
Assistant Collector of Central Excise was to only examine as to
Civil Appeal No. 3600 of 2006 Page 26 of 31
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whether excise duty was paid in excess etc. and was refundable
to the claimant as a result of adjudication of the dispute or
otherwise. It is only in the amended provision that additional
stipulation is provided as per which the claimant is required to file,
along with application for refund, such documentary or other
evidence including documents referred to any Section 12A of the
Act to establish that the amount of duty of excise was collected
from the claimant or paid by the claimant and that “incidence of
such duty had not been passed on by him to any other person”. It
clearly follows from the above that before the amendment of
Section 11B of the Act, principle of unjust enrichment was not
incorporated under the unamended provision. In fact that was
precisely the reason for amending the provision so that this
doctrine of “unjust enrichment” is incorporated, viz., to take care
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of the mischief that was prevailing under the unamended
provision which was removed by making amendment, popularly
known as Heydon's Mischief Rule.
15) Proviso to sub-section (1) of Section 11B, as amended, would be
applicable in a situation where an application for refund made
before the said amendment was still pending at the time when the
provisions of Section 11B were amended. This is how the said
Civil Appeal No. 3600 of 2006 Page 27 of 31
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proviso is interpreted by this Court in Mafatlal Industries Ltd.
(supra).
16) Once we find that no such application was pending and the orders
on the said application had already been passed, the proviso
ceases to have any application. The reason, even otherwise, is
very obvious. Section 11B relates to claim for refund of duty and
the procedure for such a refund is stipulated in this section. As
per sub-section (1) thereof, any person claiming refund of any
duty of excise has to move an application for refund of such duty
to the Assistant Commissioner of Central Excise. Once such an
application is made, the same is to be considered in accordance
with this provision. As already pointed out above, under the
unamended provision, the Assistant Commissioner was not
required to go into the question as to whether incidence of such
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duty had been passed on by the applicant claiming refund to any
other person or not. However, if the application was not decided
till the time amendment was incorporated in the year 1991, as per
the proviso, while dealing with such an application for refund, the
Assistant Commissioner is still empowered to go into this question
even when the application was filed before the commencement of
the amended provision. This situation would prevail only when
Civil Appeal No. 3600 of 2006 Page 28 of 31
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there is a pending application before the Assistant Commissioner
of Central Excise, which is yet to be decided. If the order for
refund on such an application had already been passed before
coming into force the amended provision and no application was
pending at the commencement of the Central Excise and
Customs Laws (Amendment) Act, 1991 before the Assistant
Commissioner and, therefore, question of applying the said
proviso and going into the issue as to whether incidence of such
duty had been passed by the applicant to any other person or not
would not arise. Thereafter, order passed on the application is
only to be implemented by giving the refund as per that order. By
no stretch of imagination, the Officer, at the time of carrying out
the orders for refund, which have already been passed, can be
invested with the powers to go into the question of unjust
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enrichment by invoking the proviso to sub-section (1) of Section
11B. In the instant case, the order on the refund application of the
respondent had been passed on 06.06.1989, which was much
before the amended provision came into operation. In fact, even
after the order of refund was passed, the appellant had not
refunded the amount and it is in these circumstances that writ
petition was filed in the High Court for initiation of contempt
proceedings against the defaulting officers. In such proceedings,
Civil Appeal No. 3600 of 2006 Page 29 of 31
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the High Court had passed the order dated 18.07.1995. In this
order, no doubt, the Court observed that the Assistant
Commissioner would go into the question if the respondent should
be granted the refund in spite of Section 11B of the Act. However,
merely because of such observations, it cannot be said that the
Assistant Commissioner was entitled to look into the issue of
unjust enrichment when if, otherwise, he he was otherwise had no
jurisdiction to do so in the facts of the present case. Such
observations were given in view of the statement of the counsel
for the Government who brought to the notice of the Court the
amended provisions contained in sub-section (3) of Section 11B
of the Act. The High Court did not go into the issue as to whether
such a course of action was permissible or not. Another pertinent
aspect which needs to be kept in mind is that the interpretation
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that is to be accorded to the amended provision had not been
decided by this Court till that time and the law on this issue came
to be settled in the year 1997 only when the judgment in Mafatlal
Industries Ltd. (supra) was pronounced by this Court.
17) Thus, when the order of the Assistant Commissioner was
challenged and the matter came before the Tribunal, the Tribunal
was duty bound to apply the law laid down in Mafatlal Industries
Civil Appeal No. 3600 of 2006 Page 30 of 31
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Ltd. (supra), which it did. Similar exercise is done by the High
Court in the impugned judgment. We find that the view taken by
the High Court is in consonance with the law laid down by this
Court in the aforesaid case.
18) We find that there is no scope to interfere with the impugned
decision of the High Court and, accordingly, dismiss this appeal.
No costs.
.............................................J.
(A.K. SIKRI)
.............................................J.
(ROHINTON FALI NARIMAN)
NEW DELHI;
SEPTEMBER 02, 2015.
JUDGMENT
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