Full Judgment Text
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CASE NO.:
Appeal (civil) 6832-6833 of 1999
PETITIONER:
Sahakari Khand Udyog Mandal Ltd.
RESPONDENT:
Commissioner of Central Excise and Customs
DATE OF JUDGMENT: 09/03/2005
BENCH:
RUMA PAL & ARIJIT PASAYAT & C.K. THAKKER
JUDGMENT:
JUDGMENT
Thakker, J.
Both these appeals arise out of a common order passed by the Customs Excise
and Gold (Control) Appellate Tribunal, Western Regional Bench at Bombay
(hereinafter referred to as ‘CEGAT’) on 1st June, 1999 by which it
confirmed the orders in original passed by Assistant Collector Central
Excise, Valsad and affirmed by Collector of Central Excise (Appeals),
Ahmedabad.
Before dealing the points raised by the parties in the present appeals,
relevant facts of both the cases may be stated in brief. Civil Appeal No.
6832 of 1999 is filed by M/s. Sahakari Khand Udyog Mandal Ltd. (‘Mandal’
for short). According to the Mandal, it is engaged in manufacturing sugar
falling under sub item (1) of Item No. 1 of the First Schedule to the
Central Excise and Salt Act, 1944 (hereinafter referred to as ‘the Act’).
The appellant-Mandal vide its letter dated 14th August, 1978 addressed to
the Range Forest Officer, Billimora, claimed rebate of Rs. 6,92,779.59 ps..
The refund was claimed on the basis of Notification No. 257/76 dated
September 30, 1976. The Notification was issued by the Government in
exercise of the powers under sub-rule (1) of Rule 8 of Central Excise
Rules, 1944 (hereinafter referred to as ‘the Rules’). It inter alia
provided for exemption from payment of excise duty leviable thereon in
excess of average production of sugar of the corresponding period of
preceding three years. The notification also provided that such exemption
would be on sale of sugar as specified in columns 3 and 4 as levy sugar and
free sale sugar.
According to the appellant-Mandal, the production of sugar by the Mandal
during the preceding three years was as under :
1973-74 - 1,68,636 quintals
1974-75 - 1,65,308 quintals
1975-76 - 1,30,595 quintals
Thus, total production of three years was 4,64,539 quintals. The average
production of three years for the period of 1973-74, 1974-75 and 1975-76
was 1,54,846.33 quintals (4,64,539 - 3). Since production of sugar for the
year 1976-77 was 2,09,982 quintals, the appellant-Mandal was entitled to
benefit of exemption from octroi duty for excess production of 55,135.67
quintals. The appellant, therefore, submitted its claim for Rs. 6,92,779.59
ps.
The Assistant Collector of Central Excise, by an order dated 29th March,
1993, held the claim to be time barred under Section 11B of the Act as it
was filed after six months. He also held that for an amount of Rs.1,348.80
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ps., the claimant was not entitled as the claim related to 48 kgs. of sugar
which was re-processed sugar and hence not permissible. Regarding the
amount of Rs.6,92,779.59 ps., the Assistant Collector held that to get
benefit of exemption, excess sugar was to be sold as levy sugar and free
sale sugar in the ratio of 65 : 35 respectively. The appellant claimed the
amount as under :
Excess Ratio of Kind of Rate per Total
Production Percentage Sugar Qtl Rebate
1. 55135.67 65% i.e. Levy 4.20 1,50,520.40
35838.18
2. 55135.67 35% i.e. Free sale 28.10 5,42,259.19
19297.48
Rs. 6,92,779.59
On going through actual sale by the appellant, however, it was found that
out of excess production of 55,135.67 quintals sugar, the Mandal had sold
sugar as levy sugar and free sale sugar as under:
42133 Qtl. Levy Sugar x Rs.4.20 = 1,76,l958.60
(Rate of rebate)
13003 Qtl. Free Sale x Rs.28.10 = 3,65,384.30
Sugar (Rate of rebte)
Total Rs. 5,40,342.90
The claimant, therefore, according to the Assistant Collector, could not
have claimed Rs.6,92,779.59 ps., but only Rs. 5,42.342.90 ps., The
Assistant Collector further observed that the claimant had already charged
and collected the duty amount from its customers and as such it was not
entitled to claim the said amount. He, therefore, transferred the amount to
Consumer Welfare Fund, set up by the Government of India.
Being aggrieved by the order passed by the Assistant Collector, the
appellant preferred an appeal before the Collector of Central Excise
(Appeals), Ahmedabad. Before the Appellant authority, it was contended that
the Assistant Collector had committed an error of law in holding the claim
to be barred by time; there was an error on the part of the adjudicating
authority in reducing the claim of Rs.1,348.80 ps. on the ground that the
sugar was re-processed goods and no rebate could be allowed and the working
out of ratio of 65 : 35 of levy sugar and free sale sugar had not been
correctly applied and the Assistant Collector ought not to have reduced the
claim. He also erred in not paying the amount to the Mandal. As the order
passed by the Assistant Collector was contrary to law, it was liable to be
set aside by ordering the respondents to pay the amount claimed by the
appellant - Mandal.
The Appellate Authority considered the submission regarding the claim of
Rs.1,348.80 ps. and upheld it observing that in accordance with the
Notification No. 257/76, the claimant was entitled to the said amount and
the order disallowing the claim was not proper and accordingly it was set
aside. Regarding the claim being barred by limitation, it was observed that
since the sugar year was over on September 30, 1976, the claim was required
to be submitted within six months. But the claim was submitted on 14th
August, 1978, and hence, it was barred by limitation. It was contended by
the Mandal that initially the claimant had claimed benefit of Notification
No. 36 of 1976 but after the Directorate of Sugar informed the claimant on
19th July, 1978 that the claim of the Mandal was liable to be rejected, it
filed the present claim on 14th August, 1978. The Appellate Authority,
however, observed that the Assistant Collector could not go beyond the
provision of law and when the time limit had been prescribed under Section
11B of the Act, the claim was rightly held to be time barred.
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Regarding non-payment of amount to the claimant, the Appellate Authority
observed that the Assistant Collector was right in transferring the refund
to the Consumer Welfare Fund. The claimant no doubt objected to invoking
the doctrine of unjust enrichment under Section 11B of the Act contending
that the rebate was in the nature of incentive to the factories to
encourage them to produce more sugar and such rebate was not intended to
benefit the consumers. But it was observed that with the amendment of
Section 11B, the new provision would apply to all claims including those
filed before the amendment. The Collector also observed that the
Notification No. 257/76 did not use the word "rebate" but provided for
exemption from payment of duty on levy sugar and free sale sugar at the
rate specified in the table appended thereto. Section 11B provided for
refund of excise duty in certain cases to the applicant under sub-section
(2) of Section 11B of the Act. Since the case in hand was not covered by
the said provision as the Mandal had not paid the said amount, the Mandal
could not get such amount. He, therefore, dismissed the appeals.
The aggrieved appellant approached the CEGAT. Before the CEGAT, the
arguments advanced before the lower Authorities were reiterated. The CEGAT,
however, confirmed the order passed by the Assistant Collector as well as
by the Collector. According to the CEGAT, the claim was "clearly barred by
limitation". The CEGAT also observed that even if the claim was not barred
by limitation, it would come within the judgment of this Court in Mafatlal
Industries Ltd. and Ors. v. Union of India and Ors., [1977] 5 SCC 536 :
(1997) 99 ELT 247. The appeal was accordingly dismissed.
In Civil Appeal No. 6833 of 1999, the appellant had claimed rebate of Rs.
6,44,841 vide its letter dated 1st September, 1978 lodged with Range Forest
Officer, Billimora. The rebate was claimed on the basis of Notification No.
108/78 dated 28th April, 1978. Under the said Notification, a sugar factory
was entitled to exemption from excise duty on excess production of sugar of
the corresponding period of preceding three years. The notification also
provided that such exemption would be on sale of sugar as specified in
columns (3) and (4) as levy sugar and free sale sugar. According to the
Mandal, the production of sugar by the appellant Mandal for preceding three
years was as under :
1975 - 15,573 quintals
1976 - Nil
1977 - 24,817 quintals
Total - 40,390 quintals
1978 - 45,845 quintals.
According to the appellant, the average of earlier three years came to
13,466.67 quintals and hence the appellant was entitled to rebate on excess
production of 32,378.33 quintals. The Authority, however, held that since
there was ‘nil’ production of sugar by the appellant for one year (1976),
as per the policy of the Government, the said year was required to be
ignored. The Authority, in the circumstances, held that average production
of the appellant was 20,195 quintals (40,390 - 2). On that basis, the
appellant was entitled to claim rebate on the excess production of 25,650
quintals. The Assistant Collector also observed that ratio of levy sugar
and free sale sugar had to be maintained as 65 : 35.
The appellant ought to have sold sugar as under :
16672.50 Qt. x Rs. 9.60 = Rs. 1,60,056.00
8,977.50 Qt. x Rs.54.00 = Rs. 4,84,785.00
Grand total Rs. 6,44,841.00
The appellant however, cleared levy sugar and free sale sugar in the
following ratio :
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21,261 Qt. x Rs. 9.60 = Rs. 2,04,105.60
4,389 Qt. x Rs. 54.00 = Rs. 2,37,006.00
Total = Rs. 4,41,111.60
The appellant, therefore, could not claim Rs.6,44,841 but only
Rs.4,41,111.60 ps. Taking note of the fact that the sugar factory had
"already" charged and collected duty amount from the customers to whom the
free sale sugar as well as levy sugar has been released", the Assistant
Collector held that under Section 11B of the Act, the Mandal could not
claim the said amount from the Government. He in the circumstances reduced
the claim to Rs.4,44,111.60 ps. but transferred the amount to Consumer
Welfare Fund set up by the Government of India.
Being aggrieved by the said order passed by the Assistant Collector, the
appellant preferred an appeal but the appeal was dismissed by the Collector
of Customs. The aggrieved appellant then approached the CEGAT as already
noted earlier. The CEGAT also dismissed the appeal. The common order passed
by the CEGAT in both the matters have been challenged by the Mandal in the
present appeals.
We have heard learned counsel for the parties. The learned counsel for the
appellant-Mandal contended that the Authorities below committed an error of
law in holding the claim of the appellant as time barred. He also contended
that the Authorities were wrong in reducing the claim of the appellant in
Civil Appeal No. 6833 of 1999 by improperly interpreting Notification No.
108/78 dated 28th April, 1978 and in calculating the average production as
per the said Notification. According to the learned counsel, production of
sugar by the appellant in three years was required to be divided in three
years ignoring the fact that there was no production for one year. The
appellant in that case would be entitled to benefit of excess production of
32,378.33 quintals and not 25,650 quintals. The counsel vehemently
contended that the decision of the Authorities on application of the
doctrine of unjust enrichment was unwarranted and ill-founded and the ratio
laid down in the Mafatlal Industries Ltd. would not apply. According to the
counsel, sub-section (2) of Section 11B could not be invoked by the
Authorities and the appellant was entitled to rebate as claimed. It was
submitted that the object of granting rebate was to encourage sugar
factories to have more and more sugar production and it was intended to be
given to factories and not to consumers. It was, therefore, not open to the
Authorities to take into account extraneous ground for refusing relief to
the appellant. The amount hence could not have been diverted to the
Consumer Welfare Fund set up by the Government of India but ought to have
been given to the claimant. The counsel also submitted that there was an
error on the part of the Authorities in reducing the claim of the appellant
on the ground of actual sale of sugar on quota fixed for levy sugar and
free sale sugar. Sugar was sold according to the policy of the Government
and, hence, reduction of rebate was improper. He, therefore, submitted that
both the appeals should be allowed with an appropriate direction to the
respondents to pay the amount to the appellant-Mandal.
Learned counsel for the respondent, on the other hand, supported the orders
passed by the Authorities. According to him, one claim was clearly barred
by limitation. A finding of fact has been recorded that the claim was
submitted after a period of six months. The Authorities were, therefore,
right in rejecting the claim. Regarding average production, the counsel
submitted that Clause 3 of Notification No. 108/78 is clear and it states
that the average production for the period in the preceding three sugar
years shall be worked out in which the factory has actually worked during
the said period. The period for which it had not worked had to be ignored.
He also submitted that the calculation of average was as per the policy of
the Government and Clause 3 of the Notification and no grievance could be
made against such an action. On merits, the counsel submitted that for
claiming benefit of exemption of excess production of sugar, sale of sugar
must be as per the policy of the Government for levy sugar and free sale
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sugar. From the record, it is clear and a finding has been recorded by the
Authorities that sale of sugar was not in the ratio of 65 : 35 for levy
sugar and free sale sugar respectively and, hence, the benefit was
calculated on the basis of actual sale of sugar and the action was legal,
valid and proper. Regarding the grievance of the appellant of transferring
the amount of exemption from octroi duty to Consumer Welfare Fund, it was
submitted that admittedly the appellant has not suffered. The octroi amount
has been passed on to customers and has already been recovered by the
appellant. Hence, under sub-section (2) of Section 11B of the Act, the
Mandal cannot claim such amount. But even if it is assumed that Section 11B
has no application, on general principle also, the appellant has no right
to claim such amount as it would result in ‘unjust enrichment’ by the
appellant. Hence, by not extending the said benefit, the Authorities have
committed no error of law. He, therefore, submitted that the appeals
deserve to be dismissed.
Having heard learned counsel for the parties, in our opinion, the appellant
is not entitled to any relief. On limitation, it is clear from the record
that in Civil Appeal No. 6832 of 1999, the claim was in respect of the
production for the year 1976-77. It related to a claim up to 30th
September, 1977 and the appellant ought to have filed the claim within six
months i.e. on or before 31st March, 1978. Admittedly, the claim was
submitted on August 14, 1978. It was, hence, rightly held to be barred by
limitation.
Regarding average production of sugar for three years in Civil Appeal No.
6833 of 1999, in our opinion, the submission of the learned counsel for the
respondent is well founded that the average production of two years had to
be considered. Clause 3 of Notification No. 108/78 dated 28th April, 1978
reads as under:
"3. Where during the period mentioned in column (1) of the said Table
production in any of the preceding three sugar years was nil, the average
production shall be determined as under :-
The average production for the said period in the preceding three
sugar years shall be worked out on the basis of the period or
periods in which the factory had actually worked during the said
period and the period or periods in which it did not work during
the said period shall be ignored while arriving at the average."
(emphasis supplied)
A similar question came up for consideration recently before us in
Sidheshwar Sahakari Sakhar Karkhana Ltd. v. Union of India and Ors., Civil
Appeal No. 5866 of 1999 decided on 23rd February, 2005. In that case also,
the appellant Karkhana did not produce any sugar for one year. The
Authorities, therefore, ignored the said year while calculating average
production of the Karkhana. A grievance was made by the Karkhana that the
action of the Authorities was illegal and production of sugar ought to have
been divided in three years ignoring non-production for one year.
Interpreting the Notification and the language used in Clause 3 thereof,
this Court negatived the contention and held that when there was no
production by Karkanha for one year, the said period was required to be
ignored and was rightly ignored by the Government. In our opinion, the
ratio laid down in the said case applies to the case in hand also and the
action of respondent cannot be held illegal or contrary to law.
It was then contended that the authorities were not right in reducing the
amount of rebate on the basis of sale of levy sugar and free sale sugar.
According to the appellant-Mandal, sugar was sold by the Mandal, the
authorities were made aware of that fact, and nothing was suppressed. When
the authorities were aware and yet no objection was taken by them at any
time, it was not open to them to reduce the amount on the ground that sale
of sugar by the appellant Mandal was not as per so called policy of the
Government of 65 per cent levy sugar and 35 per cent free sale sugar.
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Reduction of amount on that ground was illegal and unlawful.
We are unable to uphold the argument. In our opinion, both the
notifications are abundantly clear. The benefit under the said
notifications can be claimed only if sugar is sold in the proportion of 65
: 35 levy sugar and free sale sugar respectively. Since the appellant was
claiming the benefit of exemption from excise duty, it was obligatory on
the appellant-Mandal to sell sugar in the ratio of 65 : 35 as specified in
the notifications and unless that condition is fulfilled, the benefit of
exemption from duty could not be claimed by it. On the basis of actual sale
by the appellant, the respondent had calculated the amount of exemption
from excise duty which was in consonance with the notifications and no
grievance can be made by the appellant against that decision.
It was also argued that the authorities below could not have invoked the
provisions of Section 11B of the Act for denial of the benefit of
notifications. Section 11B was inserted in the Act by the Amendment Act of
1978 (Act 25 of 1978) with effect from November 17, 1980. It provided for
refund of duties in certain cases of excess payment. The section was
further amended by the Amendment Act of 1991 (Act 14 of 1991) with effect
from September 19, 1991.
In Union of India v. Jain Spinners Ltd., [1992] 4 SCC 389 and in Union of
India v. I.T.C. Ltd., [1993] Supp 4 SCC 326, this Court held that so long
as the refund proceedings are pending and not finalized, the amended
provisions get attracted and may disentitle the manufacturer from claiming
any refund contrary to the amended provisions. To put it differently, the
provisions of Section 11B as amended by the Amendment Act of 1991 would
also apply to claims of refund which are pending. It was held that the
Court is bound to take notice of change in law governing refund and can
call upon the manufacturer to furnish evidence to prove that the amount of
duty of excise in relation to which refund was claimed was not passed on by
him to customers.
In Mafatlal Industries Ltd., this Court reiterated the law laid down in
Jain Spinners Ltd. and I.T.C. Ltd. Speaking for the majority, B.P. Jeevan
Reddy, J., observed that the Court should have due regard to the
legislative intent evidenced in the Act and must exercise jurisdiction
consistent with the provisions of law.
The learned counsel for the appellant referred to a decision of this Court
in Hindustan Metal Pressing Works v. Commissioner of Central Excise, Pune,
[2003] 3 SCC 559, and submitted that principles contained in Section 11B of
the Act would not apply to past cases. It may, however, be stated that in
that case, the proceedings were finalized, transaction was over and the
amount was refunded to assessee in 1989. In that fact- situation, this
Court held that past finalized transactions could not be reopened on the
ground that refund was erroneously granted and there was unjust enrichment.
The fact-situation in the present case is totally different. The amount has
been passed on to consumers and the claim is made by the Mandal to refund
the amount. The ratio laid down in Hindustan Metal Pressing Works,
therefore, does not help the appellant.
Finally, it was submitted that the doctrine of ‘unjust enrichment’ has no
application. The said doctrine, therefore, could not have been invoked by
the authorities for denying the benefit of exemption from payment of excise
duty and in refusing to pay the amount to which the appellant was held
entitled by diverting it to Consumers Welfare Fund set up by the
Government.
We are not impressed by that argument also. In our view, the submission is
not well founded and cannot be accepted.
Stated simply, ‘Unjust enrichment’ means retention of a benefit by a person
that is unjust or inequitable. ‘Unjust enrichment’ occurs when a person
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retains money or benefits which in justice, equity and good conscience,
belong to someone else.
The doctrine of ‘unjust enrichment’, therefore, is that no person can be
allowed to enrich inequitably at the expense of another. A right of
recovery under the doctrine of ‘unjust enrichment’ arises where retention
of a benefit is considered contrary to justice or against equity.
The juristic basis of the obligation is not founded upon any contract or
tort but upon a third category of law, namely, quasi-contract or the
doctrine of restitution.
In the leading case of Fibrosa v. Fairbairn, [1942] 2 All ER 122, Lord
Wright stated the principle thus :
"....(A)ny civilized system of law is bound to provide remedies for cases
of what has been called unjust enrichment or unjust benefit, that is, to
prevent a man from retaining the money of, or some benefit derived from
another which it is against conscience that he should keep. Such remedies
in English law are generically different from remedies in contract or in
tort, and are now recognized to fall within a third category of the common
law which has been called quasi-contract or restitution."
Lord Denning also stated in Nelson v. Larholt, [1947] 2 All ER 751;
"It is no longer appropriate, however, to draw a distinction between law
and equity. Principles have now to be stated in the light of their combined
effect. Nor is it necessary to convass the niceties of the old forms of
action. Remedies now depend on the substance of the right, not on whether
they can be fitted into a particular framework. The right here is not
peculiar to equity or contract or tort, but falls naturally within the
important category of cases where the court orders restitution if the
justice of the case so requires."
The above principle has been accepted in India. This Court in several cases
has applied the doctrine of unjust enrichment.
In Orient Paper Mills Ltd. v. State of Orissa, [1962] 1 SCR 549, this Court
did not grant refund to a dealer since he had already passed on the burden
to the purchaser. It was observed that it was open to the Legislature to
make a provision that an amount of illegal tax paid by the persons could be
claimed only by them and not by the dealer and such restriction on the
right of the dealer to obtain refund could lawfully be imposed in the
interests of general public.
In Mulamchand v. State of M.P., AIR (1968) SC 1218, a contract was entered
into between the plaintiff and the Government for removal of forest
produce. The plaintiff deposited an amount of Rs. 10,000 and collected
forest produce. It was, however, turned out that the provisions of Article
299 of the Constitution were not complied with and the contract was void.
The plaintiff claimed refund of Rs. 10,000.
Applying the provision of Section 70 of the Contract Act, 1872 and
referring to Fibrosa and Nelson, this Court said :
"....It is well established that a person who seeks restitution has a duty
to account to the defendant for what he has received in the accounting by
the plaintiff is a condition of restitution from the defendant".
In M/s. Amar Nath Om Prakash and Ors. v. State of Punjab and Ors., [1985] 1
SCC 345 : [1985] 2 SCR 72, Section 23A of the Punjab Agricultural Produce
Markets Act, 1961 enabled the market committees to retain the fee levied
and collected by them from licensees in excess of the leviable amount if
the burden of such fee was passed on by the licensees to purchasers. The
validity of the said provision was challenged and refund was claimed. The
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Court, however, relying on Orient Paper Mills held that consumer public who
had borne the ultimate burden were the persons really entitled to refund
and since the market committees represented their interests, they were
entitled to retain the amount and the licensees who had levied and
collected the amount from consumers could not claim the benefit.
The Court said;
"The primary purpose of Section 23-A is seen on the face of it; it prevents
the refund of license fee by the market committee to dealers, who have
already passed on the burden of such fee to the next purchaser of the
agricultural produce and who want to unjustly enrich themselves by
obtaining the refund from the market committee, Section 23-A, in truth,
recognizes the consumer-public who have borne the ultimate burden as the
persons who have really paid the amount and so entitled to refund of any
excess fee collected and therefore directs the market committee
representing their interest to retain the amount. It has to be in this form
because it would, in practice, be a difficult and futile exercise to
attempt to trace the individual purchasers and consumers who ultimately
bore the burden. It is really a law returning to the public what it has
taken from the public, by enabling the committee to utilize the amount for
the performance of services required of it under the Act. Instead of
allowing middlemen to profiteer by ill-gotten gains, the Legislature has
devised a procedure to undo the wrong item that has been done by the
excessive levy by allowing the committees to retain the amount to be
utilized hereafter for the benefit of the very persons for whose benefit
the marketing legislation was enacted."
This Court held that the provision gave to the public through market
committees what they had taken from the public and due to it. It rendered
unto Caesar what was Caeser’s.
The law laid down in Orient Paper Mills Ltd. and Amar Nath Om Prakash was
quoted with approval by this Court in Mafatlal Industries Ltd.
In M/s. Shiv Shankar Dal Mills v. State of Haryana, [1980] 2 SCC 437,
market fee was collected under a provision which was struck down by this
Court in an earlier case. A prayer was, therefore, made by the traders to
refund the amount collected from them. This Court held that though
collection of market fee from the traders was illegal but traders could
demand only such amount that had not passed on to the customers. For that
view, the Court referred to Articles 38 and 39 of the Constitution as also
discretionary nature of the power under Article 226 of the Constitution.
Following Nawabganj Sugar Mills Co. Ltd. v. Union of India, [1976] 1 SCC
120 : [1976] 1 SCR 803, the Court devised a scheme providing for refund of
amounts to those from whom illegal collections had been made by traders.
In Mafatlal Industries Ltd. also, this Court held that refund of tax/duty
wrongfully paid can be claimed on the basis of doctrine of equity and a
person demanding such restitution must plead and prove that he had paid
such tax/duty and had suffered loss/injury. The burden is on the petitioner
to prove that the tax/duty paid by him is not passed on to customers or
third party and that he is entitled to restitution.
A reference may also be made to a recent decision of the Constitution Bench
in Godfrey Phillips India Ltd. and Anr. v. State of U.P. and Ors., Writ
Petition c No. 567 of 1994, dated January 20, 2005. In that case,
constitutional validity of Uttar Pradesh Tax on Luxuries Act, 1995 as also
other State Acts was challenged inter alia on the ground of legislative
competence by the State Legislature. The Court allowed the petition and
held that the State Legislature were not competent to impose luxury tax on
tobacco and tobacco products and the Acts were declared ultra vires and
unconstitutional. In the intervening period, however, tax was collected by
the appellants from consumers and also paid to the State Government. In
certain cases, interim relief was obtained by the appellants from this
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Court against recovery of tax and as alleged by the State Government, the
appellants continued to charge tax from consumers/customers.
In the circumstances, speaking through Constitution Bench, one of us, (Ruma
Pal, J.) stated;
"(F)ollowing the principles in Somalya Organics (India) Ltd. v. State of
U.P. [2001] 5 SCC 519 while striking down the impugned Acts we do not think
it appropriate to allow any refund of taxes already paid under the impugned
Acts. Bank guarantees if any furnished by the assessees will stand
discharged.
It was stated on behalf of the State Governments that after
obtaining interim orders from this Court against recovery of luxury
tax, the appellants continued to charge such tax from
consumers/customers. It is alleged that they did not pay such tax
to respective State Governments. It was, therefore, submitted that
if the appellants are allowed to retain the amounts collected by
them towards luxury tax from consumers, it would amount to "unjust
enrichment" by them.
In our opinion, the submission is well founded and deserves to be
upheld. If the appellants have collected any amount towards luxury
tax from consumers/customers after obtaining interim orders from
this Court, they will pay the said amounts to the respective State
Governments."
From the above discussion, it is clear that the doctrine of ‘unjust
enrichment’ is based on equity and has been accepted and applied in several
cases. In our opinion, therefore, irrespective of applicability of Section
11B of the Act, the doctrine can be invoked to deny the benefit to which a
person is not otherwise entitled. Section 11B of the Act or similar
provision merely gives legislative recognition to this doctrine. That,
however, does not mean that in absence of statutory provision, a person can
claim or retain undue benefit. Before claiming a relief of refund, it is
necessary for the petitioner/appellant to show that he has paid the amount
for which relief is sought he has not passed on the burden on consumers
and if such relief is not granted, he would suffer loss.
In the present case, not only no such case has been made out by the
appellant-Mandal, the position is just contrary. All the authorities below
have expressly recorded a finding that the appellant-Mandal has recovered
the amount from consumers and as such excise duty is passed on to
consumers/customers. In view of specific finding, in our opinion, the
conclusion is inescapable that the appellant-Mandal is not entitled to
claim any amount. Allowing exemption or refund of amount would result in
‘unjust enrichment’ by the appellant which cannot be permitted. In our
opinion, therefore, even on that count, orders passed by the authorities
and refusal to grant benefit cannot be held arbitrary, unreasonable or
inequitable. The said ground also, therefore, has to be rejected.
For the foregoing reasons, both the appeals deserve to be dismissed and are
accordingly dismissed. There shall be no order as to costs.