Excise/Customs:

Excise/Customs duty levied on misrepresentation/misapplication/erroneous interpretation of the statutory provisions under provisions declared unconstitutional or under mistake of law-Remedies open Maintainability of suit under S.72 of Contract Act or writ petition under Art. 226 or Art. 32 or other remedies provided in Excise Act or Customs Act-Held, where refund is claimed on the ground that provisions of the Central Excises Act/Customs Act whereunder duty levied is or held to be unconstitutional, suit or writ petition would be maintainable However, all refund claims must be filed and adjudicated under the Central Excises Act or the Customs Act-In such cases suit invoking 172 of Contract Act would be barred Writ jurisdiction in such cases to be exercised in accordance with the legislative intent manifested in the Act In all situations refund can only be allowed where manufacturer- assessee has not passed on the burden of tax to third parties viz. consumers Presumption is of passing on the burden to the consumers Burden on the manufacturer to rebut the presumption by establishing to the contrary Doctrine of undue enrichment applicable to such assessees but not applicable to State Contract Act, 1872, S.72.

Excise duty paid under a provision declared unconstitutional-Petitioner failing to assail its constitutionality and the decision becoming final Declaration of unconstitutionality obtained by another person on another ground Held cannot be availed of by such petitioner to reopen the decision in his case.

Excise duty paid under mistake of law Refund Maintainability of suit or writ petition-Held, Once assessment or levy became final in case of a manufacturer- assessee, he cannot later file suit or writ petition claiming refund on the ground that decision of Court or Tribunal in another person's case led him to discover the mistake of law under which he paid the duty. In all cases where suit or writ petition is open, it is necessary for the plain- tiff/petitioner to file suit or writ petition within the limitation period under S.17(1)(c) of Limitation Act and to allege and establish that he has not passed on the burden of tax to the consumer Where claim has to be made under the Central Excises Act or Customs Act, and no suit lies, such claim to be preferred within the period of limitation prescribed under the said Acts-Limitation Act, 1963, S.17(1)(c).

State can raise plea in defence, of spending away the amount of tax collected under unconstitutional law and/or of financial chaos in administration of the State, as a result of allowing claim of refund-Such plea by assessee not tenable where he has not passed on the burden of duty to others.

State cannot reclaim the refunded amounts where no proceedings are pending All pending matters to be governed by the law declared in the present case notwithstanding any refunds made in such pending proceedings.

Excise Law:

Central Excises and Salt Act, 1944-Ss.11-B, 11-C, 12-А, 12-B, 12-C, 12-D-Validity of Held, valid-S.11-B not a device to retain illegally collected duty-Ss.11-B and 12-B have the effect of changing the very nature of excise duty.

S.11-B-Retrospective operation-Refund Tax levied under mistake of -law-Limitation-Held, S.11-B applies to all pending proceedings but not to those proceedings which have become final after appeal period expired before the commencement of the 1991 Amendment Act-Application for refund under S.11-B to be made within six months from date of payment of duty-Since this requirement cannot be complied with in respect of pending decrees or orders, to ensure that such orders and decrees are not frustrated, it must be deemed that the duties were paid 'under protest' within the meaning of second proviso to S.11- B(1) Customs Act. 1962, S.27.

Central Excise Rules, 1944-R233-B-Grounds for payment of duty under protest-Assessee need not particularise the grounds-Letter of protest

acknowledged by the Officer shall be proof of payment of duty under protest under S.11-B of the Central Excises and Salt Act.

Constitution of India, 1950:

Art. 14-Taxing statutes-Discretion of the Legislature State allowed to pick and choose districts, objects, persons, methods and even rates for taxation with reasonableness-Courts view laws relating to economic activities with greater latitude than other matters.

Arts, 14 and 19 Reasonableness of a statutory provision-Mere possibility of abuse by those in charge of administering it Not a ground for holding it procedurally or substantively unreasonable Administrative Law Judicial Review.

Art. 226-High Court to exercise its writ jurisdiction in consonance with the legislative intent manifested by the statutory provisions involved Jurisdic- tion under Art. 226 to be exercised to effectuate the regime of law and not to abrogate it. Maintainability of writ petition-Alternative remedy-Refund claim against tax/duty wrongly paid-Remedy under the relevant Act alone to be pursued Central Excises and Salt Act, 1944, S.11- B-Customs Act, 1962, S.27.

Article 265-Tax levied or collected contrary to law-Refund of-Where taxing statute provides for refund, validity of such provision must be examined with reference to other provisions of the Constitution-Where refund is claimed on the ground that tax has been paid under mistake of law, claimant- assessee must plead and prove that he has not passed on the tax burden to third persons.

Contract Act, 1872:

S.72-Action for restitution under-Based on equity Person claiming restitution must plead and prove that he suffered loss or injury Burden of proof on petitioner/plaintiff since the fact whether duty passed on or not is within his special and exclusive knowledge-If assessee passes on the tax burden to third persons, no suit for refund on ground of mistake of law would be maintainable Evidence Act, 1872: S.106-Sale of Goods Act. 1930. S.64-A.

Civil Procedure Code, 1908-S.9-Civil Court's jurisdiction-Bar of by implication-Suit not maintainable where a complete mechanism for redressal is provided by the statute concerned-Central Excises and Salt Act, 1944, S.11-B-Customs Act, 1962, S.27.

DOCTRINES-Doctrine of unjust enrichment Doctrine of restitution-Discussed.

WORDS AND PHRASES-"Tax"-"Levy"-"Jurisdiction"-"Jurisdictional error Meaning of.

The present appeals and writ petitions raised certain questions concerning the refund of Excise & Customs duty collected contrary to law. These questions related to the correctness of certain earlier decisions of Supreme Court, concept of unjust enrichment, interpretation of Article 265 of the Constitution of India and of the provisions of the Central Excises and Salt Act 1944 and the Customs Act 1962.

The main topic of controversy viz. refund of Excise duty was governed by different provisions over the years; viz.(i) upto August 6, 1977, the refund of duties was governed by Rule 11, as it stood upto that date; (ii) between August 6, 1977 and November 16, 1980 refund of duties was governed by Rule 11 as it obtained during the said period; (iii) from November 16, 1980 upto September 19, 1991 (date of coming into force of 1991 Amendment Act) the refund of duties was governed by Section 11B as it stood during the said period; (iv) with effect from September 19, 1991 the refund of duties is governed by Section 11B as amended by the 1991 Amendment Act and the allied provisions. Though different provisions governed the subject of refund during different times, there is one feature - uniformly common to all of them viz. they purport to be exhaustive on subject of refund and they provided a period of limitation for making such claims.

In these appeals and writ petitions the appellants/writ petitioners contended that the provisions felating to refund of excise/customs duty did not preclude the filing of a suit or the filing of a writ petition clainiing refund where tax has been collected contrary to law by virtue of Article 265 of the Constitution and that the question of passing on the burden of duty is totally irrelevant in the matter of refund; that the law laid down in Kanhaiya Lal has been the law over the last 37 years and has been followed

I consistently by different Benches of the Supreme Court and that there were no good or compelling reasons to deviate from or to overrule the decision in Kanhaiya Lal; referring to the second alternative condition imposed by Section 424 wherein it was provided that if the manufacturer gives a bond undertaking to refund the same to purchaser within a particular period he would be entitled to claim the refund, it was urged that such a condition could have been imposed in the Central Excises and Customs Act as well; that even if it is legitimate for Parliament to prescribe that in case the money was passed on it must be made over to the person from whom it was collected, and this should be done through the medium of manufacturer/tax payer and not through any other medium; that a claim for refund has to be filed within six months from the relevant date but since appellate/revision proceedings or for that matter proceedings in High Court/Supreme Court take number of years and by the time the claimant succeeds and Excise/Customs:

Excise/Customs duty levied on misrepresentation/misapplication/erroneous interpretation of the statutory provisions under provisions declared unconstitutional or under mistake of law-Remedies open Maintainability of suit under S.72 of Contract Act or writ petition under Art. 226 or Art. 32 or other remedies provided in Excise Act or Customs Act-Held, where refund is claimed on the ground that provisions of the Central Excises Act/Customs Act whereunder duty levied is or held to be unconstitutional, suit or writ petition would be maintainable However, all refund claims must be filed and adjudicated under the Central Excises Act or the Customs Act-In such cases suit invoking 172 of Contract Act would be barred Writ jurisdiction in such cases to be exercised in accordance with the legislative intent manifested in the Act In all situations refund can only be allowed where manufacturer- assessee has not passed on the burden of tax to third parties viz. consumers Presumption is of passing on the burden to the consumers Burden on the manufacturer to rebut the presumption by establishing to the contrary Doctrine of undue enrichment applicable to such assessees but not applicable to State Contract Act, 1872, S.72.

Excise duty paid under a provision declared unconstitutional-Petitioner failing to assail its constitutionality and the decision becoming final Declaration of unconstitutionality obtained by another person on another ground Held cannot be availed of by such petitioner to reopen the decision in his case.

Excise duty paid under mistake of law Refund Maintainability of suit or writ petition-Held, Once assessment or levy became final in case of a manufacturer- assessee, he cannot later file suit or writ petition claiming refund on the ground that decision of Court or Tribunal in another person's case led him to discover the mistake of law under which he paid the duty. In all cases where suit or writ petition is open, it is necessary for the plain- tiff/petitioner to file suit or writ petition within the limitation period under S.17(1)(c) of Limitation Act and to allege and establish that he has not passed on the burden of tax to the consumer Where claim has to be made under the Central Excises Act or Customs Act, and no suit lies, such claim to be preferred within the period of limitation prescribed under the said Acts-Limitation Act, 1963, S.17(1)(c).

State can raise plea in defence, of spending away the amount of tax collected under unconstitutional law and/or of financial chaos in administration of the State, as a result of allowing claim of refund-Such plea by assessee not tenable where he has not passed on the burden of duty to others.

State cannot reclaim the refunded amounts where no proceedings are pending All pending matters to be governed by the law declared in the present case notwithstanding any refunds made in such pending proceedings.

Excise Law:

Central Excises and Salt Act, 1944-Ss.11-B, 11-C, 12-А, 12-B, 12-C, 12-D-Validity of Held, valid-S.11-B not a device to retain illegally collected duty-Ss.11-B and 12-B have the effect of changing the very nature of excise duty.

S.11-B-Retrospective operation-Refund Tax levied under mistake of -law-Limitation-Held, S.11-B applies to all pending proceedings but not to those proceedings which have become final after appeal period expired before the commencement of the 1991 Amendment Act-Application for refund under S.11-B to be made within six months from date of payment of duty-Since this requirement cannot be complied with in respect of pending decrees or orders, to ensure that such orders and decrees are not frustrated, it must be deemed that the duties were paid 'under protest' within the meaning of second proviso to S.11- B(1) Customs Act. 1962, S.27.

Central Excise Rules, 1944-R233-B-Grounds for payment of duty under protest-Assessee need not particularise the grounds-Letter of protest

acknowledged by the Officer shall be proof of payment of duty under protest under S.11-B of the Central Excises and Salt Act.

Constitution of India, 1950:

Art. 14-Taxing statutes-Discretion of the Legislature State allowed to pick and choose districts, objects, persons, methods and even rates for taxation with reasonableness-Courts view laws relating to economic activities with greater latitude than other matters.

Arts, 14 and 19 Reasonableness of a statutory provision-Mere possibility of abuse by those in charge of administering it Not a ground for holding it procedurally or substantively unreasonable Administrative Law Judicial Review.

Art. 226-High Court to exercise its writ jurisdiction in consonance with the legislative intent manifested by the statutory provisions involved Jurisdic- tion under Art. 226 to be exercised to effectuate the regime of law and not to abrogate it. Maintainability of writ petition-Alternative remedy-Refund claim against tax/duty wrongly paid-Remedy under the relevant Act alone to be pursued Central Excises and Salt Act, 1944, S.11- B-Customs Act, 1962, S.27.

Article 265-Tax levied or collected contrary to law-Refund of-Where taxing statute provides for refund, validity of such provision must be examined with reference to other provisions of the Constitution-Where refund is claimed on the ground that tax has been paid under mistake of law, claimant- assessee must plead and prove that he has not passed on the tax burden to third persons.

Contract Act, 1872:

S.72-Action for restitution under-Based on equity Person claiming restitution must plead and prove that he suffered loss or injury Burden of proof on petitioner/plaintiff since the fact whether duty passed on or not is within his special and exclusive knowledge-If assessee passes on the tax burden to third persons, no suit for refund on ground of mistake of law would be maintainable Evidence Act, 1872: S.106-Sale of Goods Act. 1930. S.64-A.

Civil Procedure Code, 1908-S.9-Civil Court's jurisdiction-Bar of by implication-Suit not maintainable where a complete mechanism for redressal is provided by the statute concerned-Central Excises and Salt Act, 1944, S.11-B-Customs Act, 1962, S.27.

DOCTRINES-Doctrine of unjust enrichment Doctrine of restitution-Discussed.

WORDS AND PHRASES-"Tax"-"Levy"-"Jurisdiction"-"Jurisdictional error Meaning of.

The present appeals and writ petitions raised certain questions concerning the refund of Excise & Customs duty collected contrary to law. These questions related to the correctness of certain earlier decisions of Supreme Court, concept of unjust enrichment, interpretation of Article 265 of the Constitution of India and of the provisions of the Central Excises and Salt Act 1944 and the Customs Act 1962.

The main topic of controversy viz. refund of Excise duty was governed by different provisions over the years; viz.(i) upto August 6, 1977, the refund of duties was governed by Rule 11, as it stood upto that date; (ii) between August 6, 1977 and November 16, 1980 refund of duties was governed by Rule 11 as it obtained during the said period; (iii) from November 16, 1980 upto September 19, 1991 (date of coming into force of 1991 Amendment Act) the refund of duties was governed by Section 11B as it stood during the said period; (iv) with effect from September 19, 1991 the refund of duties is governed by Section 11B as amended by the 1991 Amendment Act and the allied provisions. Though different provisions governed the subject of refund during different times, there is one feature - uniformly common to all of them viz. they purport to be exhaustive on subject of refund and they provided a period of limitation for making such claims.

In these appeals and writ petitions the appellants/writ petitioners contended that the provisions relating to refund of excise/customs duty did not preclude the filing of a suit or the filing of a writ petition claiming refund where tax has been collected contrary to law by virtue of Article 265 of the Constitution and that the question of passing on the burden of duty is totally irrelevant in the matter of refund; that the law laid down in Kanhaiya Lal has been the law over the last 37 years and has been followed

I consistently by different Benches of the Supreme Court and that there were no good or compelling reasons to deviate from or to overrule the decision in Kanhaiya Lal; referring to the second alternative condition imposed by Section 424 wherein it was provided that if the manufacturer gives a bond undertaking to refund the same to purchaser within a particular period he would be entitled to claim the refund, it was urged that such a condition could have been imposed in the Central Excises and Customs Act as well; that even if it is legitimate for Parliament to prescribe that in case the money was passed on it must be made over to the person from whom it was collected, and this should be done through the medium of manufacturer/tax payer and not through any other medium; that a claim for refund has to be filed within six months from the relevant date but since appellate/revision proceedings or for that matter proceedings in High Court/Supreme Court take number of years and by the time the claimant succeeds and asks for refund his claim will be barred and it will be thrown out on the ground that it has not been filed within six months from the date of payment of duty; that Rule 233B which prescribes the procedure to be followed in cases where duty is paid under protest requires the assessee to state the grounds for payment of duty under protest and that it may well happen that the authority to whom the letter of protest is submitted may refuse to record it if he is not satisfied with the grounds of protest; that the amended Section 11B is prospective in operation and cannot apply to pending proceedings; that Section 12A was also inserted by the 1991 (Amendment) Act and therefore it is not expected of any manufacturer/assessee to maintain the records required by Section 12A prior to its coming into force; that in respect of an application filed before the commencement of the said Act it is not possible to comply with the requirements of sub-section (1) in so far as it requires the filing of documents referred to in Section 12A and this circumstance was urged as a ground for holding that the amended Section 118 applies only to refund applications filed after coming into force of the 1991 (Amendment) Act; that the right to recover the excise duty paid is both a constitutional and a statutory right; and that all these factors militate against giving retrospective effect to Section 11B.

It was also submitted that the real purpose behind Section 11B and its allied provisions was not to benefit the consumers by refusing refund to manufacturer (on the ground of passing on the burden) but only to enable the Government to retain the illegally collected taxes; that the creation of the Consumer Welfare Fund is a mere pretence and not an honest exercise; that as per Section 12D 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; that there is no provision in the Act to locate the person really entitled to refund and to make over the money to him; that in a competitive atmosphere and for other commercial reasons it may happen that the manufacture is obliged to sell his goods at less than its proper price and the manufacturer may have to forego not only his profit but also part of excise duty and that in such a case levy and collection of full excise duty would cease to be a duty of excise and it will become a tax on income or on business; that Section 11D provides for double taxation and that  sub-section (1) of Section 11D makes the manufacturer liable to pay duty which he collects from the buyer as part of the price of goods even where the manufacturer has already paid the duty at the time of removal of the goods.

On behalf of the Union of India it was contended that Kanhaiya Lal has been wrongly decided; that no suit or writ petition lies for refund of duty except in the case of unconstitutional levy and even in such cases the claim is subject to proof that burden of duty has not been passed on to the purchaser; that in all other cases claims of refund can be made only under and in accordance with the provisions of the Act/Rules governing the subject of refund and in no other manner and in no other forum; that in any event since Kanhaiya Lal did not deal with the effect of passing on the duty to a third party it was neither raised nor considered therein; hence it is no authority for the proposition that the manufacturer/payer can recover the duty paid even if he has passed on the burden to others; that the distinction between the constitutional values obtaining in countries like United States of America, Canada and Australia or United Kingdom and the values obtaining under our Constitution are different; that the philosophy and the core values of our Constitution must be kept in mind while understanding and applying the provisions of Art. 265 of the Constitution and Section 72 of the Contract Act that 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; that no consumer organisation had come forward to voice any grievance against the relevant provisions; that clause (e) of the proviso to sub-section (2) of Section 11B  did 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 and therefore it was not correct to suggest that the Act did not provide for refund of duty to the person who has actually borne the burden; that there in no vice in the relevant provisions of the Act; that Rules can not be relied upon to impugn the validity of an enactment, which must stand or fall on its own strength; that the defect in the Rules if any, could always be corrected if the experience warrant it; that the Court may indicate the modification needed in the Rules and that the Government is always prepared to make appropriate changes in the Rules since it views the process as a trial and error method; and that in case a manufacturer is obliged to sell his goods at a price lower than the normal price declared under S.4 it is always open to him to approach the excise authorities for redetermination of the assessable value.