IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 112 of 1990 For Approval and Signature: HON'BLE MR.JUSTICE M.S.SHAH and HON'BLE MR.JUSTICE A.M.KAPADIA ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements? 2. To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- M/S I C GANDHI SILK MILLS LTD Versus UNION OF INDIA -------------------------------------------------------------- Appearance: 1. Special Civil Application No. 112 of 1990 MR UDAY JOSHI for M/S TRIVEDI & GUPTA for Petitioner No. 1 MR DHAVAL G NANAVATI for Respondent No. 1-3 -------------------------------------------------------------- CORAM : HON'BLE MR.JUSTICE M.S.SHAH and HON'BLE MR.JUSTICE A.M.KAPADIA Date of decision: 06/04/2004 ORAL JUDGEMENT (Per : HON'BLE MR.JUSTICE M.S.SHAH) What is challenged in this petition under Article 226 of the Constitution is the order dated 22.12.1989 passed by the Assistant Collector of Central Excise & Customs, Division-II, Surat rejecting the petitioner's application for refund claim of Rs.54,946-85ps. for the period from March 1972 to August 1972. 2. The petitioner-Company had earlier filed Special Civil Application Nos.6280 and 6281 of 1989 in respect of this very claim. In a dispute relating to classification of the product manufactured by the petitioner, the petitioner had succeeded and, therefore, the petitioner filed an application before the respondent-authorities for refund of the excise duty paid. The respondents were not considering the said application on the ground that the petitioner had not even produced the relevant documents to prove the payment of excise duty. That dispute was sought to be resolved by the directions given by this Court on 19.9.1989 directing the petitioners to produce such record as was available with the petitioners and also indicating as to with which authority the contemporaneous record regarding payment of duty would be available. That petition was accordingly disposed of in terms of the directions given and the observations made in the order dated 19.9.1989 (Annexure "A"). 3. Subsequently, after giving the petitioner an opportunity of being heard, the Assistant Commissioner has rejected the claim for refund on the ground that the petitioner had not produced any material to indicate that the burden of excise duty was not passed on to the purchasers. In short, the petitioner's claim for refund was rejected on the ground of unjust enrichment. The Assistant Commissioner has also given a finding that the sale price of the final products manufactured by metallic yarn included the cost of metallic yarn which also embodied the excise duty. In other words, one of the components of the cost of final products was the excise duty paid on the metallic yarn. Thus, while fixing or determining the sale price of the final products, the excise duty paid on metallic yarn must have been taken care of. 4. Mr Uday Joshi, learned counsel for the petitioner has submitted that the period in question was prior to the amendment made in the Central Excise & Salt Act, 1944 applying the doctrine of `unjust enrichment' in a statutory form and, therefore, the impugned order is required to be set aside. 5. On the other hand, Mr Dhaval Nanavati, learned Additional Standing Counsel for the Central Government has submitted that in Mafatlal Industries case, (1997) 89 ELT 247, the Apex Court has held that the doctrine of unjust enrichment was applicable even to the pre-amendment period as in several decisions the Apex Court had taken the view that when the burden of tax illegally collected had been passed on to the purchasers, the tax payer had no right to claim refund of such amount. 6. Having heard the learned counsel for the parties, we are of the view that there is considerable substance in the submissions made by Mr Dhaval Nanavati for the respondents that the doctrine of unjust enrichment was available to the respondent-authorities even before the amendment made to the Central Excise Act in the year 1991. 7. In Mafatlal Industries' case 1997 (5) SCC 536, the Apex Court has held that the principle of unjust enrichment was applicable even before amendment of Section 11B in 1991 and that such principle was recognized as a legal principle in several decisions. In paragraphs 52 to 56 of the majority judgment rendered by Hon'ble Mr Justice Jeevan Reddy, the Apex Court has approved the principles enunciated in Shiv Shankar Dal Mills vs. State of Haryana, (1980) 2 SCC 437, Amar Nath Om Prakash vs. State of Punjab, (1985) 1 SCC 345 and in State of MP vs. Vyankatlal, (1985) 2 SCC 544. The Court approved the principle laid down in Shiv Shankar Dal Mills case that though the refund of fee illegally collected may be legally due to the traders, the traders may be repaid amounts only to the extent they have not passed on the burden to their customers. To the extent they have passed on the burden to the customers, they were not entitled to get refund. This principle was deduced from the concept of distributive justice underlying Articles 38 and 39 of the Constitution of India as also from the discretionary nature of the power under Article 226 of the Constitution. In paragraph 64 of the judgment, the majority also quoted with approval the following observations from the majority judgment of the Constitutional Court in Canada:- "While it will take some time for the courts to work out the limits of the developing law of restitution, it is useful on this point to examine the American experience. Professor George C. Palmer, in his work, The Law of Restitution, makes the following comment (1986 Supplement, at p.255): There is no doubt that if the tax authority retains a payment to which it was not entitled, it has been unjustly enriched. It has not been enriched at the taxpayer's expense, however, if he has shifted the economic burden of the tax to others. Unless restitution for their benefit can be worked out, it seems preferable to leave the enrichment with the tax authority instead of putting the judicial machinery in motion for the purpose of shifting the same enrichment to the taxpayer." The Hon'ble Supreme Court has accordingly held in Mafatlal Industries Ltd. (supra) as a matter of legal principle that the tax payer will not be entitled to be unjustly enriched by refunding to him the tax illegally recovered if he has shifted the economic burden of the tax to others and it seems preferable to leave the enrichment with the tax authorities instead of putting the judicial machinery in motion for the purpose of shifting the same enrichment to the tax payer. 8. At this stage, reference may be made to Section 12B inserted w.e.f. 20.9.1991, which reads as under:- "12-B Presumption that incidence of duty has been passed on to the buyer.- Every person who has paid the duty of excise on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods." The larger Bench has held in para 97 of the judgment in Mafatlal Industries' case (supra) that Section 12B does not create a new presumption unknown till then; it merely gives statutory shape to an existing situation and even without Section 12B, the true position is the same that is the obligation to prove that duty has not been passed on to another person is always there as a precondition to claim of refund. The manufacturer has already collected the duty from his purchaser and has thus reimbursed himself. 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 get 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 11B. 9. In view of the above decision and in view of the findings given by the Assistant Commissioner (as indicated in para 3 hereinabove) that the petitioner had not produced any material to show that the incidence of duty was not passed on to the purchasers, we are of the view that no fault can be found with the impugned decision rejecting the petitioner's claim for refund on the ground of unjust enrichment. 10. The petition is, therefore, dismissed. Rule is discharged. (M.S. SHAH, J.) (A.M.KAPADIA, J.) zgs/-