SCA/21462/2005 1/33 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 21462 of 2005 For Approval and Signature: HONOURABLE MR. JUSTICE MOHIT S. SHAH HONOURABLE MR.JUSTICE RAVI R.TRIPATHI ========================================= MANISHA PHARMO PLAST PVT LTD AND ANOTHER Versus UNION OF INDIA AND OTHERS ========================================= Appearance : MR JF POCHKHANAWALA, SENIOR ADVOCATE with MR DEVANG NANAVATI for NANAVATI & NANAVATI for the Petitioners MR HARIN P RAVAL, ASSISTANT SOLICITOR GENERAL OF INDIA with MR HRIDAY BUCH for the Respondents ========================================= CORAM : HONOURABLE MR. JUSTICE MOHIT S. SHAH and HONOURABLE MR.JUSTICE RAVI R.TRIPATHI Date : 19/12/2008 CAV JUDGMENT (Per : HONOURABLE MR.JUSTICE RAVI R.TRIPATHI) 1. This petition is filed by a company incorporated under the Companies Act, having its registered office at the address mentioned in the cause title. The 2nd petitioner is the Manager of the 1st petitioner company (hereinafter referred to as “the petitioner” or “the petitioner company”). The petitioner company is in the business of manufacture of “Nycil” prickly heat powder at its factory in Umbergaon, Gujarat. 1.1 The petitioner classified the said goods under the Tariff Heading No.30.03 of the Central Excise Tariff Act. It is the case of SCA/21462/2005 2/33 JUDGMENT the petitioner company that the Central Excise Range at Surat, in- charge of the petitioners' factory, incorrectly sought to classify the said goods under Chapter Heading No.33.04. The Central Excise Department recovered a sum of Rs.4,78,45,990.30 towards excise duty on the said goods on the basis of the said goods being classified under Chapter Heading No.33.04. 2. The petitioner company challenged the classification of the said goods before the Delhi High Court. The Delhi High Court by its judgment and order dated 20.05.1999, classified the said goods as a drug under Heading No.30.03. The petitioner company filed Refund Claim dated 30.12.1999 for the excise duty paid by the petitioner of Rs.4,78,45,990.30. It is the case of the petitioners that the petitioners were entitled to claim interest on the said amount in terms of the provisions of the Central Excise Act, 1944, in the event of delay beyond three months in the settlement of the said Refund Claim. It is the case of the petitioners that the petitioners reserved their right to claim interest in terms of Section 11BB of the Central Excise Act, 1944. 3. The Central Excise Department issued a show cause notice dated 07.04.2000 and called upon the petitioners to show cause as to why their Refund Claim should not be rejected on the ground that the petitioners had already passed on the burden of incidence of duty to its buyers. The petitioners filed a detailed SCA/21462/2005 3/33 JUDGMENT reply to the said show cause notice along with all the necessary evidence to show that they had only one customer, viz. Heinz India Limited and that the burden of the excise duty illegally recovered from the petitioners had not been passed on to its customer. 3.1 The concerned Assistant Commissioner of Central Excise at Daman passed order dated 21.12.2001 and rejected the petitioners' Refund Claim on the ground of 'unjust enrichment'. 4. The petitioners challenged the aforesaid order (dated 21.12.2001) before the Commissioner of Central Excise (Appeals) at Surat, who passed order dated 01.10.2003, whereby the order passed by the Assistant Commissioner was reversed and the Refund Claim filed by the petitioners was allowed. 4.1 The Central Excise Department challenged the aforesaid order of refund passed by the Commissioner (Appeals) before the CESTAT. The department also filed a Stay Application. The CESTAT by order dated 01.03.2004 dismissed the Stay Application filed by the department. 5. It is the case of the petitioners that despite the order passed by the Commissioner (Appeals) and an order refusing the stay by the CESTAT, the department did not refund the amount of Rs.4,78,45,990.30 and therefore, the petitioners have become entitled to interest as statutorily provided under Section 11BB of the Central Excise Act, 1944 from the expiry of three months from SCA/21462/2005 4/33 JUDGMENT the date of filing its application for refund. The petitioners filed cross objection to the said appeal filed by the department before the CESTAT. In the said cross objection, the petitioners set out in detail the calculation of interest up to 15.02.2004, which amounted to Rs.2,13,36,689.84. 6. It is the case of the petitioners that as the Central Excise Department did not comply with the order of refund passed in favour of the petitioners by the Commissioner (Appeals) and though the CESTAT had rejected the Stay Application filed by the department, the petitioners were constrained to file a writ petition before this Court being Special Civil Application No.8375 of 2004 seeking compliance of the said refund order. It is also the case of the petitioners that in the said writ petition, the petitioners had claimed, inter alia, interest for the delayed period of refund. However, by order dated 11.10.2004 (Annexure-C), this Court was pleased to dismiss the said petition holding that, “the same was pre-mature on account of pendency of the department's appeal before the CESTAT.” (emphasis supplied), but was pleased to order expeditious disposal of the department's appeal. 7. The learned senior advocate for the petitioners submitted that the decision of the Delhi High Court on the issue of classification of the product, which was in favour of the petitioners, was challenged by the department before the Hon'ble SCA/21462/2005 5/33 JUDGMENT Supreme Court of India. The Hon'ble Supreme Court of India by its judgment and order dated 01.11.2004 dismissed the department's Civil Appeal. The learned advocate for the petitioners submitted that thus, the classification of the goods, as claimed by the petitioners, stood approved by the Hon'ble Supreme Court of India. 8. It is the case of the petitioners that pursuant to the order of this Court in Special Civil Application No.8375 of 2004, whereby the department's appeal pending before CESTAT against the order of Commissioner (Appeals) dated 01.10.2004 was expedited, an early hearing was granted by the CESTAT. The CESTAT by order dated 12.01.2005 confirmed the findings of the Commissioner (Appeals) and dismissed the department's appeal. The cross objections filed by the petitioners claiming interest on the delayed refund were also disposed of. 8.1 The case of the petitioners is that the Commissioner (Appeals) by its order dated 01.10.2003 had allowed the appeal filed by the petitioners praying for refund of Rs.4,78,45,900/- 'with interest'. (emphasis supplied); that the CESTAT, by confirming the order passed by the Commissioner (Appeals) and disposing of the cross objections filed by the petitioners, confirmed the refund of Rs.4,78,45,900/- 'with interest'. (emphasis supplied). 9. It is the case of the petitioners that thereafter from time to time, as set out in para-12 of the petition memo, the petitioners called upon the Central Excise Department to refund the amount of SCA/21462/2005 6/33 JUDGMENT Rs.4,78,45,990.30 together with interest thereon, but then the department on one pretext or the other did not refund any amount to the petitioners. The petitioners were therefore constrained to file Misc. Application bearing No.E/MA(Ors)/996/05 in March 2005 seeking directions from the CESTAT calling upon the Central Excise Department to refund the said amount together with interest to the petitioners. 10. The learned senior advocate for the petitioners submitted that during the pendency of the Misc. Application before the CESTAT, the department filed an appeal before this Court being Tax Appeal No.588 of 2005, challenging order dated 12.01.2005 passed by the CESTAT in favour of the petitioners. This Court was pleased to dismiss the said appeal by order dated 18.07.2005. 11. The learned senior advocate for the petitioners submitted that it is only thereafter that the Central Excise Department paid to the petitioner the principal amount of refund of Rs4,78,45,990.30 in or about July /August 2005. The learned senior advocate for the petitioners submitted that the department did not pay any interest whatsoever to the petitioners. 12. The case of the petitioners is that when the aforesaid Misc. Application filed by the petitioners came up for hearing before the CESTAT, the petitioners were orally informed by the Tribunal that since Gujarat High Court was pleased to dismiss the department's appeal by order dated 18.07.2005, the petitioners SCA/21462/2005 7/33 JUDGMENT ought to have approached the Gujarat High Court for seeking an order in respect of the interest amount which had not been paid by the department. The Misc. Application filed by the petitioners was disposed of by the CESTAT by observing that, “the Commissioner (Appeals) or the Tribunal in the order had not granted interest”. 13. The learned senior advocate for the petitioners submitted that even at the cost of repetition, he is to reiterate that in fact, by order dated 12.01.2005, CESTAT confirmed the findings of the Commissioner (Appeals) and dismissed the department's appeal, the CESTAT had also disposed of the cross objections filed by the petitioners claiming interest on the delayed refund; that the Commissioner (Appeals) by its order dated 01.10.2003 had allowed the appeal filed by the petitioners praying for refund of Rs.4,78,45,900/- 'with interest'. (emphasis supplied). The learned senior advocate for the petitioners submitted that as the Commissioner (Appeal) had allowed the appeal filed by the petitioners and had granted refund of Rs.4,78,,45,900/- with interest, the CESTAT had confirmed the order passed by the Commissioner (Appeals) and disposed of the cross objections filed by the petitioners, is to be construed to have confirmed the order of refund with interest. 14. On perusal of record, it is noticed that this petition was filed on 10.10.2005, affirmed on 07.10.2005. At the time of filing of the petition, following prayers were made:- SCA/21462/2005 8/33 JUDGMENT “24. (a) That this Hon'ble Court be pleased to declare that the Petitioner is fully entitled to recover and the Department is bound and liable to pay to the Petitioner the statutory interest amounting to Rs.2,53,81,156.02 as more particularly set out in Annexure 'H' hereto and further prohibit the Respondent from denying such legitimate statutory interest to the Petitioner; (b) That this Hon'ble Court be pleased to issue a Writ of Certiorari, or a Writ in the nature of Certiorari, or any other appropriate writ, order or direction, calling for the papers and proceedings pertaining to the course of action herein and after enquiring into the legality and propriety of the same, to compel the Central Excise Department to pay to the Petitioner the said statutory interest amount of Rs.2,53,81,156.02. (c) That this Hon'ble Court be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus, or any other appropriate writ, order or direction, directing the Respondents to (a) refrain from their illegal actions in denying the Petitioner legitimate statutory amounts and (b) forthwith pay to the Petitioner the said statutory interest amount of Rs.2,53,81,156.02 as more particularly set out in Annexure 'H' hereto. (d) That pending the hearing and final disposal of this Petition, this Hon'ble Court may be pleased by an Order and injunction to call upon the Respondent to forthwith pay to the Petitioner the said total amount of Rs.2,53,81,156.02 by way of statutory interest as set out in the Petition on such terms and conditions as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case; SCA/21462/2005 9/33 JUDGMENT (e) For ad interim relief in terms of prayer (c) above; (f) for costs of the Petition and orders thereon; and (g) for such further and other reliefs, as this Hon'ble Court may deem fit and proper in the nature and circumstances of the case.” 15. Thereafter, Civil Application (for amendment) No.1402 of 2007 was filed, wherein this Court (Coram: Hon'ble Mr.Justice J.M.Panchal & Hon'ble Smt.Justice Abhilasha Kumari) passed order on 21.02.2007, pursuant to which paragraphs 15(1) and 15(B), grounds (L) to (X) and prayer 24(cc) were added. For ready perusal, order dated 21.02.2007 is reproduced hereinbelow:- “1. Rule. Mr.Harin Raval, learned Assistant Solicitor General of India, waives service of notice on behalf of the respondents. Having regard to the facts of the case, the application is heard today. 2. By filing the instant application, the applicants have prayed to permit them to amend the memorandum of Special Civil Application No.21462 of 2005 by adding paragraphs 15(A) and 15(B) as well as grounds (L) to (X) and prayer clause 24(cc). 3. This Court has heard the learned counsels for the parties. In view of the averments made in the application, this Court is of the opinion that the prayer to amend the petition and the prayer clause deserves to be granted. Hence, the prayer made in paragraph 23(B) of the application is granted. The petitioners are SCA/21462/2005 10/33 JUDGMENT directed to carry out the amendment in the memorandum of Special Civil Application No.21462 of 2005 on or before February 28, 2007. 4. It is clarified that it will be open to the respondents to file reply to the amended petition and contend that the challenge to the order passed by the CESTAT on August 22, 2005, is not maintainable in the instant petition . Subject to the abovereferred to clarification, Rule is made absolute. There shall be no orders as to costs.” (emphasis supplied) 16. The petitioners filed yet another Civil Application – for Amendment being Civil Application No.2738 of 2007 in Special Civil Application No.21462 of 2005 which was allowed by this Court (Coram: Hon'ble Mr.Justice J.M.Panchal & Hon'ble Smt.Justice Abhilasha Kumari) by order dated 21.02.2007 and paragraphs 15(C) to 15(G), grounds (Y) to (ZD) and prayer clause 24(ccc) were added. For ready perusal, order dated 21.02.2007 is reproduced hereinbelow:- “1. Rule. Mr.Harin Raval, learned Assistant Solicitor General of India, waives service of notice on behalf of the respondents. Having regard to the facts of the case, the application is heard today. 2. By filing the instant application, the applicants have prayed to permit them to amend the memorandum of Special Civil Application No.21462 of 2005 by adding paragraphs 15(C) to 15(G) as well as grounds (Y), (Z), (ZA), (ZB), (ZC) and (ZD) and prayer clause 24 (ccc). SCA/21462/2005 11/33 JUDGMENT 3. This Court has heard the learned counsels for the parties. In view of the averments made in the application, this Court is of the opinion that the prayer to amend the petition and the prayer clause deserves to be granted. Hence, the prayer made in paragraph 27(B) of the application is granted. The petitioners are directed to carry out the amendment in the memorandum of Special Civil Application No.21462 of 2005 on or before February 28, 2007. 4. It is clarified that it will be open to the respondents to file reply to the amended petition and contend that the challenge to the order passed by the CESTAT on October 5, 2006, is not maintainable in the instant petition. Subject to the abovereferred to clarification, Rule is made absolute. There shall be no orders as to costs.” (emphasis supplied). 17. As the record shows, the amendment was carried out on 27.02.2007, incorporating paragraphs 15(A) to 15(G), grounds (L) to (ZD) and prayer clauses 24(cc) and 24(ccc). For ready perusal, prayer clauses 24(cc) and (ccc) are reproduced hereinbelow:- “24 (cc) That this Hon'ble Court would be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ order or direction quashing and setting aside the order dated 22nd August 2005 at annexure G to the Petition passed by the CESTAT to the extent it refused to give any direction to the adjudicating authority for grant of statutory interest. SCA/21462/2005 12/33 JUDGMENT 24 (ccc) That this Hon'ble Court would be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other approached writ order or direction quashing and setting aside the order dated 5th October, 2006 at annexure “CC” to the Petition passed by the CESTAT to the extent it dismissed the Misc. Application No.E/MA (Ors)2444/06 refusing to give any direction to the adjudicating authority for grant of interest.” 18. This petition is contested by the department by filing affidavit in reply of one Shri Paul J.B. Fernandes, Deputy Commissioner of Central Excise & Customs, Division – Vapi, Vapi affirmed on 15.12.2005. Another affidavit of one Shri A.B.Lala, Assistant Commissioner, Central Excise Division, Vapi, on behalf of respondent No.3 affirmed on 15.06.2007 is also filed. The case of the respondent authorities is set out in detail in these affidavits. 19. The department, before dealing with the contents of the petition as originally filed and additional contents placed on record after the amendment pursuant to the orders of this Court dated 21.02.2007 rendered in Civil Application – for Amendment Nos.1402 and 2738 of 2007, raised preliminary objections with regard to the maintainability and tenability of the petition. The department relied upon the orders passed by this Court (Coram: Hon'ble Mr.Justice J.M.Panchal & Hon'ble Smt.Justice Abhilasha Kumari) dated 21.02.2007, in both the Civil Applications. The learned Assistant Solicitor General of India – Mr.Harin P.Raval SCA/21462/2005 13/33 JUDGMENT invited attention of the Court to para 4 of both the orders, which are reproduced hereinabove. He submitted that the Hon'ble Court while allowing the amendment has reserved liberty in favour of the department to (i) reply the amended petition, and also to (ii) contend that the challenge to order passed by CESTAT on August 22, 2005 and on October 5, 2006 is not maintainable in this petition (emphasis supplied). It is the say of the department that the amendment is granted subject to the above clarification and therefore, it is open to the department to raise the preliminary objections regarding maintainability and tenability of the petition. In this regard, contents of paragraph Nos.5 to 9 of the affidavit filed by Shri A.B.Lala, Assistant Commissioner, Central Excise Division, Vapi are relevant and the same are reproduced for the ready perusal:- “5. In view of the abovementioned orders, it is respectfully submitted that the orders rendered by the Hon'ble CESTAT dated August 22, 2005 cannot be made subject matter of challenge in a petition under Article 226 of the Constitution of India. That there is a remedy under Section 35G of the Central Excise Act, 1944 against the order rendered by Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as CESTAT) by way of preferring a tax appeal. Under the circumstances, no writ petition is maintainable to challenge an order rendered by the Hon'ble CESTAT. It is submitted that the said order dated 22.08.2005 was rendered in application No.E/MA (ORS)/996/1742/03 in Appeal No.E/71/04. The order records that Misc. Civil SCA/21462/2005 14/33 JUDGMENT Application dated 01.04.2005 was filed by the appellant, namely, Manisha Pharmo Plast Private Ltd., seeking direction for refund of a sum of Rs.4,78,45,990.38 ps. being the principal amount along with interest of Rs.2,13,36,689.84 ps. as calculated upto 15.02.2004 and further interest from 16.02.2004 at the prescribed rate. The order records that another Misc. Civil Application dated 04.07.2005 had been filed by the department requesting to grant extension of time for implementation of the final order dated 12.01.2005 of the tribunal ordering refund. That the Hon'ble CESTAT after hearing both the parties clearly recorded in para-3 the following findings. “It is seen that neither the original authority nor the Commissioner (Appeals) or the Tribunal in their orders have granted interest. From the photocopy of the Hon'ble Gujarat High Court order dated 18.07.2005 it is seen that tax appeal No.538/2005 filed by the Commissioner of Central Excise has been dismissed along with Civil Application No.126/2005. None of the aforesaid orders granted interest to the appellants. It is brought to our notice by both the sides that the principal amount has already been refunded to the appellants.” After recording the said finding, vide observations and directions contained in para-4 of the aforesaid order, the Hon'ble CESTAT, after hearing both the sides and perusing the record, clearly found that there was no order of interest by the adjudicating authority, Commissioner (Appeals), Tribunal or the Hon'ble High Court and, therefore, held that the Tribunal cannot give any direction to the adjudicating authority for grant of SCA/21462/2005 15/33 JUDGMENT interest. Therefore, the application of the petitioners seeking interest was dismissed. With regard to the application of the revenue seeking extension of time to comply with the final orders of the Tribunal, the Hon'ble CESTAT held that as regards payment of principal amount, refund was already granted, there was no necessity to pass any direction and therefore, the application filed by the petitioners seeking payment of interest was dismissed. A copy of the said order dated 22.08.2005 is hereto annexed and marked as ANNEXURE-R3. 6. The said order though passed as far as back on 22nd August, 2005, was not made subject mater of challenge in the present writ petition as originally filed in October, 2005. That the writ petition as originally filed did not challenge the said order, the above petition as originally filed, was not maintainable and the petitioners, in absence of challenge to the said order, were not entitled to the reliefs as originally prayed for. That despite the petition having been filed on or about 13.10.2005, no steps were taken within a reasonable period of time to seek an amendment in the prayer so as to entitle the petitioners to challenge the said order dated 22nd August, 2005. Therefore, the reliefs as prayed for by the amendment is barred by delay and latches more particularly in light of the fact that C.A. No.1402/2007 appears to have been prepared in August, 2006 but does not appear to have been even moved and/or filed till January, 2007. That it is by way of prayer prayed in C.A. No.1402/2007 that the amendment was sought for so as to introduce prayer 24(cc) seeking a relief for quashing and setting aside the order dated 22nd August, 2005. Without prejudice to SCA/21462/2005 16/33 JUDGMENT the contention that the order of the Hon'ble CESTAT cannot be challenged in a writ petition under Article 226 of the Constitution of India, it is submitted that such a challenge at a belated stage is barred by delay, latches and acquiescence. It is respectfully submitted that the petitioners who cannot deny knowledge of law, are very well aware that the tax appeal is maintainable under Sec.35G, which is required to be filed within a statutory period of 180 days, such a belated amendment appears to have been filed. That even if a tax appeal was preferred in August, 2006, the same would have been barred by delay and latches and under the circumstances, the petitioners are not entitled to the amended writ as prayed for while challenging the order of the CESTAT dated 22nd August, 2005. I, therefore, respectfully submit that both on the ground of maintainability of a writ petition and on the ground of delay, latches and acquiescence the petitioners are not entitled to the relief notwithstanding that this Hon'ble Court has permitted the petitioners to amend the petition by way of incorporating the relief as contained in para 24(cc) of the petition. 7. That not being satisfied with the dismissal of the earlier application by the CESTAT vide its order dated 22nd August, 2005, the petitioners moved yet another application by way of E/MA(ORS)/2444/06 in Appeal No.E/71/04 seeking an order from the CESTAT to direct the department to comply with the order dated 12.01.2006 (which already stood complied with as observed by the Hon'ble CESTAT in its earlier order dated 22.08.2005 when earlier application stood dismissed) to the extent that statutory amount of interest claimed by the petitioners was allegedly due on SCA/21462/2005 17/33 JUDGMENT the refund sanctioned amounting to Rs.2,53,81,156.02 ps. with a further direction that the same be ordered to be paid to the applicants. 8. That the Hon'ble CESTAT held that the claim of refund of duty was denied by the lower adjudicating authority. However, the same was allowed by the Commissioner (Appeals) vide his order dated 01.10.2003 against which the revenue appeal was dismissed vide the Tribunal's order dated January 12, 2005. That the Hon'ble Tribunal held that after the decision of the CESTAT, an application