IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM TUESDAY, THE 30TH MARCH 2010 / 9TH CHAITHRA 1932 WP(C).No. 811 of 2006(V) ------------------------ PETITIONER(S): --------------- M/S.VENAD STRUCTURALS, GANDHI NAGAR P.O., PERUMBAIKAD, KOTTAYAM-686008, REPRESENTED BY ITS MANAGING PARTNER. BY ADV. MR. K.JAJU BABU MS. M.U.VIJAYALAKSHMI RESPONDENT(S): --------------- 1. KERALA STATE ELECTRICITY BOARD, VYDHUTHI BHAVAN, PATTOM, TRIVANDRUM, REPRESENTED BY ITS SECRETARY. 2. THE CHIEF ENGINEER, T.C.& M., KERALA STATE ELECTRICITY BOARD, VYDHUTHI BHAVAN, PATTOM, TRIVANDRUM. ADV. MR. JOSE J.MATHEIKEL, SC, KSEB MR. P.P.THAJUDEEN, SC, K.S.E.B MR. C.K.KARUNAKARAN, SC FOR KSEB THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 30/03/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).811/06 APPENDIX PETITIONER'S EXHIBITS:- EXT.P1:- TRUE COPY OF WRITTEN DIRECTION DT.23.5.90 NO.AB4/86/89-90/1535 ISSUED BY KSEB, ELE.DIVISION, KOTTAYAM EXT.P2:- TRUE COPY OF ORDER NO.V/68/18/64/90 DT.29.7.91 ISSUED BY ASST.COLLECTOR OF CENTRAL EXCISE, KOTTAYAM. EXT.P3:- TRUE COPY OF ORDER IN APPEAL NO.357/91(C) DT.27.11.91 ISSUED BY THE COLLECTOR OF CENTRAL EXCISE, COCHIN EXT.P4:- TRUE COPY OF AGREEMENT EXECUTED WITH R1 DT.13.6.92 EXT.P5:-TRUE COPY OF ORDER NO.2885/97 DT.29.10.97 ISSUEDBY CEGAT,MADRAS EXT.P6:- TRUE COPY OF LETTER NO.C&P.2/91-92/268 DT.10.9.98 ISSUED BY R1 EXT.P7:- TRUE COPY OF LETTER NO.C&P.2/91-92/383 DT.30.10.98 ISSUED BY R2 EXT.P8:- TRUE COPY OF LETTER NO.C&P.2/91-92/251DT.15.2.99 ISSUED BY R2 EXT.P9:- TRUE COPY OF LETTER NO.C&P.2/91-92/144 DT.3.6.99 ISSUED BY R2 EXT.P10:- TRUE COPY OF LETTER NO.C&P.2/91-92/4421 ISSUED BY R1 RESPONDENT'S EXHIBITS:- NIL OKB //TRUE COPY// P.A. TO JUDGE C.K.ABDUL REHIM, J. -------------------------------- W.P.(C).No.811 OF 2006 -------------------------------- Dated this the 30th day of March, 2010 J U D G M E N T ---------------------- 1. This writ petition is filed by a Contractor who had entered into an agreement with the 1st respondent Board for manufacture and supply of “pre-stressed concrete poles”. Challenge in this writ petition is against Ext.P10 letter of the 2nd respondent whereby the petitioner was required for payment of an amount of Rs.12,61,426/-, towards repayment of amounts remitted as Excise Duty, which is allowed by the Board to the petitioner. In Ext.P10, coercive steps of recovery was threatened on failure to remit the amount demanded. It is admitted case of both sides that by virtue of the contract in question the 1st respondent Board had undertaken to pay Excise Duty, sales tax and other taxes, leviable from the petitioner, apart from cost of the poles which will be manufactured and supplied. 2. Dispute pertains to payments made by the 1st respondent towards Excise Duty during the period between July 1988 and March 1990. The above said amount of W.P.(C).811/06 -2- Rs.12,61,426/- received from the 1st respondent Board on different dates was paid by the petitioner as Excise Duty to the Central Excise Department. But as per order of the Assistant Collector, Central Excise, Kottayam dt.22.10.1990 the petitioner was exempted from payment of Excise duty by virtue of provisions contained in Notification No:171/1986. 3. In view of the above circumstances the respondents directed the petitioner to file refund application before the appropriate authority of the Central Excise Department. In compliance with the direction, the petitioner filed refund application. But the same was rejected through Ext.P2 noticing that the burden of payment of Excise Duty had already been passed over by the petitioner to the actual customer and hence refund if any made will result in undue enrichment. Eventhough the petitioner filed appeal before the Collector of Central Excise and Customs, Cochin, it was dismissed through Ext.P3, upholding the very same view. The petitioner took up the matter in further appeal before the Customs, Excise and Gold (Control) Appellate Tribunal, Madras. 4. During pendency of the above said appeal, at the W.P.(C).811/06 -3- insistence of the 1st respondent Board, the petitioner had executed Ext.P4 agreement. Clause (1) and (2) of the said agreement reads as follows:- “(1) The Board authorises the contractor to take action to realise the excess Excise duty payment of Rs.12,61,426/- or any other amount from the Asst. Collector, Central Excise, Kottayam or any other representative of General Excise Department in the event of the appeal filed before CEGAT being allowed. (2) The contractor shall remit the refund amounts within 30 working days of realisation of the said amount from Excise Department to the Executive Engineer Central Mechanical Division, Pallom failing which the Board shall have the right to realise the said amount with interest at 21% from the date of receipt of the amount by attachment from the amounts due to the contractor and by other means.” 5. But the Appellate Tribunal had dismissed the appeal holding that it is only when the duty has not been passed on by the appellant, they will become eligible for benefit of refund, in terms of the provisions contained in Section 11(b) of the Central Excise Act, 1944. Since it is found that the burden of duty has already been passed on to the customer, who is the 1st respondent herein, the rejection of refund is sustainable. 6. After dismissal of appeal by the Tribunal, Ext.P6 W.P.(C).811/06 -4- letter was issued by the respondents directing the petitioner to file writ petition before this court, impleading the 1st respondent as a respondent. It was also undertaken that expenses for filing such writ petition will be met by the 1st respondent Board. Subsequently, Ext.P7 letter was issued directing the petitioner to file writ petition jointly along with 1st respondent Board and for this purpose to engage the Senior Standing Counsel of the 1st respondent for conducting the case. The above suggestion was again changed and Ext.P8 was issued stating that on getting advice from the Senior Counsel of the Board at the Supreme Court, the proper remedy is to file a review before the CEGAT under Section 35 (2) of the Central Excise Act. However, through Ext.P9 letter dt.3.6.1999 the Board ultimately has informed that the request made by the petitioner for advancing an amount of Rs.1 lakh for payment of Advocate fee for filing the review petition, could not be granted. Through the said letter the petitioner was requested to hand over necessary records to the authority of the Board for filing the review petition. According to the petitioner all the records were handed over to the authority of the Board in compliance with Ext.P9 letter. W.P.(C).811/06 -5- 7. Facts revealed are to the effect that subsequent to Ext.P9 the respondent Board had filed claim petition before the Assistant Commissioner of Central Excise, as a buyer, seeking refund of the amounts. The said application was filed along with petition seeking condonation of delay. But the Assistant Commissioner had rejected the application through an order dt.24.12.1998 since the application for refund was not filed within six months. The Board has filed appeal before the Commissioner of Central Excise against the decision. But it was also rejected through order dt.17.12.2001. It is admitted in the counter affidavit that eventhough advice was received to approach the CEGAT, further appeal could not be filed since there occurred delay in filing such appeal. However, it is conceded that the Board has filed a writ petition before this court and thereafter filed a Special Leave Petition before the Hon'ble Supreme Court challenging the decisions through which refund application was rejected. But the Board was not successful in getting any favourable orders. 8. In Ext.P10 proceedings which is impugned in this writ petition, it is stated that the Board has decided to request the petitioner to reimburse the loss sustained on account of W.P.(C).811/06 -6- the lapses occurred on the part of the petitioner. It is also stated that by virtue of Ext.P4 agreement the petitioner was bound to reimburse the entire advance payment made by the Board for remitting Excise Duty. According to the petitioner, both the reasons stated in Ext.P10 is not true and correct. It is an admitted case of both parties that whatever amount paid by the 1st respondent had already been remitted to the Central Excise Department. It is evident from the facts and circumstances that all earnest efforts were taken both by the petitioner and the respondent Board to get refund of the amount, but it could not fetch any positive result. 9. The question to be decided is as to whether the petitioner is liable to reimburse the amount to the respondent Board. According to the Board, the amount is a loss sustained to them on account of the lapses occurred on the part of the petitioner. Going by the original contract it is evident that the Board has undertaken to make payment of the Excise Duty element, over and above value of the 'PSC poles' supplied. It is in accordance with such agreement that the payment of Excise Duty was made in advance by the respondent Board. It could not be said that the petitioner has not remitted any such W.P.(C).811/06 -7- amounts to the Excise Department, due to availability of any exemption order. It is clear and evident that the exemption order in question was issued by the Assistant Commissioner only after remittance of such amounts. Further, from the facts and circumstances it is evident that the petitioner had taken all steps to get refund of the amount as per instructions given by the respondents. Therefore it could not be said that there occurred any loss to the KSEB on account of any lapses on the part of the petitioner. Further question to be considered is as to whether the petitioner is liable for payment of the amount by virtue of the provision contained in Ext.P4 agreement. From clauses (1) and (2) of Ext.P4, which is extracted above, the undertaking is only to the effect of making payment of the amount if the petitioner gets refund from the Excise Department. The respondent Board has no case that inspite of getting refund the petitioner had failed to make payment of the amount in question. Therefore I find no reason as to hold that the claim raised in Ext.P10 is sustainable. 10. However, since the respondent is maintaining a case that by virtue of contractual obligations the petitioner is W.P.(C).811/06 -8- liable for payment of the amount under demand, I am of the opinion that rights if any available to the respondents for approaching the appropriate civil court shall not be foreclosed. But the recovery steps without there being any determination of any such liability on the basis of a proper adjudication could not be enforced against the petitioner. 11. Accordingly the writ petition is allowed and Ext.P10 is hereby quashed. It is made clear that none of the observations made herein will stand in the way of the respondents seeking any remedy through appropriate civil forum, if available under law. C.K.ABDUL REHIM, JUDGE. okb