Case: Industrial Plastic Corporation Private Limited Vs. Union of India

the decision dated October 6, 1982 was issued by the Government of india. Shri Diwan submitted that in these circumstances, there is no reason why the petitioners should be deprived the doctrine of the refund of the duty paid right from year 1962 onwards. Shri mehta submitted that the doctrine of mistake of law should not be permitted to be extended for such a long period and urged that the Supreme Court decision reported in 1984 (16) ELT 171 (SC) (Shri Vallabh Glass Works Ltd. and Another v. Union of India and Others) lays down that assessee is not eligible for relief in respect of payments made beyond the period of three years from the date of filing of the Writ Petition. The submission is not correct. The Supreme Court was examining the question as to what is the point from which the limitation will commence to run when mistake became known and in that context observed that relief in respect of payments made beyond the period of three years may not be granted. We are unable to read the decision of the Supreme Court as laying down that the assessee who has paid the duty under mistake is not entitled to refund for a period beyond three years from the date of filing of the petition even though the mistake came to be known just prior to filing of petition. The issue was squarely canvassed before this High Court and in the decision reported in 1986 (25) ELT 625 (Shalimar textile Mfg. Pvt. Ltd. v. Union of India and Others) one of us (Pendse, J.) held that under Article 265 of the Constitution, no tax can be levied or collected except by authority of law, and in case any such tax is levied and collected without and authority of law, then it would not be permissible for the Department to refuse of such amount on the spacious ground that the claim for refund was made belatedly. It was further held that the authority which was recovering tax without jurisdiction cannot be permitted to retain the amount merely because the tax payer was not aware that the recovery was without jurisdiction and consequently if recovery is illegal and without jurisdiction, the claim of refund is not governed by law of limitation. It was further held that the refund would be admissible irrespective of the period covered by the refund application and not restricted only for a period of three years prior to the date of knowledge of mistake of law. Another single Judge in the decision reported in 1986 (25) ELT 638 (Bombay) (Devidayal electronics and Wires Ltd. v. Union of India and Others) after considering the decision of the supreme Court in Shri Vallabh Glass Works Limited case reached the identical conclusion. We are in respectful agreement with the view taken by the Single Judges and the claim made by the petitioners for refund of duty from year 1962 cannot be denied on the ground of limitation. ( 8 ) SHRI Mehta then submitted that the petitioners are not entitled to refund in view of the doctrine of unjust enrichment. It was urged that the excise duty being indirect tax is invariably passed on to the consumers and as the monetary burden is shifted to the consumers, the refund should be refused as the Company is not going to return the amount to various consumers. It was urged that as the duty was not paid from the pocket of the manufacturer, the refund to the manufacturer is entirely unjust. It was also claimed that the Government cannot be asked to make refund of money paid in distant past because the money so received has already been spent. We are not impressed by this submission for more than one reason. Indeed, by catena of decisions of this Court, the claim for unjust enrichment raised by the Department has been turned down. The Full Bench of this Court in the decision reported in 1990 (46) ELT 23 (Bom.) (New india Industries Ltd. v. Union of India) observed that Court ought not presume that the burden of tax has been passed to the consumers and upon that assumption reject the consequential payer for refund. The Full Bench further observed that it is for the Department to raise such a plea on affidavit and Court should decide the question according to the facts and circumstances of the case. The Court is required to satisfy itself that the tax burden has been shifted to the consumers and the order of refund would result in securing unjust enrichment. The Full Bench then observed that even when in a given case the Court is satisfied that the burden of tax has been passed on to the consumers, still there would be no uniform formula for moulding the consequential relief for benefiting those who had ultimately borne the burden. In the affidavit in the present case on behalf of the Department, there is no averment that the burden was infact shifted to the consumers save and except claiming that the excise duty is invariably passed on to the customers. It is not the averment which is sufficient to examine the claim of unjust enrichment by Writ Court in absence of any data produced by Department. In accordance with the decision of the Full Bench, it is not possible to examine the claim of unjust enrichment, even assuming that such plea is permissible. A contention that the Government should not be directed to make refund because the Government has spent the duty amount received is only required to be stated to be rejected. If such contention is to be accepted, then there would be no refund even to the assessees under the Income Tax Act because normally the duty or tax collected is immediately spent by the Government. It is no defence that the amount is spent when the recovery of dues is without authority. In our judgment, the Department is liable to refund the duty wrongfully recovered.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]The submission is correct and deservesview of these subsequent events, which inter alia support the petitioners, the question of validity of order dated September 7, 1981 or order dated July 20, 1983 accepting revised classification of price list claiming no duty payable only from December 18, 1982 instead of May 12, 1982 loses all its significance and is only of academic interest. It is, therefore, not necessary to examine as to whether the petitioner Company was entitled to advantage of exemption Notifications dated June 1, 1971 and February 27, 1982 as the petitioner Company was not liable to pay any excise duty allsubmission is not correct. The Supreme Court was examining the question as to what is the point from which the limitation will commence to run when mistake became known and in that context observed that relief in respect of payments made beyond the period of three years may not be granted. We are unable to read the decision of the Supreme Court as laying down that the assessee who has paid the duty under mistake is not entitled to refund for a period beyond three years from the date of filing of the petition even though the mistake came to be known just prior to filing of petition. The issue was squarely canvassed before this High Court and in the decision reported in 1986 (25) ELT 625 (Shalimar textile Mfg. Pvt. Ltd. v. Union of India and Others) one of us (Pendse, J.) held that under Article 265 of the Constitution, no tax can be levied or collected except by authority of law, and in case any such tax is levied and collected without and authority of law, then it would not be permissible for the Department to refuse of such amount on the spacious ground that the claim for refund was made belatedly. It was further held that the authority which was recovering tax without jurisdiction cannot be permitted to retain the amount merely because the tax payer was not aware that the recovery was without jurisdiction and consequently if recovery is illegal and without jurisdiction, the claim of refund is not governed by law of limitation. It was further held that the refund would be admissible irrespective of the period covered by the refund application and not restricted only for a period of three years prior to the date of knowledge of mistake of law. Another single Judge in the decision reported in 1986 (25) ELT 638 (Bombay) (Devidayal electronics and Wires Ltd. v. Union of India and Others) after considering the decision of the supreme Court in Shri Vallabh Glass Works Limited case reached the identical conclusion. We are in respectful agreement with the view taken by the Single Judges and the claim made by the petitioners for refund of duty from year 1962 cannot be denied on the ground ofare not impressed by this submission for more than oneare not impressed by this submission for more than onereason. Indeed, by catena of decisions of this Court, the claim for unjust enrichment raised by the Department has been turned down. The Full Bench of this Court in the decision reported in 1990 (46) ELT 23 (Bom.) (New india Industries Ltd. v. Union of India) observed that Court ought not presume that the burden of tax has been passed to the consumers and upon that assumption reject the consequential payer for refund. The Full Bench further observed that it is for the Department to raise such a plea on affidavit and Court should decide the question according to the facts and circumstances of the case. The Court is required to satisfy itself that the tax burden has been shifted to the consumers and the order of refund would result in securing unjust enrichment. The Full Bench then observed that even when in a given case the Court is satisfied that the burden of tax has been passed on to the consumers, still there would be no uniform formula for moulding the consequential relief for benefiting those who had ultimately borne the burden. In the affidavit in the present case on behalf of the Department, there is no averment that the burden was infact shifted to the consumers save and except claiming that the excise duty is invariably passed on to the customers. It is not the averment which is sufficient to examine the claim of unjust enrichment by Writ Court in absence of any data produced by Department. In accordance with the decision of the Full Bench, it is not possible to examine the claim of unjust enrichment, even assuming that such plea is permissible. A contention that the Government should not be directed to make refund because the Government has spent the duty amount received is only required to be stated to be rejected. If such contention is to be accepted, then there would be no refund even to the assessees under the Income Tax Act because normally the duty or tax collected is immediately spent by the Government. It is no defence that the amount is spent when the recovery of dues is without authority. In our judgment, the Department is liable to refund the duty wrongfully recovered.