Case: Maharashtra Vegetable Products Private Limited Vs. Union of India

(1) THIS is one more petition arising out of a claim for Excise Duty recovered by the Union of India on the price of vegetable oils manufactured by the petitioners, after taking into account the expenses of packaging, freight marketing and distribution expenses. Since a major part of the controversy involved in the petition is concluded by a decision of this Court which held thatexpenses cannot be added to the price of the manufactured article for the purposes of determining Excise Duty chargeable in respect of the article, a detailed reference to the facts is notBRIEFLY it requires to be mentioned that the price of Vanaspati manufactured by the petitioners is regulated and controlled by the Union of India under the Vegetable Oil Products Control order, 1947 and that the price at which the manufactured product was to be sold to the consumer was fixed by the Union of India. Theof the price so fixed is not available and therefore it is not possible to ascertain what were the different components of the price fixed by the Union of India for sale toFOR the purpose of Excise Duty, admittedly, the cost of the tins which were used as containers for Vanaspati, the freight charges incurred by the producers and marketing and distribution expenses borne by the producers were added to the cost of the manufactured product, viz. , vanaspati. The cost of the containers, freight charges and marketing and distribution expenses would becost and in accordance with the earlier decision of this Court, could not have been included in the price of the manufactured product for the purpose of chargeability of Excise Duty. Consequent upon the decision of this Court in Union of India v. Mansingka Industries Private Limited, 1979 ELT (J 158) = 77 Bombay Law Reporter 663, in which it was held that the cost of freight and cost of containers could not be included in the price of the manufactured articles for the purposes of Excise Duty, the petitioners submitted a freshon 10th February, 1975 excluding the two components of packing and freight. The decision in Mansingkas case was rendered on 6th September 1974. The petitioners claim that they learned about it in November 1974. On 26th November 1975 the petitioners filed a revision application claiming a refund of packing and freight charges basing their claim on the decision in Mansingkas case. In that application, the petitioners did not ask for refund of the proportionate excise Duty chargeable on marketing charges. This refund was granted.(4) THEN came the decision of this Court in Indian Tobacco Company Limited v. Union of India and others, 1979 Excise Law Times (J 476), rendered on 15th December 1979. The Division bench in that case held that marketing and distribution expenses would ordinarily be referable to selling activity and as such, for the purpose of section 4 of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Salt Act) a deduction in respect thereof will have to be allowed from the manufacturers sale price. Consequent upon that decision, a refund application came to be made on 1st September 1976 claiming a refund of Excise Duty collected in excess on account of packing cost, freight and marketing and distribution of Vanaspati, for the period from 15th April, 1970 to 30th November, 1974 amounting to about Rs. 8. 00 lacs and odd. An amount of Rs. 4,823/was also claimed on account of Excise Duty collected on marketing and distribution expenses for the period from75 for which refund in respect of other two components was already granted by the Excise authorities. Since the petitioners request went unheeded, they have filed this petition under Article 226 of the Constitution of India seeking a Writ direction or an order directing the Union of India to refund a sum of Rs. 8, 90,320. 81 on account of excess Excise Duty paid.

Reasoning: (6) WE do not think it necessary to deal at any length with the first two contentions. Having regard to decide in Mansingkas case, Indian Tobaccos case and a large number of like decisions following these two cases, it is now too late to contend that the cost of containers, freight and marketing charges are notexpenses. Having regard to the long line of decisions, we must hold that the charges under these three heads could not have been taken into account for determining the chargeability to ExciseSO far as the contention that the claim for refund is barred by Rule 11 of the Excise Rules, we may refer to a very recent decision of this Court in Associated Bearing Company Limited and another vs. Union of India, Special Civil Application No. 2118 of 1976 decided on 5th March 19801980 ELT 415, to which one of us was a party. The contention whether a claim for refund on the ground that certain items which were in the nature ofexpenses were taken into account for the purposes of chargeability to Excise Duty falls within Rule 11 of the excise Rules has been considered at length in that decision. And it has been held that levy in such a case being wholly without jurisdiction and outside the provisions of section 3 of the Act would not attract the bar of limitation prescribed by Rule 11. The contention that the claim for refund must be negatived in respect of a period in excess of one year must also standIT is difficult for us to appreciate how the fact that suit for refund could have been filed by the petitioners can come in the way of the petitioners if they are otherwise entitled to the refund of the amount claimed by them. It is now well established that the existance of an alternative remedy is not an absolute bar to entertaining a petition under Article 226. It is difficult to hold that in a case where the constitutional validity of a levy like excise duty is in question and an action of Union of India almost amounts to recovery of a tax without authority of law, a suit can be said to be a remedy which is equally expeditious, efficacious and adequate as proceedings under Article 226. We must bear in mind that in this case the claim is based on the constitutional invalidity of a part of the levy as determined by the Supreme Court and this Court in respect ofexpenses. Facts in the present case are not in dispute. The basis of the claim of the petitioners was the declaration of the law made by Supreme Court from time to time as well as by this Court in similar claims for refund of Excise Duty said to have been wrongly recovered. Indeed on the authorities and the law which seem to be now well settled, the Excise authorities have no jurisdiction to take into account anything in the nature ofexpenses for the purpose of chargeability to Excise Duty. If this constitutional position is now well established, it is difficult to entertain the argument advanced on behalf of Union of India that a manufacturer of a citizen should be forced to take recourse to a long drawn out trial in the trial Court with the possibility of the decision of the trial Court being challenged in appeals when it isthat the proceedings commencing with the suit and the appeals in higher Court taken together take nothing less than ten or twelveTHE argument on behalf of the Union of India almost comes to this that even though the constitutional position is well established the petitioners should have really gone to a Civil Court where, as it now transpires, when no substantial defence is available to the Union against the claim for refund, a decree would necessarily follow. What difference it makes to the Union of india as to whether a decree is made in a Civil Court or a direction is given by the High Court, if a direction for refund has necessarily to follow by giving effect to the earlier decision of this court, it is difficult for us to comprehend. We must therefore reject the contention that the petitioners should have taken recourse to the ordinary procedure of filing a civilTHE contention that a direction issued by this Court under article 226 is likely to result in unjust enrichment of the petitioners, in our view, is required to be considered in two aspects. Firstly, a defence of unjust enrichment would not have been available to the Union in a civil suit. If the petitioners had filed a civil suit and if they establish that Excise Duty outside the Act has been recovered, the question as to whether they had passed on the burden to the consumers or not would not have been relevant at all for deciding the liability of the Union of India to refund the excess amountobservations clearly highlight the fact that the State is under an obligation to refund monies which have been recovered without authority ofA careful study of Cawasji case will also show that the relief to the petitioners in that case was declined not on the ground that it would result in unjust enrichment of the company. The claim in the writ petitions was for refund of educational cess for the periodse observations will make it clear that the ground on which the Supreme Court was not inclined to interfere with the order of the High Court was that it was not proper to promote multiplicity of unnecessary legal proceedings. Cawasjis case is, therefore, not an authority for the proposition that the claim for refund must necessarily be rejected on the ground that an order for refund is likely to result in unjust enrichment. It appears from the judgment of the Supreme Court that the fact that the appellants had not given any reasons as to why that claim was not made in the earlier writ petitions heavily weighed with the Supreme Court when they declined to interfere with the decision of the High Court. We are therefore unable to accept the contention advanced on behalf of the Union of India that the petitioners are not entitled to any refund as the levy has already been passed on to theAS already pointed out, the matter with regard to the nature of the Excise Duty and the components which have to be included in the price chargeable to Excise Duty had been decided by the Supreme Court and it was merely an application of that law which was called for in the writ petitions in question. An additional circumstance which appears on the facts of the present case is that the goods in question were sold at a controlled price the components of which are unknown. It is not therefore possible to say how much of the Excise Duty formed a part of the controlled price at which the goods were sold to the consumer. Even otherwise, it could therefore not be said that it is fully established that the petitioners have reimbursed themselves to the extent of the amount which they are now seeking to recover. We may make it clear that this is only on additional ground on which we are not inclined to accept the argument that the claim of the petitioners should not becase makes it clear that for filing the writ petition to recover money paid under mistake of law, the starting point of limitation is from the date on which the judgment declaring as void the particular law under which the tax was paid was rendered as that would normally be the date on which the mistake becomes known to the party. The question with regard to the exclusion ofexpenses as part of the price was decided by the Supreme Court by their decision datedin A. K. Roy and another v. Voltas Ltd.1977 ELT (J 77) = AIR 1973 sc 225  . The argument that was advanced before us was that the limitation should really commence from the decision of the Bombay High Court which was taken in appeal to the Supreme Court in the Voltas case. The decision of the High Court was given in August 1970. There are two reasons on which we should reject this contention. Firstly, it is unfortunate that even through the amount, refund of which is claimed by the petitioner, has now been held to have been recovered without authority of law, such an argument was advanced before us in spite of the clear dictum of the Supreme Court that the government should normally not raise a plea of bar ofTHE second ground is that the law relating to the exclusion of the value of containers particularly came to be settled by the decision of this Court in Mansingkas case which came in September 1974 and the law relating to marketing charges came to be settled in Indian Tobacco companys case which came in December 1975. The ratio of these two decisions is now sought to be invoked by the petitioners. These were the decisions material for deciding whether the petition has been filed within three years from the time when the mistake of law became known. There is no doubt that the petition is filed within three years from the time when the decision in Mansingkas case was reported. Apart from this, it is difficult to entertain such a submission from the department which, with open eyes, wants to ignore the decision of this Court and of the supreme Court and is still persisting in the argument that Excise Duty has been properly recovered even though the three disputed components were taken into account for determining the price chargeable to Excise Duty. We are not, therefore, able to see any circumstance which would dissuade us from exercising our jurisdiction in favour of the petitioners especially when under the Constitution, recovery of every single rupee must be an authorised recovery. Any recovery which is unauthorised would be recovery without authority of law and therefore pleas raised on behalf of the authorities intended to justify their actions which are in gross violation of the law laid down by the Supreme Court and this High Court must be rejected. We must therefore hold that the petitioners will be entitled to a mandamus directing the authorities and the union of India to refund the excess amounts recovered by them on account of inclusion of packing cost, freight and marketing and distribution expenses during the period from74 and amounts recovered in excess during the period75 by including marketing and distribution expenses as a part of the price chargeable to Excise Duty. The petitioners have no doubt made a claim for a total amount of Rs. 8, 90,320. 31. It will however be for them to satisfy the appropriate authorities about the exact quantum of the amount under the heads referred to above.