Case: Union of India &amp; Others Vs. I.T.C. Limited

2. The respondent, carries on the business of manufacturing and selling cigarettes and smoking tobacco as its five cigarette factories including one at Saharanpur in the State of U.P. The respondent sells its products to wholesale buyers or dealers who make further sales to secondary wholesalers from where the products reach the retailers and the consumers. During the period September 1, 1970 to February 28, 1973, the respondents followed thel procedure laid down in ChapterA of the Central Excise Rules on payment of excise duty, as the manufacture of cigarettes affects excise duty under the Central Excises and Salt Act, 1944 (hereinafter the Act). The case of the respondent in the writ petition was that under a mistake of law regarding the true interpretation of Section 4(a) of the Act, it cleared its products but paid excess excise duty under the impression that the prices charged by the wholesale dealers to the secondary wholesalers would form the correct basis of assessment and not the price at which goods were sold to wholesale dealers. Consequent upon the judgment of this Court in the case of A. K. Roy v. Voltas Ltd. wherein it was held that under Section 4(a) of the Act, the value for the purpose of assessment is required to be determined on the basis of the price at which the manufacture sells the products to the wholesale dealers and not the price at which the wholesale dealers further make a sale of the product to secondary wholesalers, the respondent filed five applications before the appropriate authority under the Act seeking refund of the excess excise duty paid under mistake of law. Two applications pertained to the period September 1, 1970 to May 28, 1971 and June 1, 1971 to February 19, 1972 involving refund of Rs. 23, 68, 686.85 and Rs. 26, 21, 356.16 respectively. The other three applications, related to the period February 20, 1972 to February 28, 1973. The Assistant Collector of Central Excise by his order dated October 9, 1973 rejected all the five applications. The respondent preferred appeals before the Collector of Central Excise (Appeals). The Appellate Collector by an order dated December 30, 1975, allowed the appeals arising out of the three refund applications relating to the period February 20, 1972 to February 28, 1973, and set aside the orders passed by the Assistant Collector and ordered consequential relief in favour of the respondent by directing the refund of the excess excise duty paid. The appeals pertaining to the refund applications for Rs. 23, 68, 686.85 and Rs. 26, 21, 356.16 for the period September 1, 1970 to May 28, 1971 and June 1, 1971 to February 19, 1972 respectively were however, rejected by the Collector (Appeals) on the ground that the same were barred by time. The respondents did not take the matter further under the statute but instead filed W.P. No. 971 of 1976 seeking quashing of the order of the Collector of Central Excise (Appeals) dated December 30, 1975 and also sought a direction by way of mandamus for refund of the sum of Rs. 49, 90, 043.01 with interest @ 12% per annum thereon. The Division Bench of the High Court came to the conclusion that on account of a mistake of law, excess excise duty had been paid by the respondent and received by the Department. The Bench held that there was a legal obligation on the part of the Government to return the excess excise duty received/recovered by it since the same was not payable by the party. Relying upon their earlier judgment in Chemicals and Plastics v. Union of India (CWP No. 147 of 1979, decided on July 10, 1979) the Division Bench allowed the writ petition filed by the respondents herein and held that the respondent could not bed on the ground of limitation. The Court set aside the order of the Collector of Central Excise (Appeals) and directed the Department to refund the sum of Rs. 49, 90, 043.01 to the respondent. The Bench observed"The duty of excise can be which is levied in accordance with the Act and any money which is realised in excess of what is permissible in law would be a realisation made outside the provisions of the Act. The payment of the excess excise duty which has been made by the petitioners for the period September 1, 1970 to February 19, 1972 cannot be legally termed as payment of excise duty authorised by law as the authorities under the Act themselves did not treat the excess duty in identical circumstances paid for the subsequent period from February 20, 1972 to February 28, 1973, as authorised by law. The excess excise duty was not payable by the petitioners under the Act and there is corresponding legal right in the petitioners to recover it. This right cannot be defeated by a mere limitation in the Act or the Rules when the collection is without the authority of law."3. The Department was directed to refund to the respondent the sum of Rs. 23, 68, 686.85 plus Rs. 26, 21, 356.16 "or such other lesser sum as may be found on verification to be due" within a period of six months from the date of the judgment i.e. April 12, 1982. Aggrieved, by the judgment of the High Court, the Department filed special leave petition and on October 8, 1982 special leave was granted. In the stay application filed by the Union of India, the Bench directed the appellant to pay to the respondent the amount which it was required to refund under the impugned judgment within a period of six weeks of the respondent furnishing bank guarantee to the Collector of Central Excise, Meerut for the said amount and that in case, the respondent fails in this appeal, it shall refund the amount with interest @ 12% per annum to the appellants4. On April 15, 1993, when the case came up for hearing before us, learned counsel for the appellants raised the plea based on Section, as amended by the Amendment Act 40 of 1991, to deny refund to the respondent. After hearing learned counsel for the parties, we directed the respondent to "furnish documentary or other evidence as the respondent may deem appropriate to establish that the amount of duty of excise in relation to which the refund is claimed was collected from or paid by him and the incidence of such duty had not been passed on by him to any other person". The appeal was directed to be posted for hearing on May 10, 1993. The respondents did not file any documentary or other evidence nor even an affidavit stating that the incidence of duty of excise in relation to which the refund was being claimed had not been passed on to any other person. The arguments were heard finally on May 14, 1993 and the judgment was reserved, though liberty was granted to learned counsel for the parties to file written submissions if any in support of their arguments. The respondent filed written submissions on May 31, 1993. Along with the written submissions an affidavit was also filed. No other material or documentary evidence, to establish that the burden of excess excise duty had been borne by it and not passed on to any other person, was filed. The Union of India filed their written submissions on June 21, 1993

Court's reasoning:
9. We are, therefore, of the opinion that the High Court, while disposing of the writ petition under Article 266 of the Constitution of India, was perfectly justified in holding that the bar of limitation which had been put against the respondent by the Collector of Central Excise (Appeals) to deny them the refund for the period September 1, 1970 to May 28, 1971 and June 1, 1971 to February 19, 1972 was not proper as admittedly the respondent had approached the Assistant Collector Excise soon after coming to know of the judgment in Voltas case and the assessee was not guilty of any laches to claim refund16. It is, thus, seen that under Section) no refund shall be made except as provided for inn (2), as amended, notwithstanding anything to the contrary contained in any judgment, order or direction of the Appellate Tribunal or any court or in any other provision of the Act or the Rules made thereunder or under any other law for the time being in force. We are not persuaded to agree with learned counsel for the respondent that the amended provisions of SectionB can be applied only prospectively i.e. to refund claims made after the introduction of the amendment and would not apply to pending cases and refund claims filed prior thereto and that the prohibition contained therein cannot apply to the present case. The refund in the present case was ordered by the High Court in the writ petition by setting aside the orders of the statutory authority refusing the claim for refund, as barred by limitation. The judgment of the High Court is under appeal before us. It was during the pendency of the appeal in this Court, that SectionB of the Act was amended by Act 40 of 1991 with effect from September 20, 1994. The matter relating to refund was thus wide open before this Court in the present appeal and had not been finally settled when Act 40 of 1991 came into force. As per amended Section, all pending claims for refund on or before September 20, 1991 are required to be dealt with and disposed of in accordance with the amended provisions of law. By operation of Section, as amended, notwithstanding the order given by the High Court in the writ petition, no refund can be made to the respondent except in accordance with the provisions of Section) of the Act. The direction to pay the amount to the respondent to the extent ordered by the Delhi High Court contained in the interim order of this Court dated October 8, 1982 was conditional one and subject to the respondent (i) furnishing bank guarantee to the Collector of Central Excise, Meerut for the amount in question and (ii) that in case the respondent fails in this appeal, it shall be liable to pay interest @ 12% per annum while refunding the amount to the appellant. Thus, the amount in question was directed to be paid to the respondent by this Court only as an interim arrangement, during the pendency of the appeal and could not be construed to be an order of execution of the order and directions of the High Court. The conditional order made on October 8, 1982 did not finally conclude the "refund claim" of the respondent and cannot take the case of the appellant out of the purview of Section) of the Act read with the first proviso to Section, as amended. The argument on behalf of the respondent to the contrary is not only specious but also fallacious. In this connection, it would also be advantageous to note a judgment of ae Bench of this Court in Union of India v. Jain Spinners Ltd. as the law on the question of retrospectivity of Section) has been settled therein. In Jain Spinners case refund was allowed by the Assistant Collector as a result of the classification list as filed by the assessee provisionally. Subsequently, on receipt of a test report from the Deputy Chief Chemist, the department took the view that the refund had been erroneously granted and sought to recover it by issuance of a notice. The Assistant Collector confirmed the demand for payment of the duty amount which had been erroneously refunded. The assessee questioned the order of the Assistant Collector through a writ petition before the High Court and also by filing an appeal before the Collector of Central Excise (Appeals). The High Court issued an interim stay in favour of the assessee against the demand confirmed by the Assistant Collectors order subject to the assessee depositing the amount of the demand in the court. The respondent (Union of India) was permitted to withdraw the amount by an interim order of the Court on February 19, 1986 subject to the condition that it would pay interest at bank rate and refund the amount along with interest within two months of the decision of the writ petition if the petitioner ultimately succeeded. The appeal filed by the assessee before the appellate authority, however, succeeded and consequential relief was ordered, "if otherwise admissible". The assessee, thereupon, filed an application before the Assistant Collector for refund of the duty plus interest as per the conditions continued in the interim order of the High Court. The assessee also filed an application before the High Court stating that in view of the appellate order, the writ petition no longer survived and sought a direction to the respondents to pay the amount along with interest. The High Court allowed the application of the assessee on September 19, 1991 and directed the Union of India to refund the amount due to the assessee. On September 20, 1991, Act 40 of 1991 came into force, prohibiting the grant of refund except in accordance with the provisions ofn (2) of Section. The Union of India filed an application stating that whether it was the High Courts order of February 19, 1986 or September 19, 1991, it was the duty of the Assistant Collector to satisfy himself that no part of the duty in respect of which refund was claimed was recovered by the assessee from any other person before making an order of refund. The Union of India sought two months time to consider the claim for refund in accordance with the amended provisions of Section. The application was rejected by the High Court in view of the order dated September 19, 1991, which had been passed prior to the coming into force of the Amendment Act with effect from September 20, 1991. In November 1991, the assessee filed a contempt petition alleging failure on the part of the officers of the Union of India to comply with the High Courts order granting refund to the assessee. When the petition came up for hearing on March 18, 1992, the counsel for the respondent submitted that the question regarding the applicability of the amended provisions was under consideration of the Government and he sought time. On April 13, 1992, the Assistant Collector passed an exhaustive order holding that since the assessee had passed on the incidence of duty to others, it was not entitled to receive the refund. The High Court at the time of hearing of the contempt petition on April 20, 1992 was apprised of the order of the Assistant Collector but it held that the decision of the Assistant Collector was not a decision of the Government and directed the Union of India to deposit the entire amount of refund with bank interest on or before April 24, 1992. It was in this background, that the Union of India filed an appeal before this Court against the order dated April 20, 1992 passed by the High Court to give effect to its earlier order dated February 19, 1986. This Court held that the High Courts order of February 19, 1986 under which alone the refund was claimed could not be an exception to the provisions if Section) of the Act, and that the High Court could not have made any order, after September 20, 1991 directing the payment of refund contrary to the amended provisions of Section) of the Act. The Court expressed the view that Section) of the Act, as amended, would apply to all cases which were pending notwithstanding any order or decree or judgment of a court or tribunal or the provisions of any other law for the time being in force17. The judgment in Jain Spinners case therefore, answers fully the submissions raised on behalf of the respondent and we reject the plea raised on behalf of the respondent that the prohibition contained in Section) of the Act would not apply to the facts and circumstances of the present case more so because the judgment and order, of the High Court directing refund was pending final adjudication by this Court when the amended provision of Section) of the Act came into force with effect from September 20, 1991It is based on misconstruction both of the order of the High Court as well as the interim order of thisCourt.After quashing the orders of the Collector of Central Excise (Appeals), holding the two refund applications as time barred, the High Court allowed the writ petition and issued a mandamus "directing the respondents to refund to the petitioners the sum of Rs. 23, 68, 686.85 + Rs. 26, 21, 356.16 or such other lesser sum as may be found on verification to be due". Thus, refund had to be made, even under the orders of the High Court dated April 12, 1982 only after "verification of the refund due". The order was, thus, not an order absolute in terms. Admittedly, the respondent did not approach the competent authority for "verification of the refund due" and no amount till date has been verified by the competent authority to be due to the respondent. Again, payment made to the respondent under interim orders of this Court dated October 8, 1982 was only an interim arrangement pending disposal of the appeal against the judgment of the Delhi High Court and was further subject to the stipulations and conditions contained therein. That interim order cannot be treated to be an order of "refund" in terms of the directions of the HighCourt.It is, therefore, futile for the respondent to contend that Section, (2) and (3) have no application to the present case. We are of the opinion that in the facts and circumstances of the present case, the provisions of SectionB as amended by Act 40 of 1991 are clearly attracted to the present case because the order of the Division Bench of the High Court had not acquired any finality when the amendment Act of 1991 came into force and the present appeal was pending in thisCourt.All pending claims for refund on or from September 20, 1991, are required to be dealt with and disposed of only in accordance with the amended provisions of the law, by reason of the amended Section) and the present case is no exception19. Under the amended provisions of Section, claim for refund has to be made by an assessee to the Assistant Collector of Central Excise in the prescribed manner, supported by documentary and other evidence, to establish that the claimant had not passed on the burden of the excise duty to any other person and had borne it himself, but with a view to obviate delay, which would result by an order of remand aimed at providing an opportunity to the respondent to establish by any material or documentary evidence before the Assistant Collector Excise, that it had not passed on the incidence of duty to any other person, we directed the respondent to furnish documentary or other evidence, as it may deem appropriate, to establish that the amount of duty of excise in relation to which the refund is claimed was collected from or paid by him and that the incidence of such duty had not been passed on by him to any other person. The respondent has not furnished any documentary or other evidence at all. With the written submissions, the respondent has however, filed an affidavit in which it has been stated in paragraph 3 as follows"Without prejudice to the contention thatn (3), orn (2)(d) or any othern of SectionB of the Central Excises and Salt Act, 1944 (hereinafter referred to as the "Act"), as amended by Central Excise and Customs Laws (Amendment) Act, 1991 (Act 40 of 1991) is not applicable to the present case, since refund has already been made pursuant to a writ issued by the Delhi High Court under Article 226 of the Constitution of India, it is stated that differential duty, in respect of which refund has already been made to the respondent company, was not passed on to the customer, as explained in the illustration below. It may be clarified that the differential duty, in the present case, relates to the differential between the duty calculated on the basis of (i) the price at which the respondent company sold the goods to WDs (1st sale) and (ii) the higher price at which the wholesale dealersd the goods to Secondary Wholesale Dealers (2nd sale)." *This averment is not at all satisfactory. It does not go to show that the respondent did not pass on the burden of the excess excise duty to any other person. The expression "was not passed on to the customer, as explained in the illustration" is vague and. It is not stated as to at what rate the duty was collected by the respondent in the present case. The "illustrations" given in the affidavit cannot carry the matter any further nor can the same be any substitute for a clear and categoric statement of fact that the excess duty was paid by the assessee or collected from it and that its incidence was not passed on by the assessee to any other person. There is no averment, much less a clear and specific one, even to show that the respondent did not collect excise duty at the higher rate (even according to the illustrations) when they sold the goods, since the price was an integrated orThis section, thus, creates a rebuttable presumption that every person who has paid excise duty has passed on the burden of the same to the buyers of such goods. The presumption has to be rebutted by the manufacturer who has paid the duty. The burden of proof is on the person claiming the refund to establish that he has paid the duty but not passed on the duty to the buyer of such goods. Since, this Court granted sufficient opportunity to the respondent to furnish such documentary or other evidence as it may wish to produce to establish that it had not passed on the incidence of the excess excise duty to the buyers of such goods and despite the grant of that opportunity, it has failed to produce any such evidence or material and the affidavit filed by it falls completely short of the necessary averments, we would consider it futile to either remand the case to the Assistant Collector Excise or to grant an opportunity to the respondent to file a fresh application before the Assistant Collector Excise under Section) and (2) of the Act to seek refund in the manner known to law by adducing such evidence as is required by the amended provisions of law. The failure of the respondent to produce the necessary evidence before us goes to show that the respondent has failed to rebut the presumption that it had not passed on the burden of the excise duty to any other person as envisaged by SectionB of the Act