Case: Shree Digvijay Cement Co. Ltd. &amp; Another Vs. Union of India &amp; Another

2. Cement is a schedule industry under the provisions of the Industries (Development and Regulation) Act, 1951 (for short, the Act). Section 18G of the Act, inter alia, empowers the Central Government to provide for regulating the supply and distribution of any article relatable to any schedule industry. The acute shortage of cement in the country resulted in the making of the Control Order is exercise of powers conferred by Sections 18G and 25 of the Act. The cement manufacturing units in India were located in different places. Some of the units manufacturing cement were located at a long distance from consumption centres. A huge amount on freight had to be incurred in transporting the cement from various factories to the market. The manufacturing cost varied depending upon the age of the unit, manufacturing process and technology utilized etc. The transportation cost varied considerably depending upon the location of the unit. In the Control Order a mechanism was devised for equalizing the freight cost on the cement. An equalization account was provided for in the Control Order. Different ex-factory retention prices were provided in respect of various cement manufacturing units keeping their varying cost of production. It provided for the manufacturer to get a retention price to cover his cost and yield a reasonable return to the manufacturer. A uniform FOR (free on rail) destination price for cement was fixed in respect of the whole of India irrespective of the distance over which the cement had to be transported. The excess of FOR destination price realized by a cement manufacturer over his retention price, subject to certain adjustments, had to be paid by the cement manufacturers into the Cement Regulation Account (CRA). In cases where freight actually incurred was in excess of the specified amount, the differential amount was paid to the manufacturer out of the CRA.3. The operation of the Control Order brought out certain serious problems affecting the cement industry. The control resulted in the fall of the fresh investments in the cement industry. Further, there were consistent demands for revision of the retention prices on the basis that the cost of manufacture had increased considerably. The burden of CRA increased rapidly because of the rapid increase in fuel and transport cost. The CRA went into deficit, it was unable to meet its commitments.4. Considering the problems, the Government on 23rd March, 1981 constituted a high level Committee to review the developments of the cement industry and recommend measures to accelerate its progress including incentives and fair prices. The terms of the reference of that CommitteeTo review the present system of pricing in the cement industry (consisting of existing factories, new factories and mini cement factories), including the merits of establishing uniform prices for different varieties of cement, suggest modifications to ensure the healthy growth of this industry including the achievement of production at optimal levels and recommended fair prices payable to producers for the next pricing period commencing from April 1982;(ii) To review the incentives (including rebates) and concessions) available to cement factories and suggest what change in these should be made to rapidly augment the domestic production of cement. In this connection, also review the incentives available for the erection of cement factories in remote, difficult and deficit areas and recommend what alternatives should be made in these to accelerate the production of cement in these areas in a cost-effective manner;(iii) To review the progress of modernization and introduction of technological improvements (including efficiency in the use of energy; research and development and quality control) in domestic cement factories and recommended measures (including system of incentives to accelerate these in order to reduce costs and effect economies in domestic production; and(iv) To consider any other matter relating to rational development of the cement industry".After detailed and exhaustive study of all aspects in relation to cement industry a large number of recommendations were made by the aforesaid Committee including recommendation for a partial decontrol so that the cement manufacturers are allowed to sell a certain specified percentage of their production in the open market without any price control. It was expected that the cement prices in the open market would be far higher than the controlled prices and this would create incentives for the fresh investment in the cement industry. The Committee felt that the need for freight subsidy by payment out of the CRA would have to be continued otherwise serious problems would arise in remote and far-flung areas. It was noticed that there is already sizeable deficit in the CRA which would make it unable to make its past payment commitments. The Committee, therefore, recommended, as an integral part of the package of amendments, that an amount of Rs. 10/- per MT should be recovered from the cement manufacturers for payment into the CRA on every tonne of cement produced, irrespective of whether it was levy cement or non-levy cement.6. With some modifications, the recommendations of the Committee were accepted by the Central Government. The Central Government allowed partial decontrol. It allowed sale of non-levy cement to the extent of 33.34% and not 25% as recommended by the Committee. Further, instead of recommended payment of Rs. 10/- per MT, the Central Government reduced the payment to the CRA at the rate of Rs. 9/- per MT. It was felt that the payment into CRA on decontrolled quantity of cement was necessary because to the extent of decontrol, there will be no contribution into the CRA of the differential amount between FOR destination price and the manufacturers retention price. It was felt that the Governments duty and obligation to pay freight subsidy on the controlled output of levy cement which accounted for 66.66% of the total production continued and was expected that this burden would increase sharply because of substantial increases in the transport cost. The CRA would, therefore, balance in this situation of decontrol only if the said contribution of Rs. 9/- per MT was received into CRA on the non-levy cement. It was also contemplated that the sale price of the non-levy cement would be far higher than the price of the levy cement and, therefore, there will be no unnecessary burden on the cement manufacturers inasmuch as this will be passed on to the customers in the shape of higher prices. It seems that by and large, the cement industry welcomed the new package pricing policy. It complemented the High Level Committee for departing from the conventional approach to the problems of pricing and distribution and submitted report to the Government which will stimulate the cement industry and ensure its healthy growth.7. It appears that out of a large number of cement manufacturers in India, only four manufacturers, namely the appellants, challenged clause 9A and consequent payment under the said clause, three of them filing the writ petitions after the liability to pay had been withdrawn and one manufacturer in September 1986. The High Court by the impugned judgment did not accept the contention that the payment under Clause 9A amounted to tax and, thus upheld the validity of the impugned clause. The High Court held that the partial decontrol and the impugned contribution was one single integrated and inseverable9A requires every producer to pay to the Cement Regulation Account (for short, CRA) an amount at the rate of Rs. 9/- per metric tonne of production of non-levy cement. This payment to be made by the producer on production of non-levy cement was withdrawn on 15th December, 1986. One of the manufacturers (Andhra Cements) filed the writ petition in the High Court challenging the validity of the clause in September, 1986; two of them (Mysore cement and Raymond Woolen) filed writ petitions in 1987 and Digvijay Cement in the year 1992. Their principle contention before the High Court was that the amount payable under Clause 9A was in the nature of tax and there was no authority of law to impose that tax. Undoubtedly, no tax can be levied or collected except by authority of law. The contention of the writ petitioners did not find favour with the High Court and, therefore, these appeals were filed on grant of leave.

Court's reasoning:
Factual matrix of the two cases relied upon by learned counsel for the respondents and of the present case is entirely different. As already noticed, there is no control on price of sale of the non-levy cement. Except Clause 9A, no other clause of the Control Order is applicable to non-levy cement. There is no sale price, there is no retention price and the manufacturers are free to sell the non-levy cement at whatever price the like. There is no power in the subordinate legislation to impose levy on that cement which is not covered by the Control Order.26. It is no doubt true that in taxing legislation, legislature deserves greater latitude and greater play in joints. This principles, however, cannot be extended so as to validate a levy which has no sanction of law, however, laudable may have been the object to introduce it and howsoever laudable may have been the purpose for which the amount so collected may have been spent.27. It is clear from the above discussion that the impugned levy under Clause 9A is a compulsory exaction. The amount paid by the customers of non-levy cement belongs to the appellants. Such a levy amounts to levy of tax and, therefore, invalid for want of sanction to levy such a tax. Clause 9A, is, therefore, ultra vires Section 18G of the Act. To this extent we set aside the impugned judgment of the Highprinciples of unjust enrichment are applicable in claim of refund. The claimant has to allege and establish that he has not passed on the burden to another person. The Constitution Bench has held whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the requirement as explained in the judgment. Where the burden of duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. Real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that amount is retained by the State, i.e. by the people. The doctrine of unjust enrichment is a just and salutary doctrine. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State for the State represents the people of the country. No one can speak of the people being unjustly enriched.29. In the present case, it is clear that the burden of payment under Clause 9A was passed on to the customers. The President of the Cement Manufacturer Association, soon after the insertion of the amendment in February 1982, in a communication dated 12th March, 1982 sent to the Secretary of Ministry of Commerce, Department of Industrial Development, Government while giving break-up of the price of non-levy cement added in the said price, a sum of Rs. 9/- per MT payable under Clause 9A on production of the non-levy cement. Further, it appears that the levy under Clause 9A was accepted by the entire cement industry except the challenge made by the four appellants by filing the writ petitions; one just before the contribution under Clause 9A was withdrawn and three after it was withdrawn. Besides the principles of unjust enrichment on equitable principles which squarely apply here, the appellants are not entitled to claim refund of amount paid into CRA under Clause 9A. It is evident that the amount so deposited was expanded for the purpose under the Control Order. Under these circumstances, we directed that pursuant to declaration of invalidity of Clause 9A of the Control Order, the amount of contribution already paid under Clause 9A will not be liable to be refunded to thehave already noticed that Clause 9A was inserted while simultaneously introducing partial decontrol of cement. No fault can be found with the object behind the levy in question. As a result of partial decontrol, the cement manufacturers were expected to earn huge profits by sale of non-levy cement in open market. There was no limitation or restriction on sale price. The effect of Clause 9A was to make them contribute, out of those profits, Rs. 9/- per metric tonne into the CRA. Howsoever laudable the object behind the levy and collection of any sum of money may be, but if it does not have sanction of law, it has to be struck down. The contention that the partial decontrol and contribution under Clause 9 are inseparable and part of the same scheme, though looks attractive at the first brush but closer examination thereof shows that it has nothe affidavit of the respondents filed in this Court as well, it appears that on payment of the sale price of the non-levy cement by the buyers to the sellers, i.e. the cement manufacturers, the amount so paid becomes their property - amount belongs to them, though they may have passed on the burden to the customers, it cannot be held that the appellants are merely holders of thatwould be useful in this connection to quote from the affidavit filed on behalf of the Ministry of Commerce and Industry, Department of Industrial Policy and Promotion which itself shows that the money received by sale of non-levy cement becomes the money of the sellers. The affidavitit was contemplated that the non-levy open market cement price would be far higher than the levy price or the controlled price by much more than the required contribution of Rs. 9/- per MT and as a result, the said contribution of Rs. 9/- on the non-levy cement would be easily and effortlessly passed on by the cement manufacturers to their customers in the shape of higher prices. In fact, this is exactly what happened. Thereafter, the non-levy cement price was at all points of time far higher than the levy cement price. For example, in June, 1985, the levy price of cement was Rs. 532/- per MT whereas, on the other hand, the non-levy price of cement per MT was as much as Rs. 1660/- i.e, three times the levy price. Even earlier, right from February, 1982 onwards, when the Cement Control Order, 1967 was amended, the non-levy cement price was at least double the levy cement price and the manufacturers, therefore, realized a sale price for his 33.34% non-levy production a total sale price which was much more than the retention price in respect of the 66.66% production of levy cement. The said contribution of Rs. 9/- per MT of non-levy cement was, therefore, passed on by the cement manufacturers and was wholly recovered from their customers. This factual position was made abundantly clear by the letter dated March 12, 1982 addressed to the Government of India by the Cement Manufacturers Association which showed that the contribution to the Cement Regulation Account at Rs. 9/- per MT of non-levy cement was built into the price of non-levy cement and recovered from the customers".The decisions relied upon by learned counsel for the respondents have nois no automatic right of refund. In Mafatlal Industries Ltd. and ors. vs. Union of India and ors. (1997) 5 SCC 536 ), the Constitution Bench has held that the right to refund of tax paid under an unconstitutional provision of law is not an absolute or an unconditional right. Similar is the position, even if Article 265 can be invoked.