Source: https://advocatetanmoy.com/mafatlal-industries-ltd-vs-union-of-india-etc/
Timestamp: 2019-04-20 14:45:39+00:00

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Common questions of law arise for consideration in this batch of cases. Initially the matter came up before a two- Member Bench. The said Bench felt that the decision of the Constitution Bench comprising 5 Judges in Sales Tax Officer, Benaras & Others vs. Kanhaiya Lal Mukundalal Saraf (AIR 1959 SC 135 = 1959 SCR 1350) requires reconsideration and referred the matter to a larger bench of 7 Judges. When the matter came up before a bench of 7 Judges, it was noticed that Kanhaiya Lal’s case (supra) was expressly approved by a bench of 7 Judges in the decision reported in State of Kerala v. Aluminium Industries Ltd. [(1965) 16 STC 689], and so, by order dated 28.7.1993, the said Bench directed that the matter may be placed before the learned Chief Justice for constituting a still larger Bench. That is how this batch of cases came up before a Bench of 9 Judges. We heard, Sri F.S. Nariman, Sri Soli Sorabjee and Sri Harish Salve, Senior Advocates, who appeared for the different assessees (claimants) and Sri K. Parasaran and Sri M. Chandrashekhar, Senior Advocates who appeared for the Union of India.
2. Stated briefly, the controversy centres round the tenability or otherwise of the claim for refund of the amounts paid by way of excise duty under the Central Excises and Salt Act, 1944, now titled as Central Excise Act, 1944 (hereinafter referred to as `the Excise Act’ on the ground that it was so done under “mistake of law”. it will be convenient to deal with the controversy by adverting to the minimal facts in the main appeal argued before us — Civil Appeal No.3255 of 1984 – Mafatlal Industries Ltd., Ahmedabad v. Union of India. The appellant is a textile mill situate at Ahmedabad. The appellant and a few other mills manufacture “blended yarn”. The said blended yarn was captively consumed by the various mills for manufacture of fabric, popularly known as “art silk” fabric. For the period prior to March 16/17, 1972, the mills paid excise duty on blended yarn manufactured for captive consumption under Tariff Item 18 or 18A of the First Schedule to the Excise Act. In Special Application No.1058/72 filed by M/s. Calico Mills, who manufactured fabrics and was captively consuming blended yarn, produced by it for manufacturing fabric known as “art silk fabric”, a Division Bench of the Gujarat High Court by judgment dated 15.1.1976, held that the levy of the excise duty on blended yarn prior to March 16/17, 1972, under tariff Item 18 or 18A was clearly ultra vires. The High Court directed refund of the excise duty levied for 3 years prior to institution of the petition, which was instituted on 6.5.1972. The appellant and other mill-owners stated that as a result of the declaration of the law as aforesaid by the Court, they were not liable to pay excise duty on blended yarn up to March 16/17, 1972 and that they had paid the excise duty on the same upto that date under mistake of law. They requested for refund of the excise duty so paid till March 16/17, 1972, stating that such duty was illegally recovered from hem. The Revenue did not refund the excise duty as claimed. So, the appellant and others filed suits within thee years of the aforesaid judgment (15.1.1976) for refund of excise duty illegally recovered from them, with interest. The trial court decreed the suits. In the appeals filed by the Union of India against the aforesaid decrees passed by the trial court, the High Court of Gujarat allowed the appeals and set aside the decrees passed by the trial courts, by judgment dated 6.4.1984. It was held that in order to successfully sustain the claim of restitution based on Section 72 of the Contract Act, the person claiming restitution should prove “loss or injury” to him, an in the cases before them, the excise duty paid on blended yarn was ultimately passed on to the buyer of the fabric, and so the claim for restitution will not lie. In other words, in cases where an assessee has “passed on” the duty paid by or realised from him, he has suffered no loss or injury, and the action for restitution is unsustainable. The aforesaid statement of the law is seriously disputed by the appellants in Civil Appeal No.3255/84 and others.
3. In the ultimate analysis, the main question that falls for consideration in this batch of cases is, whether in an action claiming refund of excise duty (tax) paid under mistake of law, is it essential for the person claiming such refund, to establish “loss or injury” to him? In other words, in cases where the person from whom the excise duty (tax) is collected, has “passed on” the liability or deemed to have passed on the liability, is it open to him to claim refund of the duty paid by him, placing reliance on Section 72 of the Indian Contract Act? The further question as to whether an action by way of civil suit or a writ petition under Article 226 of the Constitution will lie, in the light of various amendments to the Act, claiming “refund” or “restitution”, also arises for consideration.
4. I perused the draft judgment prepared by my learned brother Jeevan Reddy, J., wherein on the main question, he has held that if the person claiming the refund has passed on the burden of duty to another and has not really suffered any loss or prejudice, there is no question of reimbursing him and he cannot successfully sustain an action for restitution, based on Section 72 of the Indian Contract Act. With great respect, I fully concur with the aforesaid conclusion of my learned brother. But, in view of the importance of the question raised, I would like to record my own reasons for the aforesaid conclusion. I shall separately deal with the maintainability of the action either by way of suit or petition under Article 226 of the Constitution — the extent to which there is ouster of jurisdiction of Courts.
5. In this batch of cases, the claims by different assessees for refund of excise duty paid by them under mistake of law arise over a period of years, and the claims were made in different proceedings — before the departmental authorities, by way of civil suits and writ petitions under Article 226 of the Constitution, which are in appeal before us.
(I) The levy is unconstitutional — outside the provisions of the Act or not contemplated by the Act.
(II) The levy is based on misconstruction or wrong or erroneous interpretation of the relevant provisions of the Act, Rules or Notifications: or by failure to follow the vital or fundamental provisions of the Act or by acting in violation of the fundamental principles of judicial procedure. (III) Mistake of law — the levy or imposition was unconstitutional or illegal or not eligible in law (without jurisdiction) and, so found in a proceeding initiated not by the particular assessee, but in a proceeding initiated by some other assessee either by the High Court or the Supreme Court, and as soon as the assessee came to know of the judgment (within the period of limit ation), e initiated action for refund of the tax paid by him, due to mistake of law.
(b) Period from 7.8.1977 to 16.11.80 — Rule 11 of the Central Excise Rules, as amended.
(d) Period after 19.9.1991 — Section 11A read along with Section 11B of the Act, as amended by Act 40 of 1991.
The circumstances and grounds on the basis of which the refund can be claimed, the period within which it should be so done, the forum before which the claim should be preferred and whether the decision thereon is subject to the jurisdiction of ordinary courts, vary from period to period. We shall advert to such provisions and their impact on various aspects regarding the claim for refund a little later.
It should be noted that Rule 11 before amendment did not provide for any ouster of jurisdiction of courts. We shall deal with Rule 11-A as amended and Sections 11A and B of the Excise Act a little later. The Revenue states that in view of these later provisions, there is ouster of jurisdiction of courts, relating to claims for refund.
6. The claims by different assessees for refund arose and are/were preferred during different periods. After Rule 11 was amended and Section 11A and B were inserted in the Act, the statute contained provisions making them exclusive for claiming refund. Be that as it may, it is only relevant to state at this juncture that in all cases, irrespective of the relevant statutory provisions in the Excise Act and/or the Rules, the claims for refund were made in different proceedings mainly based on section 72 of the Indian Contract Act. So the main issue, in all the cases, that arises for consideration is, whatever be the nature of the attack regarding the levy, or the basis put forward for claiming refund, r the period for which refund is claimed or the character of the proceedings in which it was so done, or the different nature or character of the statutory provisions either providing or not providing as to how and in what manner the claim should be made, — whether the claim for refund is tenable in any of the proceedings, for any period, based on Section 72 of the Contract Act, if the assessee has “passed on” the liability to the consumer or third party?
7. The levy under the Excise Act is an indirect tax (duty). A duty of excise is levied on the manufacture or production of goods. Ordinarily, it is levied on the manufacturer or producer of goods. (Since the levy is in relation to or in connection with the manufacture or production of goods, it may be levied even at a point later than manufacture or production of the goods.) The duty levied will form part of the total cost of the manufacturer or producer. The levy being a component of the price for which the goods are sold, is ordinarily passed on the customer. It is a matter of common knowledge that every prudent businessman will adjust his affairs in his best interests and pass on the duty levied or leviable on the commodity to the consumer. That is the presumption in law.
“Liability of person to whom 72. A person to whom money is paid or thing money has been paid, delivered, by mistake or anything or under coercion. delivered, by mistake or under coercion, must repay or return it.
“Of Certain Relations Resembling Those Created By Contract”. The Chapter contains five sections — Sections 68 to 72. The rights and liabilities dealt with in those Sections accrue from relations resembling those created by contract. It is not a real contract, but one implied in law or a quasi- contract.
Law is fairly settled that “Money paid under a mistake or on a consideration which has wholly failed or under duress falls under the general head of money “had and received.” An action for money “had and received” is an action “founded on simple contract” which has been called quasi contract or restitution.” (See Pollock & Mulla – Indian Contract And Specific Relief Acts (10 the Edition) page 598).
(Emphasis supplied) The person claiming restitution should have suffered a “loss or injury”. In my opinion, in cases where the assessee or the person claiming refund has passed on the incidence of tax to a third person, how can it be said that he has suffered a loss or injury? How is it possible to say that he has got ownership or title to the amount claimed, which he has already recouped from a third party? So, the very basic requirement for a claim of restitution under Section 72 of the Contract Act is that the person claiming restitution should plead and prove a loss or injury to him; in other words, he has not passed on the liability. If it is not so done, the action for restitution or refund, should fail.
” It is no longer appropriate to draw a distinction between law and equity. Principles have now to be stated in the light of their combined effect. Nor is it necessary to canvass the niceties of the old forms of action.
(Emphasis supplied) The observations extracted above indisputable point out that a person who seeks restitution, has a duty to disclose or account for what he has received in the transaction. An accounting is a condition precedent in an action for restitution. By way of analogy, it can be stated that in cases where restitution is claimed under Section 72 of the Contract Act, on the ground of payment due to mistake of law, the person claiming restitution, should plead and prove that “he has not passed on” the liability to another. That is the nature of “accounting” in cases falling under Section 72 of the Contract Act. IN my opinion, the High Court was justified in law in holding that since the excise duty paid by the appellant was ultimately passed on to the buyers of the fabric, and that the appellant has suffered no loss or injury, the action for restitution based on Section 72 of the Contract Act, was unsustainable. (This is the legal position even under general law, without reference to Section 11B of Central Excises & Salt Act as amended by Act 40/1991).
Shiv Shanker Dal Mills etc. etc. v. State of Haryana & Ors. etc. [1980 (1) SCR 1170 (1173)], State of Madhya Pradesh v. Vyankatlal & Anr. [1985 (3) SCR 561 (566, 568)], M/s. Amar Nath Om Parkash and Ors. etc. v. State of Punjab and Ors. etc. [1985 (2) SCR 72 (at pp. 96-100)], Indian Aluminium Company Limited v. Thane Municipal Corporation [1992 Supp. (1) SCC 480 (488-489)] and State of Rajasthan & Others v. Novelty Stores etc. (AIR 1995 SC 1132).
(i) Whether the term “mistake” occurring in section 72 of the Contract Act took within its fold “mistake of law” as well as “mistake of fact”?
162) and again in Orient Paper an Industries Ltd. and Another v. State of Orissa & Others (1991 Supp. (1) SCC 81, at page 96), should govern the matter.
(Emphasis supplied) The above observations should be borne in mind in understanding the scope of the decision in Kanhaiya Lal’s case, and the cases following the said case. The said decisions cannot be understood as laying down the law that even in cases the liability has been “passed on”, the assessee can maintain an action for restitution.
It also appears that there is some inconsistency in the Kanhaiya Lal’s case. The basis in an action for restitution under Section 72 of the Contract Act, rests upon the equitable doctrine of unjust enrichment. The Court observed on page 1364 that the recovery of the money paid under mistake of law or fact can be recovered “subject however to questions of estoppel, waiver, limitation or the like”. Even so, at page 1366, the Court has observed “equitable considerations could scarcely be imported when there is a clear and unambiguous provision of law which entitled the plaintiff to the relief claimed by him.” The very basis of the claim, though statutorily incorporated in Section 72 of the Contract Act, is equitable in nature and if so, how can it be said that equitable considerations should not be applied in adjudicating the claim for restitution (refund)? If an assessee has passed on the tax to the consumer or a third party and sustained no loss or injury, grant of refund to him will result in a windfall to him. Such a person will be unjustly enriched. This will result in the assessee or the claimant obtaining a benefit, which is neither legally nor equitably due to him. In other words, such a person is enabled to obtain “an unjust benefit” at the cost to innumerable persons to whom the liability (tax) has been passed on and to whom really the refund or restitution is due. The above factors certainly disentitle such a person from claiming restitution. If the decision in Kanhaiya Lal’s case (supra) and the cases following the said decision, enables such a person to claim refund (restitution), with great respect to the learned Judges, who rendered the above decisions, I express my dissent thereto.
(Emphasis supplied) Mr. Parasaran also urged that it should be borne in mind that excise duty is an indirect levy or tax which could be passed on. Innumerable persons bear the brunt. And it is passed on, ordinarily by prudent businessmen. The decisions in R.C. Jall v. Union of India [1962 suppl. (3) SCR 436 at 451] and The Province of Madras v. M/s. Boddu Paidanna and Sons [1942 F.C.R.90], were referred to. Reference also was made to Section 64A of Sale of Goods Act, 1930 which was substituted later by Act 33 of 1963 to show that the levy could be passed on and so recognised by statute, and in the above background. there is a presumption that excise duty has been passed on. The scope of Article 39(b) of the Constitution, as laid down by this Court in State on Karnataka and Anr. etc. v. Shri Ranganatha Reddy & Anr. etc. [1978 (1) SCR 641 (689)], Sanjeev Coke Mfg. Co. v. Bharat Coking Coal Ltd. & Anr. [1983 (1) SCR 1000 (1023-24 & 1026)], State of Tamil Nadu etc. etc. v. L. Abu Kavur Bai & Ors. [AIR 1984 SC 326 (343) = 1984 (1) SCR 725 (759, 761)] was highlighted. Reliance was placed on M/s. Amar Nath Om Parkash and Ors. etc. v. State of Punjab and Ors. etc. [1985 (2) SCR 72, at pp.96, 97, 99, 100)] Shiv Shanker Dal Mills etc. etc. v. State of Haryana & Ors. etc. [1980 (1) SCR 1170 (1173)], and Walaiti Ram Mahabir Prasad v. State of Punjab & Ors. [AIR 1984 (P&H) 120, at p. 124], to stress the point that the persons claiming refund who were only middle-men, should not be unjustly enriched and allowed to make a “fortune” as it were, at the expense of innumerable unidentifiable innocent consumers and that “public interest” requires that such persons claiming refund should not be unduly or unjustly benefited; and, public interest is better served, if the State is allowed to retain the collection of tax, which could be made/spent, for the benefit of the “public”.
16. On an evaluation of the rival pleas urged in the matter, I am of the view that the plea of Counsel for Union of India should prevail.
“Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. It in an indirect duty which the manufacturer or producer passes on to the ultimate consumer, that is, its ultimate incidence will always be on the consumer.
(Emphasis supplied) Section 64A of the Sale of Goods Act after its amendment by Act 33 of 1963, in providing that in contract of sale amount of increased or decreased taxes, may be added or deducted by the seller or by the buyer, in case of increase or decrease or remitted, after the making of the contract for the sale or purchase of such goods, without stipulation as to the payment of tax where a tax was not chargeable at the time of making the contract, expressly states that the pr visions shall apply to any duty of customs or excise and any tax on the sale or purchase of goods. the scope of Article 39(b) of the Constitution which has as its basis the concept of “distributive justice”, as explained in three cases referred to in the previous paragraph; Shri Ranganatha Reddy (1978(1) SCR 641), Sanjeev Coke v. Bharat [1983(1) SCR 1000] and L. Abu [AIR 1984 SC 326] go to show that the words “material resources” occurring in Article 39 clause (b) will take in, natural or physical resources and also movable or immovable property and it would include all private and public sources of meeting material needs, and not merely confined to public possessions. So also, the three cases, Shiv Shanker Dal Mills’ case [1980 (1) SCR 1170], Amar Nath Om Parkash’s case [1985 (2) SCR 72] and Walaiti Ram Mahabir Prasad [AIR 1984 (P&H) 120], emphasis the principle that the persons who have passed on the burden of the levy — middlemen — should not be allowed to profiteer by illogtten gains and unjustly enriched. An analysis of the above decisions in detail will point out that if Article 265 of the Constitution is literally interpreted and in isolation, and refund ordered, in cases where excise duty has been passed on, it will result in a mockery, totally ignoring the other salient features of the Constitution and the ground realities. As the Preamble states, the Constitution was enacted by the people, to secure to all the citizens, justice, political, social and economic. It is fairly settled by the decisions of this Court, that the directive principles contained in Part IV of the Constitution are fundamental in the governance of this country and all organs of the State including the judiciary are bound to enforce those directives. In interpreting the various provisions of the Constitution, the courts have to be realistic and should be alive to the needs of the times. There courts have a responsibility to ensure proper and meaningful interpretation of the directive principles and to adjust or harmonise the objectives enshrined in the Preamble — justice, political, social and economic and the directive principles contained in Part IV, with the individual rights. In the process, it is permissible to restrict, abridge, curtail and in extreme cases, abrogate other rights in the Constitution, if found necessary and expedient, in particular situations. In the light of the above, I hold that Article 265 should be read along with the Preamble and Article 39(b) and (c) of the Constitution, and so construed in cases where the assessee has passed on the liability to the consumer or third party, he is not entitled to the claim of restitution or refund. The fact that the levy is invalid need not automatically result in a direction for refund of all collections made in pursuance thereto. The observation of a three-Member Bench of this Court in Orissa Cement Ltd. v. State of Orissa [1991 Supp. (1) SCC 430 (498 para 69)], is apposits in this context.
17. It is open to the Court to deny the equitable remedy of refund (restitution) in such cases. The attempt of persons who have passed on the liability in claiming refund is only to strike at a bargain — to make a fortune at the expense of innumerable unidentifiable consumers. Such persons have suffered no loss. On the other hand, if the State is allowed to retain the amount, it will be available to the community at large and could be made use of for public purposes. On this basis as well, the denial of refund or restitution is valid. There is nothing abhorrent or against public policy if refund or restitution is withheld in such a situation. It should also be stated that in cases of indirect levy of tax which was passed on, this Court has negatived the claim for refund in a few cases, mentioned in paragraph 12 (supra); — Shiv Shanker Dal Mills v. State of Haryana [1980 (1) SCR 1170 (1173)], State of Madhya Pradesh v. Vyankatlal & Anr. [1985 (3) SCR 561 (566, 568)], M/s. Amar Nath Om Parkash and Ors. v. State of Punjab and Ors. [1985 (2) SCR 72 (96-100)], Indian Aluminium Company Limited v. Thane Municipal Corporation [1992 Supp. (1) SCC 480 (488-489)] and State of Rajasthan & Ors. v. Novelty Stores etc. [AIR 1995 SC 1132].
18. It now remains to consider the foreign decisions brought to our notice. The various decisions of foreign courts and their scope have been very exhaustively considered by Jeevan Reddy, J. in this judgment under the heading “Decisions of foreign courts on the subject”. I am in broad agreement with my learned brother Jeevan Reddy, J., in the analysis of the various decisions aforesaid. It is unnecessary to cover that ground over again.
Defining the extent of the Woolwich Principle” – by J.
48. This defence differs from that of change of position because with the latter the issue relates to the conduct of the payee. With the defence of passing on the issue relates to the conduct of the payer.
50. In Moses v. Macferlan (1760) 2 Burr. 1005 at p.1020 Lord Mansfield said that the payee “may defend himself by everything which shews that the plaintiff, ex aequo et bono, is not entitled to the whole of his demand, or to any part of it.” This principle suggests that a defence of passing on should exist, for simple reasons of justice.
51. In Woolwich, supra, Lord Goff deferred the issue of the existence of a passing on defence, suggesting (at p.178) that the availability of such a defence may depend on the nature of the tax. It is submitted that the only real relevance of the nature of the tax relates to the case of determining whether the burden of the tax really was passed on.
incorporated in the price of goods and passed on to purchasers. Although this decision is confined to charges levied contrary to the rules of Community law, the very fact that Community law accepts the validity of a defence of passing on and accepts that the rationale of it is to avoid the unjust enrichment of the initial taxpayer, is a good reason for the defence to be adopted generally in English law. It would be odd if there were a divergence of approach between English and Community law on this matter.
However, it must be noted that Community law “does not prevent” Member States from adopting a defence of passing on. The San Giorgio case is not authority for the proposition that Member States must adopt such a defence. There has been some disquiet expressed as to the need for such a defence in theory and how it would work in practice. The defence was rejected in Mason v. New South Wales. The operation of the defence is fraught with difficulties because it is not easy to show that the charge was passed on in the price of gods. For the price of goods is affected by many factors, conditional upon the state of the market. Advocate General Mancini in the San Giorgio case said that the “passing on of charges is not generally relevant because of the innumerable variables which affect price formation in a free market and because of the consequent impossibility of definitively relating any part of the price exclusively to a certain cost.” Thus, may be the price of goods was increased in an attempt to recoup the tax paid to the Revenue from the purchasers of goods, but this in turn may have had an impact on sales volume resulting in an overall loss. The burden of the enrichment cannot really be said to have been passed on when the initial taxpayer suffers a net loss.
In Kanhaiya Lal’s case (1959 SCR 1350 at page 1367), this Court was not inclined to accept that defence in mitigation that the State has not retained the amount, but has spent them away in the ordinary course of governmental activities. This plea in defence based on the theory of “Change of Position” has been dealt with by Graham Virgo in his article in British Tax Review (1993) at pages 458-459. See also the views expressed in this behalf by a two-Member Bench of this Court in D. Cawasji & Co. v. State of Mysore [1975 (2) SCR 511].
21. I am of the view that the above academic opinion has got much force. However, it is subject to one aspect, stated hereunder. As held by me earlier, ordinarily, the presumption is that the taxpayer has passed on the liability to the consumer (or third party). It is open to him to rebut the presumption. The matter is exclusively within the knowledge of the taxpayer, whether the price of the goods included the `duty’ element also and/or also as to whether he has passe don the liability since he is in possession of all relevant details. Revenue will not be in a position to have an in depth analysis in the innumerable cases to ascertain and find out whether the taxpayer has passed on the liability. The matter being within the exclusive knowledge of the taxpayer, the burden of proving that the liability has not been passed on should lie on him. It is held accordingly.
22. The next important question that falls to be considered is, as to what extent the jurisdiction of the ordinary courts is ousted, regarding claims for refund of tax illegally levied or collected?
According to the Revenue, the Act is a special enactment creating new rights and liabilities and has also made exhaustive provisions, to ventilate the grievances against all illegal and improper assessments by way of appeals, revisions etc. and also to obtain refunds in appropriate cases by following certain procedures and fulfilling some conditions. A hierarchy of tribunals is provided to afford relief to the assessees. Elaborate alternate remedies provided by the Act, taken along with the specific bar of the jurisdiction of courts provided in Rule 11 (as amended) and Section 11(B) of the Act, and in particular specifying the conditions and procedure for entertaining claims for refund, period of limitation within which the claim should be preferred, etc. will oust/bar the jurisdiction of ordinary courts in that regard. (Attention was also drawn to Sections 11C, 11D and also to Sections 12A to D of the Act, to stress the scheme of the Act.) On the other hand, counsel for the assessees-claimants urged that the provisions in the Act dealing with refund of tax “unconstitutionally” or “illegally” or “unauthorisedly” collected are not exhaustive. Even so, in cases where the levy is unconstitutional or illegal or without jurisdiction, the jurisdiction of the Civil Courts is not barred to annual the levy and/or order refund.
(I) the levy is unconstitutional – outside the provisions of the Act or not contemplated by the Act.
(II) the levy is based on misconstruction or wrong or erroneous interpretation of the relevant provisions of the Act, Rules or Notifications; or by failure to follow the vital or fundamental provisions of the Act or by acting in violation of the Fundamental Principles of judicial procedure.
(III) mistake of law — the levy or imposition was unconstitutional or illegal or not eligible in law (without jurisdiction) and, so found in a proceeding initiated not by the particular assessee, but in a proceeding initiated by some other assessee either by the High Court or the Supreme Court, and as soon as the assessee came to know of the judgment, (within the period of limitation) he initiated action for refund of the tax paid by him, due to mistake of law.
(d) Period after 19.9.1991 — Section 11A read along with Section 11B of the Act, as amended by Act 40 of 1991. Rule 11 of the Central Excise Rules which was in force prior to 7.8.1977, has been quoted in paragraph 5 of this judgment. It contains no specific provision relating to outster of jurisdiction of the courts.
(1) Any person claiming refund of any duty paid by him may make an application for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the date of payment of duty.
Explanation.– Where any duty is paid provisionally under these rules on the basis of the value or the rate of duty, the period of six months shall e computed from the date on which the duty is adjusted after final determination of the value or the rate of duty, as the case may be.
(2) If on receipt of any such application the Assistant Collector of Central Excise is satisfied that the whole or any part of the duty paid by the applicant should be refunded to him, he may make an order accordingly.
(3) Where as a result of any order passed in appeal or revision under the Act, refund of any duty becomes due to any person, the proper officer may refund the amount to such person without his having to make any claim in that behalf.
(4) Save as otherwise provided by or under these rules no claim for refund of any duty shall be entertained.
Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if, for the words `six months’, the words `five years’ were substituted.
SECTION 11-B BEFORE AMENDMENT BY ACT 40/1991 “11B. Claim for refund of duty.– (1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the relevant date: Provided that the limitation of six months shall not apply where any duty has been paid under protest.
(3) Whereas a result of any order passed in appeal or revision under this Act refund of any duty of excise becomes due to any person, the Assistant Collector of Central Excise may refund the amount to such person without his having to make any claim in that behalf. (4) Save as otherwise provided by or under this Act, no claim for refund of any duty of excise shall be entertained.
(5) Notwithstanding anything contained in any other law, the provisions of this section shall also apply to a claim for refund of any amount collected as duty of excise made on the ground that the goods in respect of which such amount was collected were not excisable or were entitled to exemption from duty and no court shall have any jurisdiction in respect of such claim.
Provided further that the limitation of six months shall not apply where any duty has been paid under protest.
Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of duty has not been passed on by the persons concerned to any other person.
(Emphasis supplied) Section 11C deals with the power of Central Government to dispense with recovery of excise duty in certain specified cases, which is not necessary for our discussion. Section 11D and Section 12A to D highlight the new scheme of the Act, relating to refund and they are as follows:- 11D. Duties of excise collected from the buyer to be deposited with the Central Government (1) Notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal or any court or in any other provision of this Act or the rules made thereunder, every person who has collected any amount from the buyer of any goods in any manner as representing duty of excise, shall forthwith day the amount so collected to the credit of the Central Government.
(2) The amount paid to the credit of the Central Government under sub-section (1) shall be adjusted against duty of excise payable by the person on the finalisation of assessment and where any surplus is left after such adjustment, the amount of such surplus shall either be credited to the Fund or, as the case may be, refunded to the person who has borne the incidence of such amount, in accordance with the provisions of section 11B and the relevant date for making an application under that section in such cases shall be the date of the public notice to be issued by the Assistant Commissioner of Central Excise.” “12A Price of goods to indicate the amount of duty paid thereon Notwithstanding anything contained in this Act or any other law for the time being in force, every person who liable to pay duty of excise on any goods shall, at the time of clearance of the goods, prominently indicate in all the documents relating to assessment, sale invoice and other like documents, the amount of such duty which will form part of the price at which such goods are to be sold. 12B. Presumption that incidence of duty has been passed on to the buyer Every person who has paid the duty of excise on any goods under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such duty to the buyer of such goods.
(c) any income from investment of the amount credited to the Fund any other monies received by the Central Government for the purposes of this Fund.
12D. Utilisation of the Fund (1) Any money credited to the Fund shall be utilised by the Central Government for the welfare of the consumers in accordance with such rules as that Government may make in this behalf.
— and this is the purport of Section 11D. The said section (Section 11D) should be understood in the above practical and business sense. Section 12A provides that the price of the goods sold should indicate the amount of duty, which will form part of the price. Section 12B states that the person, who has paid the duty of excise on any goods under the Act, shall be deemed to have passed on the incidence of such duty to the buyer of such goods. It is a rebuttable presumption. Section 12C creates the “Consumer Welfare Fund”. The amount of duty referred to in Sections 11B(2), 11C(2) and 11D(2) shall be credited in the said Fund. Section 12D provides that the Fund shall be utilised for the welfare of the consumers.
26. The question that falls to be considered is as to how far or to what extent the jurisdiction of the ordinary courts is barred, in view of the alternate remedies provided by the Act by way of appeals, revisions, claims for refund and the period of limitation provided therefor, etc. and specifically excluding the jurisdiction of the civil courts for claiming refund? In discussing this aspect, one has to bear in mind the content of Article 265 also. It will apply where the statute is unconstitutional or invalid and also where the collection is unauthorised/illegal, i.e.., without “authority of law”.
“……………It is necessary to add that these observation, though made in somewhat wide terms, do not justify the assumption that if a decision has been made by a taxing authority under the provisions of the relevant taxing statute, its validity can be challenged by a suit on the ground that it is incorrect on the merits and as such, it can be claimed that the provisions of the said statute have not been complied with. Non- compliance with the provisions of the statute to which reference is made by the Privy Council must, we think, be non-compliance with such fundamental provisions of the statute as would make the entire proceedings before the appropriate authority illegal and without jurisdiction. Similarly, if an appropriate authority has acted in violation of the fundamental principles of judicial procedure, that may also tend to make the proceedings illegal and void and this infirmity may affect the validity of the order passed by the authority in question. It is cases of this character where the defect or the infirmity in the order goes to the root of the order and makes it in law invalid and void that these observations may perhaps by invoked in support of the plea that the civil can exercise its jurisdiction notwithstanding a provision to the contrary contained in the relevant statute. In what cases such a plea would succeed it is unnecessary for us to decide in the present appeal because we have no doubt that the contention of the appellant that on the merits, the decision of the assessing authority was wrong, cannot be the subject- matter of a suit because S.18-A clearly bars such a claim in the civil courts.
(Emphasis supplied) In this case, the relevant Act contained detailed and specific provisions by way of appeal, revision etc. to ventilate the grievances of the assessees. In addition thereto, there was specific provision ousting the jurisdiction of the courts. Even so, the court did not hold that the principles laid down in Mask & Co. case are inapplicable. The principles in Mask & Co. case were affirmed and explained.
“The Constitution Bench, however went on to examine the rulings of the Judicial Committee in Mask and Co.’s and Raleigh Investment Co.’s cases, 67 Ind App 222 = (AIR 1940 PC 105) and 74 Ind App 50 = (AIR 1947 PC 78). Dealing with the former case, this Court pointed out that non-compliance with the provisions of the statute meant non-compliance with such fundamental provisions of the statute as would make the entire proceedings before the appropriate authority illegal and without jurisdiction…..
Emphasis supplied) Referring to the facts of Firm of Illuri Subbayya Chetty and Sons v. State of Andhra Pradesh (AIR 1964 SC.
“The case of Firm of Illuri Subayya, 1961-1 SCR 752 = (AIR 1964 SC 322) may be said to be decided on special facts with additional reference to the addition of Section 18-A excluding the jurisdiction of civil court and the special remedies provided in Section 12-A to 12-D by which the matter could be taken to the highest civil court in the State.
“The Special Bench refrained from either accepting the dictum of Mask Co.’s case, 67 Ind App 222 = (AIR 1940 PC 105) or rejecting it, to the effect that even if jurisdiction is it, to the effect that even if jurisdiction is excluded by a provision making the decision of the authorities final, the civil courts have jurisdiction to examine into cases where the provisions of the particular Act are not complied with.
“One of the points which is often treated as relevant in dealing with the question about the exclusion of civil Courts’ jurisdiction, is whether the special statute which, it is urged, excludes such jurisdiction, has used clear and unambiguous words indicating that intention. Another test which is applied is: does the said statute provide for an adequate and satisfactory alternative remedy to a party that may be aggrieved by the relevant order under its material provisions? Applying these two tests, it does appear that the words used in S.3(4) and S. 16 are clear. Section 16 in terms provides that the order made under this Act to which the said section applies shall not be called in question in any Court. This is an express provision excluding the civil courts’ jurisdiction. Section 3(4) does not expressly exclude the jurisdiction of the civil Courts, but, in the context, the inference that the civil Courts jurisdiction is intended to be excluded, appears to be inescapable. Therefore, we are satisfied that Mr. Goyal is right in contending that the jurisdiction of the civil Courts is excluded in relation to matters covered by the orders included within the provisions of S.3(4) and S. 16.
“This conclusion, however, does not necessarily mean that the plea against the validity of the order passed by the District Magistrate, or the Commissioner, or the State Government, can never by raised in a civil Court. In our opinion, the bar created by the relevant provisions of the Act excluding the jurisdiction of the civil Courts cannot operate in cases where the plea raised before the civil Court goes to the root of the matter and would, if upheld, lead to the conclusion that the impugned order is a nullity.
“In M/s. Kamla Mills Ltd. v. The State of Bombay, C.A. No. 481 of 1963, dated 23-4-1965: (AIR 1965 SC 1942), while dealing with a similar point, this Court has considered the effect of the two decisions f the Privy council, one in the case of Mask and Co., 67 Ind app 222. (AIR 1940 PC 105) (supra), and the other in raleigh Investment Co.
Ltd. v. Governor-General in Council, 74 Ind App 50 at pp.62-63: (AIR 1947 PC 78 at pp. 80-81). The conclusion reached by this Court in M/s. Kamla Mill’s case, C.A. No. 481 of 1963 dated 23-4-1965: (AIR 1965 SC 1942), (supra) also supports the view which we are taking in the present appeal.
In considering Mask & Co. (AIR 1940 PC 105), and Kamala Mills (AIR 1965 SC 1942) the Constitution Bench in Ram Swarup’s case (AIR 1966 SC 893) held that if the proceeding assailed is totally invalid and a nullity or without jurisdiction, the jurisdiction of the civil courts is not barred. Again, the principle laid down in Mask & Co. (supra) was only affirmed.
“Neither of the two cases of Firm of Illuri Subayya, 1964-1 SCR 752 = (AIR 1964 SC 322) or Kamla Mills, 1966 1 SCR 64 = (AIR 1965 SC 1942) can be said to run counter to the series of cases earlier noticed. The result of this inquiry into the diverse views expressed in this Court may be stated as follows: (1) Where the statute gives a finality to the orders of the special tribunals the civil court’s jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure. (2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to Find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court. Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not.
(3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals. (4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit. (5) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegally collected a suit lies.
(6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry.
(7) An exclusion f the jurisdiction of the civil court is not readily to be inferred unless the conditions above set down apply.
compliance with such fundamental provisions of the statute as would make the entire proceedings before the appropriate authority illegal and without jurisdiction.
[Dulabhai’s case (supra) — para 32 Clause (1)] (Emphasis supplied) Here also, the appropriate action should be laid within the period of limitation provided by the appropriate law and also can invoke Section 72 of the contract Act, as the case may be.
In this category, assessees who initiated proceedings and impugned the assessments/claimed refund, for any reason, either by way of suit or petition under Article 226 of the Constitution, and the action was dismissed on merits, they cannot maintain an action over again. He who fights and runs away, cannot have another day. If the levy or imposition was held to be unconstitutional or illegal or not exigible in law, in a similar case filed by some other person, the assessee who had already lost the battle in a proceeding initiated by him or has otherwise abandoned the claim cannot, take advantage of the subsequent declaration rendered in another case where the levy is held to be unconstitutional, illegal or not exigible in law. The claim will be unsustainable and barred by res judicata. [M/s. Tilokchand Motichand and Ors. v. H.B. Munshi, commissioner of Sales Tax, Bombay and another (AIR 1970 SC 898)]. (This will be confined to the period for which action was laid and lost).
Subject to the above, if a levy or imposition of tax is held to be unconstitutional or illegal or not exigible in law i.e. without jurisdiction, it is open to the assessee to take advantage of the declaration of the law so make, and pray for appropriate relief inclusive of refund on the ground that tax was paid due to mistake of law, provided he initiates action within the period of limitation prescribed under the Limitation Act. Such assessee should prove the necessary ingredients to enable him to claim the benefit under Section 72 of the Contract Act read with Section 17 of the Limitation Act. [Dulabhai’s case (supra) – para 32 – clauses (4) and (5)].
30. It should be borne in mind, that in all the three categories of cases, the assessee should prove the fundamental factor that he has not “passed on” the tax to the consumer or third party and that he suffered a loss or injury. This aspect should not be lost sight of, in whatever manner, the proceeding is initiated — suit, Article 226, etc.
31. As observed earlier, proposition No.(1) of clause No. (1), enunciated in Dulabhai’s case (supra) should be understood in the background of or in accord with the observations of the earlier Constitution Bench in Illuri Subbayya Chetty’s case – [AIR 1964 SC 322 (at pp. 325-326)] as quoted in para 27 (supra) — (see para 29 of this judgment).
Lack of jurisdiction may arise in various ways. There may be an absence of those formalities or things which are conditions precedent to the tribunal having any jurisdiction to embark on an enquiry. Or the tribunal may at the end make an order that it has no jurisdiction to make. Or in the intervening stage while engaged on a proper enquiry, the tribunal may depart from the rules of natural justice; or it may ask itself the wrong questions; or it may take into account matters which it was not directed to take into account. Thereby it would step outside its jurisdiction. It would turn its inquiry into something not directed by Parliament and fail to make the inquiry which the Parliament did direct. Any of these things would cause its purported decision to be a nullity.
“……….Though the dividing line between lack of jurisdiction or power and erroneous exercise of it has become thin with the decision of the House of Lords in the Anisminic Case, (1967) 3 W.L.R.
382, we do not think that the distinction between the two has been completely wiped out. We are aware of the difficulty in formulating an exhaustive rule to tell when there is lack of power and when there is an erroneous exercise of it. The difficulty has arisen because the word “jurisdiction” is an expression which is used in variety of senses and takes its colour from its context, (see Per Diplock, J. at p. 394 in the Anisminic Case). Whereas the `pure’ theory of jurisdiction would reduce jurisdictional control to a vanishing point, the adoption of a narrower meaning might result in a more useful legal concept even though the formal structure of law may lose something of its logical symmetry. “At bottom the problem of defining the concept of jurisdiction for purpose of judicial review has been one of public policy rather than one of logic”. (S.A.De Smith, “Judicial Review of Administrative Action”.
2nd Edn., p. 98.) (1988 edition) (emphasis supplied) The observation of the learned author, (S.A. De Smith) was continued in its third edition (1973) at page 98 and in its fourth edition (1980) at page 112 of the book. The observation aforesaid was based on the then prevailing academic opinion only as is seen from the foot notes. it should be stated that the said observation is omitted from the latest edition of the book De Smith, Woolf and Jowel] – Judicial Review of administrative Action – 5th edition (1995) as is evident from page 229; probably due to later developments in the law and the academic opinion that has emerged due to the change in the perspective.
“A tribunal lacks jurisdiction if (I) it is improperly constituted, or (2) the proceedings have been improperly instituted, or (3) authority to decide has been delegated to it unlawfully, or (4) it is without competence to deal with a matter by reason of the parties, the area in which the issue arose, the nature of the subject matter, the value of that subject matter, or the non- existence of any other prerequisite of a valid adjudication. Excess of jurisdiction is not materially distinguishable from lack of jurisdiction and the expressions may be used interchangeably.” “Where the jurisdiction of a tribunal is dependent on the existence of a particular state of affairs, that state of affairs may be described as preliminary to, or collateral to the merits of, the issue, or as jurisdictional.” (p.
(c) wrong, misunderstood or ignored.
(b) on the face of the record.
35. The scope of the exclusionary clauses contained in the statutes has been considered in great detail with reference to the decisions of the superior courts in England and also the decisions of the Supreme Court of India by Justice G.P.
“(1) An Exclusionary Clause using the formula`an order of the tribunal under this Act shall not be called in question in any Court’ is ineffective to prevent the calling in question of an order of the tribunal if the order is really not an order under the Act but a nullity.
(2) Cases of nullity may arise when there is lack of jurisdiction at the stage of commencement of enquiry e.g., when (a) authority is assumed under an ultra vires statute; (b) the tribunal is not properly constituted, or is disqualified to act; (c) the subject-matter or the parties are such inquire; and (d) there is want of essential preliminaries prescribed by the law for commencement of the inquiry.
With great respect to the learned author, I would adopt the above statement of law, as my own.
I would conclude this aspect by holding that the jurisdiction of civil courts is not barred in entirety regarding the attack against the levy and/or claim for refund; in those cases, coming within the three categories mentioned in paras 5 and 29 of this judgment, the jurisdiction of the ordinary courts will not be ousted, in the circumstances and subject to the conditions stated therein and in para 30 (supra).
36. Two decisions of this Court rendered after Section 11B of the Act was amended in 1991, deserve mention. They are — Union of India and others v. Jain Spinners Limited and another [1992 (4) SCC 389], Union of India and others v. ITC Ltd. [1993 Supp. (4) SCC 326]. In Jain Spinners case, the application for refund itself was filed before the concerned statutory authority (Assistant Collector, Central Excise). While the said application was pending, Section 11B of the Act came into force. There was an earlier interim order passed by the High Court directing the deposit of the duty levied with a liberty to the Revenue to withdraw it, subject to the condition that the amount will be refunded if the assessee succeeded ultimately. The Assistant Collector applying the amendments effected in 1991, declined to order refund, holding that the assessee had passed on the incidence of duty to others. it was upheld by this Court notwithstanding the interim orders and other proceedings of the High Court. Basically, the application for refund was filed before the concerned statutory authority, who negatived the claim by giving effect to the provisions of the Amendment Act. There was no attack in the above case, that the levy or collection as one unauthorised or unconstitutional or without jurisdiction or illegal. In Union of India v. ITC Ltd., the Jain spinners case (supra) was followed. The main aspect that arose for consideration in the latter case was, whether the assessee had passed on the incidence of duty to the consumers or other persons. In spite of the repeated orders of this Court, the assessee failed to establish that the burden of excess excise duty was borne by it and was not passed on to any other person. The assessee had filed five applications for refund. Three of them were allowed by the statutory authorities in the appeals. Only two refund applications were rejected which were assailed in the High Court. The High Court allowed the said applications, directing the Revenue to refund the amounts due as per the two refund applications. In Appeal, this Court stressed the fact that the assessee was not able to substantiate that the burden of excess excise duty was borne by it and was not passed on to any other person. incidentally, this Court also referred to the amended provisions of the Act (11B, 12B etc.) and held that the amended provisions would apply when the matter regarding refund was still pending for adjudication in this Court. In this case also the levy or collection was not assailed as unconstitutional or illegal or without jurisdiction and, in consequence refund was called for. The above two cases did not deal with the maintainability of action in the ordinary courts where the levy or collection is assailed on the ground that it is unconstitutional, illegal or without jurisdiction.
37. The changes brought about by the Central Excise and Customs Laws (Amendment) Act, 1991 (w.e.f. 20.9.1991) regarding refund and the scope of Section 11B read with Section 12B was the subject of great controversy before us. The Amendment Act 1991, is also attacked as unconstitutional, illegal, invalid and unreasonable and as a “device” to deny refund legitimately due. The relevant statutory provisions have been extracted earlier in this judgment. Briefly stated the position is this. Clause (3) of Section 11B provides that notwithstanding any judgment, decree or order of the appellate tribunal or any court etc. no refund shall be made except as provided in sub-section (2). In other words, the procedure to obtain refund is made exclusive as per Section 11B(3) of the Act. The application, therefore, shall be made under Section 11B(1) and dealt with by the concerned authority under Section 11(2) of the Act. These provisions mandate amongst other things that the person claiming refund should substantiate that the incidence of duty has not been passed on by him to any other person. The application should also be filed within the time prescribed in the said sub-section. Section 11B(2) and Section 11B(3) go together. Under Section 11B(2), in certain specified cases, the duty paid will be refunded to the applicant. One such case is, the duty of excise paid by the manufacturer, if he had not passed on the incidence of such duty to any other person and substantiates the same. In cases not falling within the proviso to Section 11B(2) of the Act the duty collected will be credited to the Consumer Welfare Fund and the said Fund will be utilised as per Section 12D of the Act.
1. Refund’ made or due as per orders passed by Courts, in a suit or in a petition under Article 226 of the Constitution of India, which have become final.
2. refunds ordered by the statutory authority concerned which have become final.
It is obvious that in such cases no application can or will be deemed to be pending on the date of the commencement of the Amendment Act. No application praying for refund is to be filed in such cases, either. No further probe, regarding the requisites for obtaining refund specified in the Amendment Act, 1991, is called for in such cases. The above aspects are fairly clear. Section 11B(2) and (3) cannot be made applicable to refunds already ordered by the court or the refund ordered by the statutory authorities, which have become final. It follows from a plain reading of Section 11B, Clauses (1), (2) and (3) of the Act. The provisions contemplate the pendency of the application on the date of the coming into force of the Amendment Act or the filing of an application which is contemplated under law, to obtain a refund, after the Amendment Act comes into force. I am of the opinion, that if the said provisions are held applicable, even to matter concluded by the judgments or final orders of courts, it amounts to stating that the decision of the court shall not be binding and will result in reversing or nullifying the decision made in exercise of the judicial power. The legislature does not possess such power. The court’s decision must always bind parties unless the condition on which it is passed are so fundamentally altered that the decision could not have been given in the altered circumstances. It is not so herein. [Shri Prithvi Cotton Mills Ltd. & Anr. vs. Broach Borough Municipality & ors. (1970 (1) SCR 388) and Madan Mohan Pathak vs. Union of India & ors. etc. (1978 (3) SCR 334)]. See also Comorin Match Industries (P) Ltd. v. State of Tamil Nadu [JT 1996(5) SC 167]. Alternatively, it may be stated that duty paid in cases, which finally ended in orders or decrees or judgments of courts, mush be deemed to have been paid under protest and the procedure and limitation etc. stated in Section 11B(2) read with Section 11B(3) will not apply to such cases. It need hardly be stated, that Section 11B(1), the proviso thereto, Section 11B(2) and Section 11B(3) read together will apply only to (1) refund applications made before the Amendment of the Act and still pending on the date of commencement of Amendment Act, 1991 and (2) applications contemplated under law to obtain refund and filed after the commencement of the Amendment Act, 1991. (Cases dealt with in paras 5 and 29 of this judgment will not be covered by the above, to the extent stated therein).
40. Before closing I should specifically deal with two important aspects. In this judgment I have dealt with cases where duty is paid on items which are consumed as such. Due to paucity of details, the case of captive consumption has not been dealt with. It is made clear that whatever is stated in this judgment will not apply in the cases of goods which are captively consumed.
Chapter II-A of the Act was inserted by way of amendment in 1991. The establishment, working, administration and utilisation to the Consumer Welfare Fund is in its state of infancy. The scheme or set-up envisaged by Sections 12C and 12D and its working will require an in depth evaluation by the appropriate authorities in order to vouchsafe that the scheme is not rendered a mere ritual or illusory, but is meaningful and effective. For the present, I do not want to deal with that aspect in detail.
41. For the sake of convenience. I shall summarise my conclusions as here-under :- (in case of doubt, the body of the judgment should be looked into).
A) If the excise duty paid by the assessee was ultimately passed on to the buyers or any other person, and that the assessee has suffered no loss or injury, the action for restitution based on Section 72 of the Contract Act, is unsustainable. (This is the legal position even under general law, without reference to Section 11B of Central Excises & Salt Act as amended by Act 40/1991). B) The decision in Kanhaiya Lal’s case, and the cases following the same, cannot be understood as laying down the law that even in cases the liability has been “passed on”, the assessee can maintain an action for restitution.
If the decision in Kanhaiya Lal’s case (supra) and the cases following the said decision, enables such a person to claim refund (restitution), with great respect to the learned Judges, who rendered the above decisions, I express my dissent thereto. In this context, the observations in para 29 – clause III shall be borne in mind.
C) Article 265 should be read along with the Preamble and Article 39(b) and (c) of the Constitution, and so construed in cases where the assessee has passed on the liability to the consumer or third party, he is not entitled to restitution or refund. The fact that the levy is invalid need not automatically result in a direction for refund of all collections made in pursuance thereto.
D) The presumption is that the taxpayer has passed on the liability to the consumer (or third party). It is open to him to rebut the presumption. The matter is exclusively within the knowledge of the taxpayer, whether the price of the goods included the `duty’ element also and/or also as to whether he has passed on the liability since he is in possession of all relevant details. Revenue will not be in a position to have an in depth analysis in the innumerable cases to ascertain and find out whether the taxpayer has passed on the liability. The matter being within the exclusive knowledge of the taxpayer, the burden of proving that the liability has not been passed on should lie on him. E) It is not possible to conclude that any and every claim for refund of illegal/unauthorised levy of tax, can be made only in accordance with the provisions of the Act (Rule 11, Section 11B etc., as the case may be), and an action by way of suit or writ petition under Article 226 will not be maintainable under any circumstances. An action by way of suit or a petition under Article 226 of the Constitution is maintainable to assail the levy or order which is illegal, void or unauthorised or without jurisdiction and/or claim refund, in cases covered by propositions No.(1), (3), (4) and (5) in Dulabhai’s case, as one passed outside the Act, and ultra vires. Such action will be governed by the general law and the procedure and period of limitation provided by he specific statute will have no application.
F) The attack against the illegal or unauthorised levy as also the relief of refund may fall ordinarily within the three categories specified in paragraph 29 of the judgment. An action by way of suit or writ petition under Article 226 of the Constitution of India will lie in the cases, and subject to the conditions stated in paragraphs 29 and 30 of the judgment.
G) The jurisdiction of civil courts is not barred in entirety regarding the attack against the levy and/or claim for refund; in those cases, coming within the there categories mentioned in paras 5 and 29 of this judgment, the jurisdiction of the ordinary courts will not be ousted, in the circumstances and subject to the conditions stated therein and in para 30 (supra). H) Section 11B(2) and (3) cannot be made applicable to refunds already ordered by the court or the refund ordered by the statutory authorities, which have become final. It follows from a plain reading of Section 11B, Clauses (1), (2) and (3) of the Act. The provisions contemplate the pendency of the application on the date of the coming into force of the Amendment Act or the filing of an application which is contemplated under law, to obtain a refund, after the Amendment Act comes into force. If the said provisions are held applicable, even to matters concluded by the judgments or final orders of courts, it amounts to stating that the decision of the court shall not be binding and will result in reversing or nullifying the decision made in exercise of the judicial power. The legislature does not possess such power. Alternatively, it may be stated that duty paid in cases, which finally ended in orders or decrees or judgments of courts, must be deemed to have been paid under protest and the procedure and limitation etc. stated in Section 11B(2) read with Section 11B(3) will not apply to such cases. I) It read hardly be stated, that Section 11B(1), the proviso thereto, Section 11B(2) and Section 11B(3) read together will apply, only to (1) refund applications made under the statute and filed before the Amendment of the Act and still pending on the date of commencement of Amendment Act, 1991 and (2) applications contemplated under law to obtain refund and filed after the commencement of the Amendment Act, 1991. (Cases dealt with in paras 5 and 29 of this judgment will not be covered by the above to the extent stated therein).
J) The proviso to Section 11B(2), provides, that the duty of excise will be refunded in few specified cases, subject to certain conditions — one of them is the manufacturer – in cases, where he has not passed on the incidence to any other person [Clause (d)]. Those provisions will apply only for refunds to be made under the Act. In the totality of the factual situation, it cannot be said, that the provisions ushered in by Amendment Act, 1991 — and the scheme formulated in Section 11B and 12A to D — (in the light of the clarifications made in the body of the judgment, and more particularly in paras 25 and 40 above) are, a “device” or invalid or arbitrary or unreasonable (except to the extent stated in para 38 supra) or in any way constitutionally infirm. (Of course, the cases dealt with in paras 5 and 29 are excluded to the extent stated therein).
42. The principles laid down in this judgment should be applied to the fact situation obtaining in individual cases and should be disposed of accordingly.
The matters may be placed before My Lord the Chief justice for appropriate orders in this behalf.
The conclusions arrived at by learned brother paripoornan, J. and the reasons given in support thereof, have my respectful concurrence. I have nothing useful to add. The time at my disposal does not really permit me to do so, as the draft of this judgment reached my hands on the night of 15th instant; indeed, the first draft judgment of the case got me in the evening of 13th of this month.

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