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Civil Appeal No. 3255 of 1984 with C.A. Nos. 3256-3270/84, 660/89, 541/89, 2/91, 2578-80/92, 1794/84, 921/92, 4952/91, 4412/91, 4878/91, 2/86, 6255/90, 289/91, 2966/89, 143/94, 190/95, 5688-89/95, 6094/90, 565-568/86, 4326/95, 777/95, W.P. (C) Nos. 189/93, 520/93, 521/93, 1122/88 and Civil Appeal Nos. 16885-94 of 1996 [Arising our of S.L.P. (C).... Case: Mafatlal Industries Ltd. Vs Union of India. Supreme Court (India)

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Case NumberCivil Appeal No. 3255 of 1984 with C.A. Nos. 3256-3270/84, 660/89, 541/89, 2/91, 2578-80/92, 1794/84, 921/92, 4952/91, 4412/91, 4878/91, 2/86, 6255/90, 289/91, 2966/89, 143/94, 190/95, 5688-89/95, 6094/90, 565-568/86, 4326/95, 777/95, W.P. (C) Nos. 189/93, 520/93, 521/93, 1122/88 and Civil Appeal Nos. 16885-94 of 1996 [Arising our of S.L.P. (C)...
JudgesA.M. Ahmadi, C.J.I. and J.S. Verma, S.C. Agrawal, B.P. Jeevan Reddy, A.S. Anand, B.L. Hansaria, S.C. Sen, K.S. Paripoornan and B.N. Kirpal, JJ.
IssueCustoms Act, 1962 - Section 27; Central Excise Act, 1944 - Section 11B
Citation1997 (89) ELT 247 (SC)
Judgement DateDecember 19, 1996
CourtSupreme Court (India)

Judgment:

B.P. Jeevan Reddy, J.S. Verma, S.C. Agrawal, A.S. Anand and B.N. Kirpal, JJ.

  1. Significant questions concerning the refund of Excise and Customs duties collected contrary to law - in all its shades - arises for consideration in these appeals and writ petitions. They involve the correctness of certain earlier decisions of this Court, concept of unjust enrichment, interpretation of Article 265 of the Constitution of India and of the provisions of the Central Excises and Salt Act, 1944 and the Customs Act et al.. As far back as August 14, 1984, Civil Appeal No. 1794 of 1984 and the connected special leave petitions were referred to a Bench of seven Judges by a Bench of two learned Judges, since the referring Bench doubted the correctness of the five-Judge Bench decision in Sales Tax Officer, Benars & Ors. v. Kanhaiyalal Mukundlal Saraf (1959 S.C.R. 1350). When the matter came up before a seven-Judge Bench, it was brought to our notice that a seven-Judge Bench has followed the decision in Kanhaiyalal in State of Kerala v. Aluminium Industries Limited [(1965) 16 S.T.C. 689]. Accordingly, the matters were directed to be posted before a nine-Judge Bench. Meanwhile, several matters raising identical or connected issues got tagged on. Leave granted in Special Leave Petitions.

  2. In the year 1991, the Parliament enacted the Central Excises and Customs Law (Amendment) Act, 1991 [being Act 40 of 1991] substantially amending the provisions relating to refund in both the Central Excises and Salt Act and the Customs Act, besides introducing several new provisions therein. Writ petitions challenging the validity of the said amendment are also posted before us. Apart from the validity, the meaning and purport of the amended provisions also falls for consideration. For the sake of convenience, we would refer to the relevant provisions in the Central Excises and Salt Act inasmuch as the relevant provisions in both the enactments are identical.

  3. The Central Excises and Salt Act, 1944 [the Act] was enacted with a view "to consolidate and amend the law relating to Central Duties of Excise and Salt". The Statement of Objects and Reasons [vide Gazette of India, 1943, Part-V, P. 243] stated inter alia:

    "The administration of internal commodity taxation in British India has grown up piecemeal over many years and has been considerably expanded during the last decade. Hitherto the introduction of a new central duty of excise has required the enactment of self-contained law and the preparation of a separate set of statutory rules. There are no less than 10 separate excise Acts.....and 11 sets of statutory rules; and there are also 5 Acts relating to salt.....This agglomeration of statutes and regulations dealing with similar matters is neither convenient for the public nor conductive to well-organized administration......

    (2) It is accordingly proposed to consolidate in a single enactment all the laws relating to central duties of excise and to the tax on salt and to embody therein a Schedule, similar to that in the [Indian Tariff Act, 1934] setting forth the rates of duty leviable on each class of goods. At the same time, the statutory rules will be similarly amalgamated and disembarassed of their unnecessary details. The Act and the consolidated statutory rules, together with as many manuals of departmental instructions as may be necessary, will then form a complete Central Excise Code, which will simplify the administration of this branch of the revenue system and aid such further development as may be necessary........"

    [Emphasis added]

  4. Section 2 defines the several expressions occurring in the Act. Section 3 is the charging section while Section 4 deals with valuation of excisable goods for the purposes of charging of duties of excise. Section 5 provides for remission of duties on goods found deficient in quantity. Section 5A empowers the Central Government to grant exemption from duty of excise in public interest. Section 9 provides for punishment for violation of the provisions of the Act and the Rules. Section 11 provides for recovery of sums due to Government as arrears of land revenue. Section 11A, which was introduced with effect from November 17, 1980, provides for recovery of duties not levied or not paid or short levied or shrot paid or erroneously refunded. Section 11B, which too was introduced with effect from the same date and by the same Amendment Act [Act 25 of 1978], provides for refund of duties. Chapter-III deals with powers and duties of officers and land holders while Chapter-IV deals with transport by sea. Chapter-V contains special provisions relating to salt. Chapter-VI deals with adjudication of confiscations and penalties while Chapter VI-A introduced by the Finance No. 2 Act, 1980 [with effect from October 11, 1982] provides for appeals against the orders of the original and appellate authorities. In certain matters, a reference is provided to the concerned High Court and in other cases, a direct appeal to this Court is provided from the orders of the Tribunal. Chapter-VII contains supplementary provisions. Section 37 confers upon the Central Government the power to make rules to carry into effect the purposes of the Act and in respect of several matters mentioned therein.

  5. Rules have been made by the Central Government in exercise of power conferred upon them by Section 37. The rules are very elaborate and provide for various matters and situations, to all of which it is not necessary to refer for the purposes of this case. Suffice it to mention that, broadly speaking, there are two methods of removal of excisable goods. One is, what may be called, general method where the goods are cleared on payment of duty and the other is what is called the self-removal procedure. The Rules provide for approval of classification list and price list. In case of dispute regarding classification of excisable goods or valuation (approval of the price list), there are provisions under which provisional orders can be made which would be operative pending the dispute and shall be subject to final decision in the matter. The Rules also provide for self-determination of duty in certain cases. In short, the Rules provide for all possible situations that may arise under the Act.

  6. The particular provisions in the Act and the Rules relevant to the controversy herein may now be noticed a little more closely. Sections 11A and 11B are complimentary to each other. While Section 11A provides for recovery of duties not collected or short-collected by Revenue, Section 11B provides for refund of taxes collected in excess of what is legitimately due under the Act. Section 11A has remained [untouched] by the Amendment Act 40 of 1991 though it has been amended in certain minor respects by subsequent enactments. Omitting portions not necessary to the present controversy, Section 11A, as it stands today, reads as follows:

    11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. -When any duty of excise has not been levied or paid or has- (1) been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:

    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.

    Explanation. --...........

    relevant date''(ii) means, --

    in the case of excisable goods on which duty of excise has(a) not been levied or paid or has been short-levied or short-paid..........

    in any other case, the date on which the duty is to be paid(c) under this Act or the rules made thereunder;

  7. Coming to Section 11B, before it was amended by Act 40 of 1991, it read as follows (again omitting portions not necessary for the present purposes):

    "11B. Claim for refund of duty. Any person-- (1) 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.

    If on receipt of any such application, the Assistant(2) Collector of Central Excise is satisfied that the whole or any part of the duty of excise paid by the applicant should be refunded to him, he may make an order accordingly.

    Whereas a result of any order passed in appeal or revision(3) 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.

    Save as otherwise provided by or under this Act, no claim(4) for refund of any duty of excise shall be entertained.

    Notwithstanding anything contained in any other law, the(5) 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.

    Explanation. -- For the purpose of this section........

    'relevant date' means -(B)

    in any other case, the date of payment of duty."(f)

  8. Section 11B along with Section 11A was introduced...

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