Pioma Industries vs Union of India

Bela Trivedi, J.—The petitioner by way of this petition under Article 226 of the Constitution of India has challenged the action of the respondents in not making the payment of interest to the petitioner at the rate of 12% per annum on the amounts deposited by the petitioner, and has sought further interest at the rate of 24% per annum on the amount of interest. The petitioner has also challenged the legality and validity of the show cause notice dated 10th March, 1997 issued by the respondent no. 3, as also of the letter dated 3-10-2002 of the respondent no. 4 - Board, informing the petitioner that its request for the payment of interest on the deposits made by it could not be acceded to.

The brief facts giving rise to the present petition, as transpiring from the chronology of events submitted by the learned Advocates for the parties, as also from the documents on record, are as under :

2 (i). The petitioner is a proprietorship firm belonging to Khambhata Family Trust, engaged in the business of manufacturing Rasna Soft Drink Concentrate (hereinafter referred to as RSDC). In the year 1986, the new Central Excise Tariff Act, 1985 (hereinafter referred to as the CETA), having come into force w.e.f. 28th February, 1986, the Jurisdictional Superintendent of Central Excise informed the petitioner-firm that the RSDC manufactured by the petitioner was classifiable as "edible preparation not elsewhere specified or included/'' under sub-heading No. 2107.91 of the CETA w.e.f. 28-2-1986. The petitioner, therefore, challenged the said direction of the Superintendent by filing writ petition being Special Civil Application No. 1205 of 1986 before this Court. This Court, vide order dated 20-4-1987, directed the concerned respondents to issue a show-cause notice to the petitioner before adjudicating the matter. The Assistant Collector, thereafter, issued a show cause notice dated 17-6-1987 pursuant to the said order passed by this Court, and subsequently adjudicated vide order dated 19-4-1988 classifying the product under Chapter heading No. 2107.91 chargeable to duty at the rate of 15% w.e.f. 28-2-1986 and also confirmed the demand of Rs. 2,06,13,031.01 as duty chargeable for the period from March-1986 to April-1987. The petitioner being aggrieved by the said order dated 19-4-1988 passed by the Assistant Collector, preferred the writ petition being Special Civil Application No. 2505 of 1988 before this Court. This Court (Coram : A.M. Ahmedi & R.J. Shah, JJ), vide order dated 28th July 1988, disposed of the said petition, giving directions to the petitioner as well as to the Revenue, with the consent of learned advocates for the parties. The relevant portion of the said order reads as under :

In view of the above, we direct by consent of parties, that on the petitioner - assessees depositing under protest a sum of rupees thirty lakhs in the office of the Assistant Collector within six weeks and on his filing an appeal within four weeks the Collector of Central Excise (Appeals) will entertain the appeal without raising the plea of limitation and dispose of the same on merits in accordance with law. The assessee will file an undertaking that in the event he finally fails in his challenge and is held liable to pay Excise Duty, he will pay the difference with interest at 12% per annum. On behalf of the revenue an undertaking will be filed that in the event the assessee finally succeeds in his challenge and is found not liable to pay excise duty on his product, the revenue will refund the amount with interest at 12% per annum.

2 (ii). Pursuant to the said order, the petitioner deposited Rs. 30 lakhs on 5-9-1988 and filed the Appeal before the Collector of Central Excise (Appeals), Bombay. The Collector (Appeals) remanded the case of the petitioner to the Assistant Collector for de novo adjudication holding that the Assistant Collector had the jurisdiction to decide the issue involved, vide order dated 17-3-1989. Being aggrieved by the said order, the petitioner preferred an Appeal before the CEGAT, New Delhi, however, the same came to be rejected by the CEGAT, vide order dated 20-7-1989. Thereafter, in view of the remand of the case, the Assistant Collector conducted the de novo proceedings being No. O.I.O.49/VC/90 and confirmed the classification of the petitioner''s product under the sub-heading 2107.91 and also confirmed the demand for Rs. 2,06,13,0131.01ps, towards the dues, vide order dated 14-3-1990. The petitioner thereafter challenged the said order and other orders passed by the concerned authorities from time to time, before this Court and before the CEGAT, as in the meantime the Assistant Collector had also passed other seven orders pertaining to the demand of dues amounting to Rs. 4,56,08,162/- for the period from 1-1-1988 to 31-1-1990.

2 (iii). It further appears that when the appeals of the petitioner were pending before the CEGAT, the respondent no. 4 - Board issued a circular bearing no. 23/13/1993 dated 20-12-1993, in exercise of powers conferred u/s 37B of the Central Excises and Salt Act, 1944, classifying the product "synthetic soft drink concentrate" under sub-heading 2107.99, where the rate of duty was nil. The CEGAT, therefore, in view of the said circular of the Board, disposed of the said appeals preferred by the petitioner, vide order dated 30-11-1994 and remanded the cases to the concerned Assistant Collector of Central Excise, Ahmadabad for de novo adjudication in the light of the said circular dated 20-12-1993 of the Board. It appears that against some other proceeding arising from the order passed by the Assistant Collector, the Collector (Appeals) also vide order dated 24-4-1995, remanded the matter to Assistant Collector for de novo adjudication in the light of the circular dated 20-12-1993 of the Board. The concerned Assistant Commissioner, thereafter, vide order dated 12-7-1995, passed in O.I.O. No. 27/D/95 dropped the proceedings initiated against the petitioner, holding inter alia that the petitioner''s product was classifiable under sub-heading No. 2107.99, chargeable to nil rate of duty for the period covered by the show cause notices listed in the Annexure-''A'' to the said order. The Assistant Collector, thereafter, also passed the order dated 21st August 1995 directing to return the deposits of Rs. 5.56 crores, security for Rs. 2,71,21,193/- and bank guarantee for Rs. 3,01,75,230/- to the petitioner, and also passed another order dated 30-5-1996 directing to return the deposits of Rs. 4,56,15,329.60ps. to the petitioner. Accordingly, the said amounts of deposits were returned to the petitioner, and the petitioner had also issued two receipts for having received Rs. 5,56,00,000/- and Rs. 4,56,15,329.60ps. on 21st August 1995 and 30th May 1996 respectively, under protest without prejudice to its claim for interest.

2 (iv). The petitioner, thereafter, appears to have written a letter dated 15-1-1997 to the Assistant Commissioner of Central Excise, requesting him to pay the amount of interest at the rate of 12% per annum on the said amounts of deposits as per the directions given by the High Court vide order dated 28-7-1988 in Special Civil Application No. 2505 of 1988. In reply to the said letter, the Assistant Commissioner of Central Excise, Rural Division, Ahmadabad, issued a show cause notice dated 10-3-1997 calling upon the petitioner to show cause as to why the refund for interest should not be rejected on the grounds mentioned in the said notice. The petitioner, in response thereto, appears to have submitted the reply on 3-4-1997 praying to quash and set aside the said show cause notice for the reasons mentioned therein. According to the petitioner, thereafter, the petitioner kept on making various representations to the different authorities, and lastly wrote the letter dated 12-8-2002 to the Board regarding non-payment of interest. In response thereto, the Under Secretary, Government of India, Ministry of Finance and Company Affairs, vide letter dated 3-10-2002, conveyed the petitioner that it was not found possible to accede to the request of the petitioner to pay interest as demanded in its letter dated 12th August 2002. The petitioner under the circumstances, approached this Court by way of present petition challenging the legality and validity of the show cause notice dated 10th March 1997 issued by the respondent no. 3 and the decision of the respondent no. 4 - Board contained in the letter dated 3rd October 2002 and also sought issuance of appropriate writ directing the respondents to pay the interest at the rate of 12% per annum on the amounts of deposits, together with further interest at the rate of 24% per annum on the amount of interest.

The learned Senior Advocate Mr. K.B. Trivedi placing heavy reliance on the order dated 28th July 1988 passed by this Court in Special Civil Application No. 2505 of 1988 submitted that as per the directions given in the said order which was passed with the consent of the parties, the revenue was liable to pay interest at the rate of 12% on the amounts deposited by the petitioner, as the petitioner had finally succeeded in its challenge and was not found liable to pay excise duty on its product. According to Mr. Trivedi, after the passing of the said order by the High Court, the matter had traveled from one forum to the other and the petitioner had complied with the orders passed by the concerned Authorities/Courts from time to time and ultimately when the proceedings were pending before the CEGAT, the respondent no. 4 - Board issued the circular dated 20-12-1993 classifying the product "synthetic soft drink concentrate", which included the petitioner''s product also, under the sub-heading 2107.99 where the rate of duty was nil. Therefore, runs the submission of Mr. Trivedi, in view of the said circular of the Board, the CEGAT had disposed of the appeals of the petitioner and remanded the cases to the Assistant Collector for de novo adjudication. The bone of contention raised by Mr. Trivedi was that the High Court was very much cautious in passing the said order in the said petition and using the words, "in the event the assessee finally succeeds in his challenge", and therefore the said order is required to be read in the context of the petitioner''s challenge, and its final success in the challenge. It was submitted that, the petitioner having finally succeeded in its challenge that it was not liable to pay excise duty on its product, the revenue was liable to refund the amounts deposited by the petitioner from time to time, with interest at the rate of 12% per annum in view of the said order dated 28th July 1988 passed by the High Court in Special Civil Application No. 2505 of 1988, however, the petitioner was paid only the amounts of deposits and the securities, and not the interest amounts thereon. Relying upon the decision of Hon''ble Supreme Court in case of Tata Refractories Ltd. & Another v. Sales Tax Officer and Other (2003) 1 SCC 65, Mr. Trivedi submitted that when the deposits were made as per the directions of High Court, the Revenue was liable to pay interest as per the condition imposed in the said order, as the petitioner had finally succeeded in its challenge.

The learned counsel Mr. Trivedi also relied upon the number of judgments of our High Court, other High Courts and Hon''ble Supreme Court to buttress his submission that even in absence of any specific order of the Court for the payment of interest on the delayed refunds, the Courts have awarded the interest on the equitable grounds, considering the fact that the revenue had used the amount of deposits made by the assessee, and correspondingly the assessee was kept out of the use of such amount during the relevant period. Mr. Trivedi, further developing his arguments, had submitted that in the instant case despite the order passed by the High Court the Revenue did not pay the interest amount on the huge deposits made by the petitioner pending the proceedings and on the contrary issued impugned show cause notice. It was submitted by him that though the petitioner was paid the amount of deposits, the action of the respondents in not paying the interest on the said deposits and in issuing the impugned show cause notice was ex facie arbitrary and in utter disregard of the order passed by this Court. Pressing into service the principle of "Restitution", as propounded in the case of South Eastern Coalfields Ltd. Vs. State of M.P. and Others, , Mr. Trivedi submitted that the petitioner having been deprived of the use of its money, for so many years, the loss was required to be compensated by directing the revenue to make payment of interest on the amounts of deposits. Mr. Trivedi also placed heavy reliance on the judgment of Hon''ble Supreme Court in the case of O.N.G.C. Ltd. Vs. Commnr. of Customs, Mumbai, to submit that the petitioner was entitled to the interest on the amounts of deposits, on the application of the principle of restitution. Mr. Trivedi lastly relied upon the decision of Hon''ble Supreme Court in case of Sandvik Asia Ltd. Vs. Commissioner of Income Tax-I, Pune and Others, to submit that since the Revenue had wrongfully withheld the amount of interest payable to the petitioner, the petitioner was required to be compensated by awarding the interest at the rate of 24% per annum on such interest amount as prayed for in the petition.

On the other hand, Ms. Sejal Mandavia, learned Standing Counsel for the Union of India, taking the Court to the chronology of events and the contentions raised in the affidavit in reply, vehemently submitted that the order dated 28th July, 1988 passed by this Court in Special Civil Application No. 2505 of 1988 was required to be read in the context of the order of Assistant Collector which was under challenge in the said petition. According to her, after the said order of this Court and after the Collector (Appeals) remanded the case, the Assistant Collector passed the order dated 14-3-1990 in O.I.O. No. 49/VC/90, confirming the classification of the petitioner''s product under the sub-heading 2107.91 and directed the petitioner to pay the duty of Rs. 2,06,13,031.01ps., and therefore it could not be said that the petitioner had finally succeeded in its challenge. According to Ms. Mandavia, on the contrary, the petitioner had failed in its challenge before the concerned Assistant Collector, and the petitioner, instead of complying with the said order, had challenged the same by filing another writ petition being Special Civil Application No. 2759 of 1990, in which the petitioner was directed by this Court to deposit a sum of Rs. 50 lakhs in addition to Rs. 30 lakhs earlier deposited by the petitioner. Hence, it was submitted by Ms. Mandavia that the petitioner neither paid the amount of duty as directed by the Assistant Collector nor paid any interest thereon though it had failed in its challenge before the Assistant Collector. She also submitted that the petitioner kept on challenging the orders passed by the various authorities from time to time and did not make the payment as directed by the said authorities and the Courts. Ultimately, runs the submissions of Ms. Mandavia, when the proceedings were pending before the CEGAT, the respondent no. 4 -- Board, suo motu took an independent decision considering the various representations made by various parties and considering the various assessment practices prevailing at the relevant time, the benefit of which was conferred to the petitioner. Under the circumstances, it could not be said that the petitioner had finally succeeded in its challenge as sought to be canvassed by the petitioner.

It was further submitted by Ms. Mandavia that the Assistant Collector having already refunded the amount of deposits as per the orders dated 21-8-1995 and 30-5-1996, the question of payment of interest on the said amount did not arise. Ms. Mandavia has relied upon the judgment of Hon''ble Supreme Court in the case of Union of India and Others Vs. M/s. Orient Enterprises and Another, in support of her submission that the writ petition under Article 226 of the Constitution praying for refund of money was not maintainable, and that the petitioner had no statutory right or legal right to claim interest on the deposits made by it in the pending proceedings. Relying upon the judgments of our High Court in case of Ramkrishna Wire Works Vs. Union of India, and of G.H. Industries Vs. Collector of Central Excise, Ahmedabad, , Ms. Mandavia submitted that in absence of any statutory provisions the petitioner could not claim interest on the amount of refund of duty granted to it. Summarising her arguments, Ms. Mandavia submitted that the order of High Court dated 28th July, 1988 was good only up to the final order of adjudicating authority i.e. Assistant Collector and the petitioner having failed in the said proceedings before the Assistant Collector as also before the other Appellate Authorities, the revenue was not liable to pay any interest on the amount of deposits made by the petitioner in the said proceedings. According to her, there being no wrongful retention of the amount of the petitioner by the revenue, nor any specific provisions in the statute at the relevant time, for payment of interest, this Court should not exercise its extra-ordinary jurisdiction in favour of the petitioner, either for the payment of interest on deposits or for payment of interest on interest amount as claimed in this petition.

Before dealing with the rival contentions raised by learned Advocates for the parties, it would be necessary to decide the issue regarding the maintainability of petition, as raised by learned Standing Counsel Ms. Mandavia for the respondent. In this regard it may be stated that the legal position has been settled by the Hon''ble Supreme Court in various judgments pronounced from time to time, and more particularly, in case of Suganmal Vs. State of Madhya Pradesh and Others, , wherein it was held that a writ petition under Article 226 of the Constitution of India solely praying for the issue of writ of mandamus directing the State to refund the money allowed to have been illegally collected by the State as tax would not ordinarily be maintainable. While distinguishing the petition seeking direction for refund given by way of consequential order in a case, where the legality of assessment was questioned, and the petition filed only for the purpose of seeking refund, it was observed in the said case as under :

We do not consider it proper to extend the principle justifying the consequential order directing the refund of amount illegally realised, when the order under which the amount had been collected has been set aside, to cases in which only orders for the refund of money are sought. The parties had the right to question the illegal assessment orders on the ground of their illegality or unconstitutionality and, therefore, could take action under Article 226 for the protection of their fundamental right and the Courts, on setting aside the assessment orders, exercise their jurisdiction in proper circumstances to order the consequential relief for the refund of the tax illegally realised. We do not find any good reason to extend this principle and, therefore, hold that no petition for the issue of a writ of mandamus will be normally entertained for the purpose of merely ordering a refund of money to the return of which the petitioner claims a right.

The said proposition of law has been reiterated and followed in the case of Union of India v. Orient Enterprises (supra), wherein the Hon''ble Supreme Court, while dealing with the question as to whether a writ petition under Article 226 of the Constitution seeking relief of payment of interest on delayed refund of amount paid by the assessee towards the customs duty, was maintainable, has held as under :-

Thus at relevant time there was no statutory right entitling the respondents to payment of interest on delayed refund and the writ petition filed by them was not for the enforcement of a legal right available to them under any statute. The claim for interest was in the nature of compensation for wrongful retention by the appellants of money that was collected from the respondents by way of customs duty, redemption fine and penalty. In view of the law laid down by this Court in Suganmal (supra) a writ petition seeking the relief of payment of interest on delayed refund of the amount so collected could not, in our opinion, be maintained.

If the above stated legal position is considered in the light of the facts and more particularly, the prayers sought in the present petition then it transpires that the present petition has been filed mainly seeking issuance of writ of mandamus for directing the respondents to make payment of interest on the refunded amounts of deposits made to the petitioner, and further to make payment of interest on such interest amount. Of course, incidentally the petitioner has prayed to quash and set aside the impugned show cause notice dated 10-3-1997 and the decision of the Board contained in letter dated 3-10-2002. If the substance of the prayers is seen, it clearly transpires that the petitioner having prayed for the issuance of writ of mandamus seeking direction against the respondents for the payment of interest on the refunded amounts of deposits, as rightly submitted by Ms. Mandavia, such a claim for interest amount should have been made in the civil Court by filing a civil suit, and ordinarily the writ petition would not be maintainable as per the ratio of above referred decisions of the Hon''ble Supreme Court. However, it is pertinent to note that now, since, the petition has been finally heard after a lapse of about 9 years of its admission, it would not be appropriate to relegate the petitioner to the Civil Court for filing a civil suit in respect of its claim of interest amount. Under the circumstances, instead of stretching the issue of maintainability of petition any further, the petition is being decided on merits.

In the instant case, the main controversy revolves round the order dated 28th July, 1988 passed by this Court in Special Civil Application No. 2505 of 1988, and more particularly, the use of the words, "in the event the assessee finally succeeds in his challenge." The relevant portion of the said order has already been reproduced hereinabove. In order to appreciate the said controversy, in the light of the submissions of the learned advocates of the parties, it would be necessary to recapitulate the proceedings and the events which took place since the commencement of the petitioner''s challenge till its culmination. It appears that consequent to the commencement of Central Excise Tariff Act, 1985 w.e.f. 28-2-1986, the petitioner was requested by the Range Superintendent to observe the Central Excise formalities, as their product RSDC was liable to be classified under heading 2107 of schedule, chargeable to duty. The petitioner, therefore, filed Special Civil Application No. 1205 of 1986 before this Court challenging the said action of the Superintendent of Central Excise directing the petitioner to follow the Central Excise procedure for its product. Since, the said direction was given without hearing the petitioner, the High Court, vide order dated 20-4-1987, directed the department to issue a show cause notice to the petitioner before taking the decision. It further appears that thereafter the Assistant Collector issued the show cause notice on 17-6-1987 pursuant to the said order passed by the High Court, however, the petitioner did not respond to the said notice and filed another Special Civil Application being No. 4157 of 1987. The said petition came to be withdrawn by the petitioner with the permission of the Court, in order to approach the concerned authorities for raising all contentions that were available to the petitioner. It appears that thereafter the Assistant Collector, by the order dated 19-4-1988, adjudicated the SCN vide O.I.O. No. 48/1988 and classified the product of the petitioner under sub-heading 2107.91 chargeable to duty at 15% w.e.f. 28-2-1986, confirming the chargeable duty as Rs. 2,06,13,031.01ps., for the period from March-1986 to April-1987.

The said order came to be challenged by the petitioner by way of Special Civil Application No. 2505 of 1988 before this Court. As stated hereinabove, this Court, with the consent of parties, passed the order on 28-7-1988 in the said petition, directing the petitioner to deposit under protest, a sum of Rs. 30 lakhs in the office of Assistant Collector and to file appeal before the Collector of Central Excise (Appeals) against the order under challenge of Assistant Collector. The Court also further directed the petitioner to file an undertaking to the effect that in the event of the petitioner finally failing in his challenge and being held liable to pay excise duty, he would pay the difference with interest at 12% per annum. The Court also directed the revenue to file an undertaking to the effect that in the event of the assessee finally succeeding in his challenge, and being found not liable to pay excise duty on his product, the revenue would refund the amount with interest at 12% per annum. The said order is annexed as Annexure-A to the petition. After passing of the said order, it appears that the petitioner deposited Rs. 30 lakhs and filed the appeal before the Collector (Appeals). The Collector (Appeals) by the order dated 17-3-1989 remanded the case of the petitioner to the Assistant Collector for de novo adjudication holding that the Assistant Collector had the jurisdiction to decide the issue involved. Against the said order, the petitioner preferred an appeal before the CEGAT, New Delhi, however, the same came to be rejected vide order dated 20-7-1989. Again, in view of the said orders of remand passed by the Collector (Appeals) and the CEGAT, the Assistant Collector in de novo proceedings being No. O.LO. 49/VC/90 confirmed the classification of petitioner''s product under the subheading 2107.91 and confirmed the demand for Rs. 2,06,13,031.01ps. towards the duty vide his order dated 14-3-1990. Further, the petitioner again challenged the order of Assistant Collector dated 14-3-1990 by filing Special Civil Application No. 2759 of 1990 before this Court and this Court by order dated 19-5-1990 directed the petitioner to deposit Rs. 50 lakhs in addition to Rs. 30 lakhs already deposited pursuant to the order passed in Special Civil Application No. 2505 of 1988 and also directed the petitioner to file appeal before the Collector of Central Excise (Appeals) against the order dated 14-3-1990 under challenge passed by the Assistant Collector. It appears that in the meantime, the concerned Assistant Collector passed other seven orders in connection with the other show cause notices issued, pertaining to the demand of duty amounting to in aggregate Rs. 4,56,08,162/- for the period from 1-1-1988 to 31-1-1990. The petitioner therefore filed in all eight appeals, one against the order passed in O.LO 49/VC/90 and seven others passed by the Assistant Collector, before the Collector of Central Excise (Appeals). The said appeals were numbered as O.I.A. No. 738/1991 to 745/1991 in the office of the Collector (Appeals), who, vide order dated 15-10-1991, dismissed all the said eight appeals and directed the petitioner to pay the balance amount of Rs. 6,21,21,193/- with interest, referring the order dated 28-7-1988 passed in Special Civil Application No. 2505 of 1988 and the order dated 19-4-1990 passed in Special Civil Application No. 2759 of 1990 by the Gujarat High Court (Annexure-B).

It further transpires that being aggrieved by the said order dated 15-10-1991 passed by the Collector (Appeals), the petitioner filed eight appeals being A. No. E/4932 to 4939/91-D before the CEGAT, New Delhi, along with the applications seeking stay of the order of the Collector (Appeals), and simultaneously filed two petitions before this Court being Special Civil Application Nos. 691 of 1992 and 40 of 1992, seeking prayers inter alia that the CEGAT should decide the stay applications expeditiously. This Court, vide order dated 12-2-1992, while disposing of the said petition No. 691 of 1992, permitted the petitioner to clear its goods up to Rs. 25 lakhs on the petitioner''s depositing Rs. 30 lakhs, till the CEGAT decided the petitioner''s stay application. It was specified in the said order that the Court had not decided the contentions of the petitioner as to whether on the product of the petitioner, excise duty was leviable or not. The other Special Civil Application No. 40 of 1992 came to be withdrawn by the petitioner. The CEGAT, thereafter, decided the stay application of the petitioner directing the petitioner to deposit Rs. 4,20,00,000/- u/s 35F of the Act in five installments of Rs. 84 lakhs each and to furnish the bank guarantee for the balance amount, vide order dated 31-8-1992. However, the petitioner again filed a petition, being C.W.P. No. 3516 of 1992 before the Delhi High Court challenging the said order of the CEGAT. The High Court of Delhi, vide order dated 23-10-1992, directed the petitioner to deposit Rs. 3.5 crores and to furnish a security of immovable property for the balance amount. It appears that the petitioner complied with the said directions issued in the said order passed by the Delhi High Court. When the said appeals against the orders of Collector (Appeals) passed in O.I.A. No. 738 of 1991 to 745 of 1991 were pending before the CEGAT, New Delhi, the respondent no. 4 - Board issued a circular dated 20-12-1993 classifying the product "synthetic soft drink concentrate" under the sub-heading 2107.99 in which the rate of duty was nil.

It is pertinent to note that the petitioner in its petition has not specifically stated about the said proceedings filed by it in the CEGAT and about the petitions filed in the High Court of Gujarat and of Delhi. It has also not stated in its petition about the circular dated 20-12-1993 issued by the respondent No. 4. The said circular was produced on record as Annexure-II by the respondents along with their affidavit-in-reply. Now, in the very first para of the said circular, it is stated that there was no uniformity in the classification of ''synthetic soft drink concentrate'' in the Schedule to the Central Excise Tariff Act, 1986, and that lack of uniform classification of goods had brought in disparity in the pricing of the commodity by the manufacturers of such goods with consequent impact on sales and market economy. In the last but second para of the said circular, it is stated that "Now, therefore, in exercise of the powers conferred u/s 37B of the Central Excises and Salt Act, 1944 (1 of 1944) henceforth referred as Act, and for the purpose of ensuring uniformity in classification, Board, hereby orders that "Synthetic Soft Drink Concentrate" packed and marketed as para 2 supra shall be henceforth classified under sub-heading No. 2107.99 of the Tariff".

From the bare reading of the said circular, it clearly transpires that the Board had issued the said circular for the purpose of ensuring the uniformity in the classification and had ordered to classify the said product under subheading No. 2107.99 of the Tariff, considering the manufacture, composition and analysis of the product and the technical literature. Hence, it emerges that the said circular was issued by the respondent no. 4 Board, independently without taking into consideration the proceedings of the petitioner pending before the CEGAT.

The CEGAT, Delhi, thereafter heard the learned Advocates for the petitioners, and considering the said circular dated 20-12-1993 of the Board, remanded the cases to the concerned Assistant Collector of Central Excise, Ahmadabad for de novo adjudication, as per the order dated 30-11-1994 (Annexure-C). Finally, the Assistant Collector, vide order dated 12-7-1995 (Annexure-E), held that the product ''Rasna Soft Drink Concentrate'' was required to be classified under the sub-heading 2107.99 for the period from March 1986 to April 1987 and January 1988 to September 1991 and was chargeable to nil rate of duty as per CETA, 1985. Accordingly, all the demands raised by the revenue were dropped in the said proceedings. Subsequently, the Assistant Commissioner, Central Excise, Rural Division, Ahmadabad, vide orders dated 21-8-1995 and 30-5-1996, directed to return the amount of deposits to the tune of Rs. 5.56 crores and of Rs. 4.56 crores respectively to the petitioner. (Annexure F Collectively).

From the above stated series of proceedings filed by the petitioner, and the orders passed by the judicial and quasi judicial authorities from time to time, it emerges that the proceedings initiated against the petitioner by the respondents, initially by issuing the show cause notice dated 17-6-1987 making demand of duty for the period from March-1986 to April-1987, and thereafter by issuing other seven show cause notices for different periods ranging from January-1988 to September-1991, were dropped by the Assistant Collector, vide order dated 12-7-1995, considering the circular dated 20-12-1993 issued by the respondent No. 4 Board. Hence, the petitioner after a long battle finally succeeded in its challenge by virtue of the Board''s circular classifying "Synthetic Soft Drink Concentrate" under the sub-heading No. 2107.99 not chargeable to duty. Though the said circular was issued for the purpose of ensuring uniformity in the classification and in exercise of the powers conferred u/s 37-B of the Central Excises and Salt Act, 1944, the said circular was made applicable to the product of the petitioner RSDC by the respondent authorities, and ultimately the deposits of Rs. 5.56 crores and Rs. 4.56 crores were refunded to the petitioner as per the orders passed by the Assistant Commissioner, Ahmadabad (Annexure-F Collectively). Now, the moot question which requires consideration is, whether the petitioner was entitled to receive the said amounts of deposits with interest as claimed by it.

So far the facts of the present case are concerned, as stated hereinabove since there was no uniformity in the classification of ''Synthetic Soft Drink Concentrate'' in the schedule, in order to ensure uniformity, the Board had issued the Circular dated 20-12-1993 classifying the said product under the sub-heading No. 2107.99, where the chargeable rate of duty was nil. The petitioner was given the benefit of the said circular for its product RSDC and was refunded the amounts of deposits made by it pending various proceedings. Since the said amounts of deposits were accepted by the petitioner under protest without prejudice to its right to claim interest thereon, the petitioner wrote a letter dated 15-1-1997 (Annexure-H) to the Assistant Commissioner of Central Excise, Ahmadabad, requesting him to pay the amount towards interest at the rate of 12% as directed by the High Court in the order dated 28-7-1988 passed in Special Civil Application No. 2505 of 1988. In response to the said letter, the Assistant Commissioner issued a notice dated 10-3-1997 (Annexure-I) calling upon the petitioner to show cause as to why the claim of interest should not be rejected, the same being inadmissible and barred by time in view of Section 11B of the Central Excise Act, 1944. It appears that the petitioner gave reply to the said show cause notice on 3-4-1997 and also made written submission on 14-4-1997 requesting the Assistant Commissioner to withdraw the show cause notice and make payment of interest on the deposits as per the order dated 28-7-1988 passed by the High Court. However, thereafter nothing was heard from the Assistant Commissioner and therefore the petitioner kept on making various representations to the different authorities. Ultimately, the petitioner made a representation dated 12-8-2002 to the respondent No. 4 regarding non-payment of interest, however, same was also not acceded to by the respondent No. 4 as per its letter dated 3-10-2002 (Annexure-L).

It is not disputed that at the relevant time, there was no statutory provision in the Central Excises and Salt Act, 1944, for the payment of interest on the refunds. The Division Bench of this Court, dealing with the provisions of the said Act as regards question of payment of interest on refunds, in the case of Satellite Engineering Ltd. Vs. Asstt. Collector of Central Excise, and in case of Ramkrishna Wire Works Vs. Union of India, has held inter alia that there is no statutory provision in the said Act, unlike other taxing statutes such as, Sales Tax Act and Income Tax Act, on the basis of which the petitioner could have claimed interest on the amount of refund of dues granted to them. Negativing the contention that the interest can be claimed on the principle of justice, equity and good conscience, the Court held inter alia that interest cannot be allowed by way of damages, more particularly, when Section 40 of the said Act, protected the Government and its officers for the acts done in good faith in pursuance to the Act. Further, in the case of G.H. Industries Vs. Collector of Central Excise, Ahmedabad, , the Court held to the effect that when there was scope for difference of opinions as regards the correct classification of the product in question, and even when the petitioner was made to pay excise duty on account of erroneous interpretation of the provisions of Central Excise Tariff, then also it could not be said that the department had acted with mala fides or that the action of the department was taking good faith, and therefore the department could not be made liable to pay interest on the refund amounts.

However, as can be seen in the reply to the show cause notice given and the representations made by the petitioner, as also in the averments made in the present petition that the claim of the petitioner for interest on the deposits is based upon the order dated 28-7-1988 passed by this Court in S.C.A. No. 2505 of 1988. In this regard, it is pertinent to note that in the said petition, the order under challenge was the order dated 19-4-1988 passed by the Assistant Collector, who had confirmed the amount of Rs. 2,06,13,031.01 ps. as the duty payable by the petitioner for the period from March-1986 to April-1987, classifying the petitioner''s product under the sub-heading No. 2107.91 of C.E.T.A. In the said petition, the order was passed with the consent of the parties, and the petitioner was directed to pay Rs. 30 lakhs in the office of Assistant Collector and to file appeal before the Collector (Appeals). Further, both the parties were directed to file their respective undertakings as mentioned therein. Accordingly, the revenue was directed to file undertaking to the effect that "in the event, the assessee finally succeeds in the challenge and is found not liable to pay excise duty on his product, the revenue will refund the amount with interest at 12% per annum". Now, as discussed hereinabove, the Assistant Collector, in the de novo proceedings adjudicated upon the said show cause notice covering the period from March-1986 to April-1987, and the other seven show cause notices covering the period from 1-1-1988 to 31-1-1990. The said orders came to be challenged before the Collector (Appeals), and before the CEGAT and before this Court and Delhi High Court, etc. as already stated hereinabove. Therefore, though the petitioner was directed in the said petition being No. SCA 2505 of 1988 to deposit Rs. 30 lakhs against the demand of about Rs. 2.06 crores made in the order dated 19-4-1988 by the Assistant Collector and to file appeal before the Collector (Appeals), the Assistant Collector, after the remand of the said proceedings from the Collector (Appeals) and CEGAT, heard and adjudicated upon the said proceedings arising out of the show cause notice dated 17-6-1987, along with the other proceedings arising out of seven other show cause notices, against the challenge of the petitioner regarding the payment of the duty. The said proceedings and the challenge of the petitioner could attain finality only when the respondent no. 4 Board issued the circular, on the basis of which the said proceedings came to be dropped. Under the circumstances, as rightly submitted by Mr. Trivedi for the petitioner, the order dated 28-7-1988 of this Court could not be confined to the challenge of the petitioner before the Assistant Collector, Collector (Appeals) or CEGAT, but the said order was required to be read in the context of the challenge of the petitioner regarding his liability to pay the duty, and therefore the Court had used the words that "in the event the assessee finally succeeds in his challenge". If the Court wanted to restrict the order only up to the challenge before the Assistant Collector or the Collector (Appeals), it would have specified so in the order. However, instead of that, the Court has used the words, "finally succeeds in his challenge". Since, the petitioner finally succeeded in his challenge, on the Assistant Collector having held in his order dated 12-7-1995, that the petitioner''s product was classifiable under sub-heading No. 2107.99, chargeable to Nil rate of duty covered under various show cause notices, the Revenue was liable to pay the interest at the rate of 12% per annum on the deposits made by the petitioner, in view of the said order dated 28-7-1988 passed in Special Civil Application No. 2505 of 1988.

It was sought to be contended by learned Advocate Ms. Mandavia that since the order dated 28-7-1988 pertained to the order of Assistant Collector dated 19-4-1988 which was adjudicated pursuant to the show-cause notice covering the period March-1986 to April-1987 only, the said order dated 28-7-1988 could not be made applicable to the other show cause notices issued, covering the period January-1988 to January-1990, for the payment of interest at the rate of 12% on the deposits made by the petitioner subsequent to the said order. The said submission of Ms. Mandavia cannot be accepted for the simple reason that after the passing of the said order dated 28-7-1988 the petitioner had filed appeal before the Collector of Central Excise (Appeals) and the same having been remanded to the Assistant Collector for de novo adjudication, it was numbered as O.I.O. No. 49/VC/90. The Assistant Collector, thereafter, had passed the Orders-in-Original in other seven proceedings arising out of seven other show cause notices and the said orders of Assistant Collector were challenged by the petitioners before the Collector (Appeals), which were numbered as Orders-in-Appeal Nos. 738 of 1991 to 745 of 1991. The Collector (Appeals), vide order dated 15-10-1991 (Annexure-B), while rejecting the said appeals, had observed inter alia that the appellants i.e. the petitioners were required to pay the balance amount along with the interest at the rate of 12% in pursuance of the undertaking given by them before the High Court of Gujarat as directed in its order dated 28-7-1988 in Special Civil Application No. 2505 of 1988. Thus, it clearly emerges that the Collector (Appeals) had also treated the said order dated 28-7-1988 passed in Special Civil Application No. 2505 of 1988 as applicable in the other proceedings having arisen pursuant to the other show cause notices issued against the petitioners subsequent to the said order. If the said order passed in Special Civil Application No. 2505 of 1988 was confined only to the proceedings of O.I.O. No. 48 of 1988 in which the Assistant Collector had passed the order dated 19-4-1988, the Collector (Appeals) while disposing of the said eight appeals on 15-10-1991 would not have referred to the said order dated 28-7-1988 passed in Special Civil Application No. 2505 of 1988, for directing the petitioners to pay balance amount along with the interest at the rate of 12% per annum. It is also pertinent to note that the said order of Collector (Appeals) was further carried before the CEGAT by filing other eight appeals and when the said appeals were pending, the respondent No. 4 Board had issued the said circular and thereafter ultimately on the basis of said circular the proceedings against the petitioner were dropped by the Assistant Collector vide order dated 12-7-1995 (Annexure-A). Thus, the respondents themselves having made applicable the order dated 28-7-1988 of the High Court to all the proceedings which took place subsequent to the passing of the said order, by directing the petitioners to pay interest at the rate of 12% as per the undertaking given in Special Civil Application No. 2505 of 1988, it does not lie in the mouth of the respondents to say that the said order dated 28-7-1988 was applicable only to the challenge of petitioner before the Assistant Collector or the Collector (Appeals).

Even otherwise, as rightly submitted by Mr. K.B. Trivedi relying upon various judgments of Hon''ble Supreme Court, the petitioner''s claim of interest was required to be considered taking into consideration the principle of equity. As held in case of South Eastern Coal Fields Ltd. v. State of M.P. (supra), the rule in equity is that interest is payable even in absence of any agreement, when the existence of a state of circumstances established justify the exercise of such equitable jurisdiction. It is also observed in the said case while considering the principle of restitution that no one shall suffer by an act of Court. The relevant observations are reproduced as under :

That no one shall suffer by an act of the court is not a rule confined to an erroneous act of the Court; the "act of the Court" embraces within its sweep all such acts as to which the court may form an opinion in any legal proceedings that the court would not have so acted had it been correctly apprised of the facts and the law. The factor attracting applicability of restitution is not the act of the court being wrongful or a mistake or error committed by the Court; the test is whether on account of an act of the party persuading the court to pass an order held at the end as not sustainable, has resulted in one party gaining an advantage which it would not have otherwise earned, or the other party has suffered an impoverishment which it would not have suffered but for the order of the court and the act of such party. Therefore the successful party finally held entitled to a relief assessable in terms of money at the end of the litigation, is entitled to be compensated by award of interest at a suitable reasonable rate for the period for which the interim order of the Court withholding the release of money had remained in operation.

In the instant case, the petitioners had made deposits of the amount as per the directions given by the Court from time to time during the pendency of proceedings before the Collector (Appeals) and the CEGAT, wherein the petitioner''s challenge was that they were not liable to pay any excise duty. The petitioners having finally succeeded in that challenge, the said amount of deposits were required to be returned to the petitioners with interest considering the doctrine of restitution and on equitable principles as such deposits made by the petitioner as per the orders of the Court, had resulted into impoverishment which it would not have suffered, but for the orders of the Court. The Hon''ble Supreme Court in case of ONGC Ltd. v. Commissioner of Customs, Mumbai (supra) has also awarded the interest on the amounts deposited by the concerned appellants, applying the principle of restitution. It is, therefore, held that the petitioner was entitled to the refund of deposits with interest at the rate of 12% per annum, as per the order dated 28-7-1988 passed by the Court in Special Civil Application No. 2505 of 1988 as well as on the application of principles of restitution and equity. Under the circumstances, the show cause notice dated 10-3-1997 issued by the respondent No. 3, and the letter dated 3-10-2002 of the respondent No. 4 Board, not acceding to the claim of petitioner for the payment of interest on the deposits, are liable to be quashed and set aside.

So far as the claim of the petitioner regarding interest on interest amount is concerned, the learned Senior Advocate Mr. K.B. Trivedi has placed heavy reliance on the judgment of Sandvik Asia Ltd. v. Commissioner of Income Tax (supra), wherein the Hon''ble Supreme Court had awarded by way of compensation the interest on the delayed payment of refund made by the concerned authorities. However, it is required to be noted that in the said case the Hon''ble Supreme Court was considering the provisions of Income Tax Act, 1961, and more particularly. Sections 214 and 244 read with Section 240 of the said Act, where there is specific statutory provision for the payment of interest on the amount of refund. The Hon''ble Supreme Court in the said case having found that the interest on refund was granted by the department after a substantial lapse of time, the appellants in the said case were awarded interest on interest amount, as compensation for the period of delay. However, in the instant case, undisputedly there was no provision in the Central Excises and Salt Act, 1944 and the Central Excise Act, 1946 at the relevant time, for the award of interest on the delayed refund payable by the respondent authorities. The petitioner all throughout had claimed interest on the deposits made by them pursuant to the order of the High Court passed in Special Civil Application No. 2505 of 1988, and on equitable grounds. The said disputed claim of the petitioner for the interest on the deposits has been decided for the first time by the Court in the instant order. Since the said issue as regards payment of interest on the deposits was very much debatable, and was not adjudicated earlier, it could not be said that there was any lapse or in action on the part of the respondent authorities in not making payment of interest amount on the deposits made by the petitioners. It is also relevant to note that in none of the representations made by the petitioner to the respondent authorities, the claim of interest on interest amount has been made by the petitioner and that it is for the first time in the present petition such a claim has been made. It is also further required to be noted that though the notice was issued by the Assistant Commissioner as back as on 10-3-1997 calling upon the petitioner to show cause as to why their claim for interest on deposits should not be rejected, the petitioner kept on making representations before the various authorities for about five years and thereafter filed the present petition in the year 2002. As per the case of the petitioner, since the respondent Board had rejected its request for payment of interest on the deposits only on 3rd October, 2002, they had preferred the petition in 2002. However, it appears that the said letter was written by the respondent No. 4 Board in response to the letter of the petitioners dated 12-8-2002. There is no explanation coming forth as to why the petitioner waited for a period of five years and did not take any legal action for about five years. Further it is also required to be noted that the present petition filed in 2002 is being decided in 2011. Therefore, the said delay from 1997 to 2011 cannot be attributed to the respondent authorities for making them liable to pay interest on interest amount as claimed in this petition. In that view of the matter, it is required to be held that the respondents cannot be directed to pay interest on the interest as claimed by the petitioners in the instant case.

For the reasons stated above, the Special Civil Application is partly allowed by setting aside the impugned show cause notice dated 10-3-1997 (Annexure-I) and the letter dated 3-10-2002 of the Board (Annexure-L), and by directing the respondents to pay interest at the rate of 12% per annum on the refunded amounts of deposits, for the period during which the said amounts of deposits had remained with the respondent authorities. The respondent shall make the said payment within eight weeks from the date of this order. The relief claimed by the petitioner as regards further interest at the rate of 24% per annum on the amount of interest is hereby rejected. The petition stands partly allowed. Rule is made absolute accordingly.

[Per : Harsha Devani, J.]. - Since the facts and contentions have already been set out in detail by my learned sister, it is not necessary to reiterate the same. Two issues arise for consideration in the present petition. Firstly whether the petitioner is entitled to interest at the rate of 12% in terms of the order dated 28-7-1988 passed by this court in Special Civil Application No. 2505 of 1988. If the first issue is answered in favour of the petitioner, then whether the petitioner is entitled to interest on interest at the rate of 24% as claimed by it.

Insofar as the claim for interest at the rate of 12% on the amounts deposited by the petitioner is concerned, it is evident that insofar as the order dated 28-7-1988 passed in Special Civil Application No. 2505 of 1988 is concerned, the same pertains to deposit of rupees thirty lakhs which the petitioner was required to deposit in terms of the said order. However, thereafter, pursuant to show cause notices issued from time to time similar proceedings were taken and the petitioner was required to deposit various sums as detailed hereinabove. On behalf of the petitioner, it has been contended that the direction to pay interest covers all the amounts deposited till the culmination of the proceedings vide the order dated 12-7-1995 passed by the Adjudicating Authority. On behalf of the revenue it is submitted that the petitioner did not succeed finally in the proceedings instituted under the directions of this Court before the Commissioner (Appeals). That on the contrary, the jurisdictional Assistant Collector''s Order in Original classifying the product ''Rasna'' under Chapter Sub-heading No. 2107.91 and confirming the demand therein was upheld by the Collector (Appeals) in the order-in-appeal dated 15-10-1991. According to the respondents the directions issued by this Court in SCA No. 2505 of 88 were relevant for payment of interest only at the stage when the Collector of Appeals was to dispose of the appeal. That the Collector (Appeals) decided the matter against the petitioner hence, in terms of the directions issued by this High Court the petitioner became liable to pay interest. However, the petitioner did not do so and instead chose to prefer an appeal against the said order before the Tribunal. It is the case of the respondents that the directions of this Court had become inoperative, once the Collector (Appeals) finalised the issue and the petitioner had not paid the interest. That the Tribunal as well as the Delhi High Court had not issued any directions to pay interest and as such the respondents have processed and scrutinised the admissibility or otherwise of the liability to pay interest on the amounts deposited by the petitioner which does not warrant any interference.

The Apex Court in the case of Tata Refractories Ltd. and Another v. Sales Tax Officer (2003) 1 SCC 65 has held thus :

It is to be noted that the order of the High Court in the earlier writ petition, namely, OJC No. 1200 of 1995 was made by the High Court in the exercise of its power under Articles 226 and 227 of the Constitution of India wherein while directing the appellants to deposit the amount quantified therein, the High Court also issued a direction to the respondent State that it should refund the amount with interest at the rate of 18% per annum in the event of the appellants succeeding in the second appeal. This order is definitely not one made under the provisions of the Act. The respondent State which took benefit of the said order and retained the amount deposited by the appellant, cannot now be permitted to say when it comes to refund the direction issued by the High Court in its order dated 15-3-1995 will not be binding on it and it is only the provisions of the statute that will bind. As noted above, it is not by invoking the provisions of the Act, the deposit was directed to be made by the High Court, hence, any direction made while making an order under Articles 226 and 227, to deposit any sum of money will be governed by the conditions imposed in the order directing such deposit. On the contrary, if any such condition as to the interest had not been made by the High Court while directing the deposit of the amount then it could be said that the refund which may become payable will be governed by the provisions of the State Act. In the instant case, since the very order which directed the deposit itself has directed the refund with 18% interest, we have no doubt in holding the said order as to mean that the refund should be made with interest at the rate of 18% from the date on which the amount was deposited pursuant to the order of the High Court dated 15-3-1995.

In the light of the principles enunciated in the said decision, either of the parties who failed finally would be liable to pay interest at the rate of 12% in terms of the order of this High Court.

In the present case it is not as if the petitioner has come to this court with a prayer to grant interest simpliciter as was the case in Union of India v. Orient Enterprises (supra) on which reliance has been placed by the respondents. Though the claim is not based on any statutory provision, the same is based upon an order passed by this Court. Hence, the case cannot be equated with a case where a petition is filed seeking interest on delayed refund directly before this court based on general principles without any statutory or other basis. The petition is filed for enforcement of a right conferred under the said order.

A perusal of the order dated 28th July, 1988 passed by this court in Special Civil Application No. 2505 of 1988 shows that under the said order by consent of the parties it was inter alia directed that the assessee will file an undertaking that in the event he finally fails in his challenge and is held liable to pay Excise Duty, he will pay the difference with interest at 12% per annum and that on behalf of the revenue an undertaking will be filed that in the event the assessee finally succeeds in his challenge and is found not liable to pay excise duty on his product, the revenue will refund the amount with interest at 12% per annum. Thus liability to pay interest would arise under the said order when the challenge becomes final. The question that arises for consideration in view of the rival contentions is as to when can the challenge said to have attained finality.

On behalf of the revenue it has been contended that the challenge attained finality immediately upon the order dated 15-10-1991 being passed by the Collector (Appeals). This contention on the face of it is fallacious, inasmuch as a proceeding attains finality only when an order is no longer subject matter of appeal. When one talks about the finality of the challenge it would only be at the, stage when the proceedings are finally culminated by an order of the highest forum or by an order of a forum which has not been challenged any further. All the orders of the lower forums merge with the ultimate order against which no further appeal is preferred. Till then it cannot be said that the proceeding has attained finality. In the present case, therefore, the proceedings attained finality by virtue of the order dated 12-7-1995 passed by the Adjudicating Authority holding that the petitioner''s product is classifiable under sub-heading 2107.99 chargeable to nil rate of duty. Hence, the liability to pay interest under the aforesaid order of this Court arose at that stage. The revenue was therefore liable to pay interest at the rate of 12% in terms of the order of this Court pursuant to the order dated 12-7-1995. However, at the relevant time no interest was paid to the petitioners.

The next question that, therefore, arises is as to on what amount the revenue would be liable to pay interest. Prima facie on a plain reading of the order dated 28-7-1988 of this High Court it appears that the liability to pay interest on the part of the revenue under the said order is confined to the amount deposited in terms of the said order. However, as noticed earlier the said order was passed with the consent of the parties. Another significant aspect is as to how the parties to the proceedings have interpreted the said order. In this regard it may be relevant to refer to the order dated 15-10-1991 passed by the Collector (Appeals) and more particularly to the penultimate paragraph thereof wherein it has been held thus :

Accordingly, the eight appeals are rejected. As such, the appellants are directed to immediately pay all the outstanding dues of Central Excise duty, adjudged against them by the AC vide his impugned orders, in pursuant of their undertaking and guarantees furnished before the High Court of Gujarat at Ahmadabad in SCAs filed by them. It is relevant to mention here that in terms of the last order dated 19-4-90 of Gujarat High Court in SCA No. 2759 of 1990, all the 3 trustees of Khambhatta Family Trust were required to file undertaking in the court to the effect that in the event the petitioners fail in the challenge before the Collector (Appeals), they will pay the excise duty difference as expeditiously as possible, subject to any different orders of the higher authorities. It is further noticed that out of the total demand of duty amounting to Rs. 6,21,21,193/- covered by the eight impugned orders, the appellants have so far paid only an amount of Rs. 80 lakhs (30 + 50), as directed by the High Court of Gujarat. As such the appellants are directed to immediately pay the balance amount along with interest at 12% in pursuance of the undertaking given by them before High Court of Gujarat, as directed in its order dated 28-7-88 in SCA No. 2505 of 1988.

Thus, from the aforesaid order it is apparent that the parties have proceeded on the footing that all amounts in respect of similar proceedings pertaining to classification of the petitioner''s product would be covered by the aforesaid order of this High Court and accordingly even the respondents have demanded interest at the rate of 12% on amounts not covered under the said order. Thus, once the respective parties have construed the said order in a particular manner and have proceeded accordingly, merely because the petitioner is the beneficiary of the said order, the revenue cannot be heard to say that the order covers only the amount deposited there under. In the circumstances, interest at the rate of 12% per annum would be payable to the petitioner on the entire amount deposited by it from time to time.

Once it is held that in view of the High Court order the petitioners are entitled to payment of interest at 12% per annum, as a natural corollary it follows that the action of the respondents in not paying the said amount is incorrect and not legal and valid. In the circumstances, the fact that the petition was pending before this Court for all these years and the fact that this Court has by this order held that the respondents are liable to pay the interest does not detract from the fact that the respondents had wrongly retained the amount and had not paid the amount when due and payable.

The Supreme Court in the case of Sandvik Asia Ltd. Vs. Commissioner of Income Tax-I, Pune and Others, has inter alia held thus :

In the impugned order, the Bombay High Court has held that no compensation is required to be paid since "... there was a serious dispute between the parties, which was ultimately ordered to be paid pursuant to the order passed by this Court on 30-4-1997. Undisputedly, the amount pursuant thereto was paid on 27-3-1998...." The Court further held that since the amount was paid once the controversy was resolved there was no wrongful retention of monies. No authority can ever accept an obligation to make payment and simply refuse to pay. In each and every case an authority must at least claim to act in accordance with law and hence claim that it has no obligation to pay for some reason or another. When the claims of the authority are found to be unsustainable or erroneous by the courts, it follows that the authority has acted wrongfully in the sense of not in accordance with law and compensation to the party deprived must follow. If the decision of the High Court is upheld it would mean that there can never be any wrongful retention by an authority until this Court holds that their stand is not in accordance with law. Therefore, that on this issue as well, the impugned judgment cannot be sustained and ought to be reversed.

The facts and the law referred to in paragraph (supra) would clearly go to show that the appellant was undisputably entitled to interest under Sections 214 and 244 of the Act as held by the various High Courts and also of this Court. In the instant case, the appellant''s money had been unjustifiably withheld by the Department for 17 years without any rhyme or reason. The interest was paid only at the instance and the intervention of this Court in Civil Appeal No. 1887 of 1992 dated 30-4-1997. Interest on delayed payment of refund was not paid to the appellant on 27-3-1981 and 30-4-1986 due to the erroneous view that had been taken by the officials of the respondents. Interest on refund was granted to the appellant after a substantial lapse of time and hence it should be entitled to compensation for this period of delay. The High Court has failed to appreciate that while charging interest from the assessees, the Department first adjusts the amount paid towards interest so that the principal amount of tax payable remains outstanding and they are entitled to charge interest till the entire outstanding is paid. But when it comes to granting of interest on refund of taxes, the refunds are first adjusted towards the taxes and then the balance towards interest. Hence as per the stand that the Department takes they are liable to pay interest only up to the date of refund of tax while they take the benefit of assessees'' funds by delaying the payment of interest on refunds without incurring any further liability to pay interest. This stand taken by the respondents is discriminatory in nature and thereby causing great prejudice to lakhs and lakhs of assessees. Very large number of assessees are adversely affected inasmuch as the Income Tax Department can now simply refuse to pay to the assessees amounts of interest lawfully and admittedly due to them as has happened in the instant case. It is a case of the appellant as set out above in the instant case for assessment year 1978-79, it has been deprived of an amount of Rs. 40 lakhs for no fault of its own and exclusively because of the admittedly unlawful actions of the Income Tax Department for periods ranging up to 17 years without any compensation whatsoever from the Department. Such actions and consequences, in our opinion, seriously affected the administration of justice and the rule of law.

Applying the aforesaid decision to the facts of the present case, the petitioner became entitled to refund of the amounts deposited by it along with interest at the rate of 12% in terms of the order of the High Court once the proceedings attained finality by the order dated 12-7-1995 passed by the Adjudicating Authority. However, interest has not been paid to the petitioner till date due to the erroneous view taken by the officials of the respondents. Since interest of the refund has not been granted for a considerable time, in the light of the view taken by the Court in the aforesaid decision on general principles the petitioner ought to be compensated for the delay in receiving monies properly due to it. However, as noticed hereinabove, the petitioner''s claim is not based on any statutory provision inasmuch as at the relevant time the Central Excise Act, 1944 did not make any provision for payment on interest on late payment of refund. Hence, had it not been for the order dated 28th July, 1988 passed by this court in Special Civil Application No. 2505 of 1988 the petitioner would not even be entitled to claim interest on the amounts so deposited in a writ petition under Articles 226 of the Constitution. Any claim for interest could then be made on general principles by pursuing the ordinary civil remedy. As held by the Supreme Court in the case of Tata Refractories Ltd. and another v. Sales Tax Officer (supra) when deposit is made not by invoking the provisions of the Act but as directed to be made by the High Court, any direction made while making an order under Articles 226 and 227, to deposit any sum will be governed by the conditions imposed in the order directing such deposit. Applying the aforesaid decision to the facts of the present case, the deposits made by the petitioner will be governed by the aforesaid order dated 28th July, 1988. A perusal of the said order makes it clear that the same does not make provision for payment of interest on interest. In the circumstances, the petitioner in a writ petition under Article 226 of the Constitution of India cannot be granted any further relief than that flowing from the said order. However, non-granting of the said relief in the present petition shall not preclude the petitioner from availing of the ordinary civil remedy in relation to its claim for interest on interest on account of delayed payment of interest.

For the foregoing reasons, the petition succeeds in part and is accordingly allowed in terms of the relief granted vide paragraph 24 hereinabove.