V.I.P. Industries Ltd. vs Union of India

Pendse, J.—The petitioners are a company registered under the provisions of the Companies Act and are engaged in the manufacture of plastic moulded luggage articles. The petitioners have a factory at Nasik where plastic moulded brief cases, suit-cases, vanity cases and overnight cases in the brand name of "V.I.P." and "V.I.P. Travelite" are manufactured. The products are manufactured by molding into shells of different sizes a basic raw material called high density polyethylene (plastic) by a process called "injection moulding." After the moulding process, the resultant shells are assembled in the factory''s assembly section along with aluminium frames, hinges, locks, channels etc.

Between March 1, 1975 and April 20, 1979 the petitioners paid excise duty on the manufacture of the articles under Tariff Item 68 of the First Schedule to the Central Excise & Salt Act, 1944. Tariff Item 68 is a residuary item and excise duty was paid under Tariff Item 68 on an advise and directions given by the officers of the Collector of Central Excise. Tariff Item No. 68 was inserted in the First Schedule with effect from March 1, 1975 and thereupon the duty was recovered from the petitioners as prescribed under Tariff Item No. 68.

The petitioners claim that in December 1978 it was learnt that M/s. Universal Luggage who were also manufacturing the identical goods filed classification list claiming that the duty is payable under Tariff Item 15A(2) and seeking exemption from payable of duty in accordance with Notification No. 68/71 dated May 29, 1971. The claim made by M/s. Universal Luggage was accepted by the Assistant Collector of Central Excise, Bombay. The petitioners thereupon on December 22, 1978 addressed letter to Superintendent, Central Excise, reclassifying product under Tariff Item No. 15A(2) instead of Tariff Item No. 68 and sought exemption from payment of duty in accordance with exemption notification dated May 29, 1971. The classification list filed by the petitioners was approved by Assistant Collector of Central Excise on April 18, 1979 though subsequently attempt was made to review the order of approving the classification, but that was given up on August 25, 1980 on receipt of representation from the petitioners. It is therefore no longer in dispute that the goods manufactured by the petitioners are liable to payment of excise duty under Tariff Item No. 15A(2) and the petitioners are entitled to total exemption from payment of duty in accordance with the notification dated May 29, 1971.

On May 25, 1979 the petitioners lodged refund claim for Rs. 39,95,918.72 paise being the duty paid erroneously for the period commencing from March 1, 1975 and ending with April 20, 1979. The Assistant Collector of Central Excise on September 12, 1979 issued show cause notice to the petitioners to explain why the refund claim should not be held to be barred by Rule 11 Central Excise Rules. Rule 11, inter alia, provides that any person claiming refund of any duty shall 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. The petitioners filed their reply and therefore the Assistant Collector of Central Excise passed the impugned order dated October 13, 1980 holding that the petitioners are entitled to the refund of duty wrongly paid for the period commencing from November 29, 1978 and ending with April 20, 1979. The total amount refundable to the petitioners was determinated as Rs. 14,16,642.62. Respondent No. 2 rejected the claim for refund for the period commencing from March 1, 1975 and ending with November 28, 1978 on the ground that the claim for this period was barred by limitation as prescribed under Rule 11 of Central Excise Rules. The decision recorded by the Assistant Collector of Central Excise denying part of the refund claim is under challenge in this petition filed under Article 226 of the Constitution of India.

Mr. Talyarkhan, learned counsel appearing on behalf of the petitioners, submitted that the Assistant Collector held that the petitioners paid duty through inadvertence and were entitled to the refund of duty but erroneously declined to grant the relief for the entire duration by reference to Rule 11 of the Central Excise Rules. It is undoubtedly true that excise duty was paid inadvertently by the petitioners under Tariff Item No. 68 when the duty was payable under Tariff Item No. 15A(2) and there was a total exemption granted from payment of duty under Notification dated May 29, 1971. The Assistant Collector of Central Excise was bound by the provisions of Rule 11 of Central Excise Rules and could not have granted refund for a period of six months prior to the date of lodging of claim of refund. Mr. Talyarkhan submits, and in our judgment with considerable merit, that though the Assistant Collector was not entitled to grant refund for the earlier period, there is no bar to this Court directing payment of refund while exercising jurisdiction under Article 226 of the Constitution of India. The submission is correct. It is now well settled by catena of decisions of this Court that when a duty is wrongly paid, then the bar of limitation prescribed under Rule 11 of Central Excise Rules is not available in a proceeding filed under Article 226 of the Constitution of India seeking refund of duty. In view of several decisions recorded by this Court, the petitioners are entitled to an order of refund of duty wrongly paid between the period commencing from March 1, 1975 till November 28, 1978.

Mr. Desai, learned counsel appearing on behalf of the Department, referred to the decision of Full Bench of this Court New India Industries Ltd. and another Vs. Union of India and another, . and urged that when the revenue raises the plea of unjust enrichment the courts have to decide the question according to the facts and circumstances of the case and not grant refund as a matter of course. If is undoubtedly true that in paragraph 31 of the judgment the Full Bench observed that when the Department in writ petition raises a plea of unjust enrichment on affidavit then the Writ Court would have to decide the question according to facts and circumstances of the case. The Full Bench further observed that the writ court is required to satisfy that the tax burden has been in fact shifted to others and that an order for refund in favor of the writ petitioner would result in unjust enrichment. We enquired from Mr. Desai as to whether the Department has filed any affidavit raising such contention and has produced material to substantiate the claim. Mr. Desai very frankly stated that though the hearing of the petition was adjourned on last occasion to enable the Department to file an affidavit, such affidavit is not filed nor any material is available with the Department to sustain the submission that grant of refund would result in unjust enrichment to the petitioners. In our judgment, in view of failure of the Department to file affidavit, the question of unjust enrichment does not fall for consideration.

Mr. Desai also submitted that the petitioners should not be granted relief in the present proceeding because the petitioners are guilty of laches in approaching the Court. The learned counsel urged that the refund claimed is from March 1, 1975 onwards and the refund application was filed on May 25, 1979 before the Assistant Collector even though the petitioners were fully conscious that in accordance with Rule 11 of Central Excise Rules the Assistant Collector is not authorised to grant refund for a period of six months prior to the date of presentation of the refund application. Mr. Desai submitted that the petitioners ought to have filed petition under. Article 226 of the Constitution, in respect of refund due from March 1, 1975 in the year 1979 itself and filing of the petition in the year 1981 after the Assistant Collector rejected the claim amount to approaching court after considerable laches. We are not impressed by the submission. The petitioners did not know that the Assistant Collector would reject the claim on the ground of limitation. The petitions were hopeful that the Assistant Collector would not reject the claim of refund by resort to Rule 11 when the duty was paid inadvertently and because of the instructions and directions given by the officers of the Central Excise. Even assuming that the petitioners have approached this Court after some delay, still we are unable to appreciate how that fact has caused any prejudice to the revenue. The Department is not entitled to retain duty erroneously recovered by resort to the plea of laches in approaching the Court. In our judgment, the petitioners cannot be deprived of the right to get refund of the duty erroneously paid.

Accordingly, petition succeeds and the order dated October 13, 1980 passed by the Assistant Collector of Central Excise, Nasik, rejecting the claim of refund made by the petitioners for the period commencing from March 1, 1975 and ending with November 28, 1978 is set aside and the proceedings are remitted back to the Assistant Collector to grant refund even in respect of this period. The Assistant Collector is directed to pass appropriate orders and refund the duty on or before December 31, 1990. In case the duty is not refunded before December 31, 1990 then the petitioners would be entitled to get the refund amount along with interest at the rate of 15% per annum payable from today till the date of payment. It is made clear that the order of the Assistant Collector granting refund for the period between November 29, 1978 and April 20, 1979 is upheld. It is made clear that the proceedings are remitted back to the Assistant Collector only for the purpose of verification of the amount of refund to be paid and the Assistant Collector shall not raise an objection that he has no jurisdiction to refund the amount beyond period of six months.

There will be no order as to costs.