The Assistant Commissioner (Ct) vs M/S. Sss Melange on 8 September, 2022

[Cites 18, Cited by 0]

Madras High Court

The Assistant Commissioner (Ct) vs M/S. Sss Melange on 8 September, 2022

Learned Government Advocate (T) for the petitioner and the learned counsel for the respondent submit that as of now, the issue is covered as per the decision of the Division Bench of this Court in State of Tamil Nadu and another V. M/s. Everest Industries Limited in W.A. Nos. 1260 of 2017 etc batch vide order dated 31.03.2022.

2. The relevant portions of the judgment of the Division Bench, by which the aforesaid writ appeals were disposed of is as hereunder:

"143. The second question which may possibly arise is, whether "unjust enrichment" would apply to taxes paid on raw material and captively consumed in the manufacture of finished goods within the State. The said question stands resolved by the decision of the Hon-ble Supreme Court in the case of Union of India and others vs. Solar Pesticides Private Limited 2\14 https://www.mhc.tn.gov.in/judis W.A. No. 1872 of 2019 and another reported in (2000) 2 SCC 705 in which, while holding that the doctrine of “unjust enrichment“ would apply to duty paid on raw materials and captively consumed, it was held that "passing of incidence of duty to any other person may be direct such as when the goods imported are themselves sold and the burden of tax thereon is passed on to the buyer or it may be indirect when the goods imported are captively consumed by importer himself and the duty paid thereon is added to the price of the finished goods which are sold to others". The following passage of the said judgment would make the said position clear:

“20. We are of the opinion that the aforesaid observations would be applicable in the case of captive consumption as well. To claim refund of duty it is immaterial whether the goods imported are used by the importer himself and the duty thereon passed on to the purchaser of the finished product or that the imported goods are sold as such with the incidence of tax being passed on to the buyer. In either case the principle of unjust enrichment will apply and the person responsible for paying the import duty would not be entitled to get the refund because of the plain language of Section 27 of the Act. Having passed on the burden of tax to another person, directly or indirectly, it would clearly be a case of unjust enrichment if the importer/seller is then able to get refund of the duty paid from the Government notwithstanding the incidence of tax having already been passed on to the purchaser. “ (emphasis supplied)

144. Following the above judgment of the Hon-ble Supreme Court in Solar Pesticides Private Limited, the doctrine of “unjust enrichment“ was applied to capital goods used captively in the case of Commissioner of Central Excise, Chennai vs. Grasim Industries reported in (2015) 14 SCC 1, the relevant paragraph of which is profitably reproduced below:

“10. However, what follows from the reading of the said judgment is that if a particular material is used for the manufacture of a final product, that has to be treated as the cost of the product. Insofar as the cost of production is concerned, it may include capital goods which are a part of fixed cost as well as raw material which are a part of variable cost. Both are the components which come into costing of a particular product. Therefore it cannot be said that the principle laid down by the Court in Solar Pesticides [Union of India v. Solar Pesticides (P) Ltd., (2000) 2 SCC 705] would not extend to capital goods which 3\14 https://www.mhc.tn.gov.in/judis W.A. No. 1872 of 2019 are used in the manufacture of a product and have gone into the costing of the goods. In order to come out of the applicability of the doctrine of unjust enrichment, it therefore becomes necessary for the assessee to demonstrate that in the costing of the particular product, the cost of capital goods was not taken into consideration. We, thus, are of the opinion that the view taken by the Tribunal is not correct in law. “ (emphasis supplied)

145. It is also useful to refer to the Judgment of the Apex Court in A. Venkata Subbarao v. State of A.P., (1965) 2 SCR 577 : AIR 1965 SC 1773 while dealing with the claims relating to tax that was illegally retained.

"49.Besides, if there is no legal basis for these demands by the Government we consider that it is not possible to characterise them as anything else than as taxes. They were imposed compulsorily by the executive and are sought to be collected by the State by the exercise inter alia of coercive statutory powers, though these latter are vested in Government for very different purposes. We are clearly of opinion that the fact that agreements were taken from some of these merchants affords no defence to their claim for refund.

53.It was submitted by the learned Counsel for the appellants that it was not Article 62 that applied to a suit making a claim of this nature but the residuary Article 120 which runs: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~ “Description of period of limitation time from which suits period begins to run ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~

120. Suit for which Six yaers When the right to no period of limitation sue accrues“ is provided elsewhere in this schedule.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~ As Article 120 can apply only if no other specific article were 4\14 https://www.mhc.tn.gov.in/judis W.A. No. 1872 of 2019 applicable, we have to examine the question whether there is any other specific article applicable and in particular whether the language of the first column of Article 62 covers a suit making a claim of the nature made in the plaints before us. The contention urged on behalf of the appellant in Civil Appeals 306 and 644 of 1962 was that the Article refers to "money payable by the defendant to the plaintiff " only in those cases where "the money was received by the defendant for the plaintiff's use". The latter condition that the money which is sought to be recovered must have been received by the defendant for the plaintiff's use should, it was urged, be literally satisfied before that Article could be applied. In other words, the contention was that that Article could not apply unless at the moment when a defendant received the money, he received it specifically for the use of the plaintiff. On the other hand, the rival construction suggested by the respondent was that the language of the Article had reference to the action "for money had and received" as known to the English Law, and that the reference to the receipt being for the plaintiff's use was a technical term of English pleading and law which imposed upon a defendant who received money in circumstances which in justice and equity belonged to the plaintiff rendered its receipt a "receipt by the defendant to the use of the plaintiff". Here, it was pointed out, the money was received by the defendant from the plaintiff which the plaintiff was not bound in law to pay but which he was compelled or forced to pay because of the threats or apprehension of legal process. The circumstances, therefore, in which the money was received were, it was said, such that notwithstanding that the receipt by the defendant purported to be for his own benefit still it was money which at the very moment of the receipt in justice and equity belonged to the plaintiff, and that was the whole basis of the plaintiff's claim on the merits.

54. The questions for consideration, therefore, are: (1) Does Article 62 embody the essential elements of the action known in English Law and pleading as the "action for money had and received to the plaintiffs use?" (2) Does the fact that at the moment of receipt the defendant intended to receive the money for his own benefit and not for the use of the plaintiff render the Article inapplicable? Stated in other terms is a literal compliance with the words that the money must have been received by the defendant for the plaintiff's use necessarily before the Article applies, or is it sufficient that the circumstances of the case are 5\14 https://www.mhc.tn.gov.in/judis W.A. No. 1872 of 2019 such that the plaintiff being entitled in equity to the money, the law would impute to the defendant the intention to hold it for the plaintiffs use and compel a refund of it to the plaintiff.

56. The doctrine on which the action for "money had and received" was based was propounded by Lord Mansfield in Moses v. Macferlan[(1760) 2 Burr 1005] where it was explained that it lay "for money which ex aquo et bono the defendant ought to refund" and in a later case [Sadler n Evans, (1760) 4 Burr 1984] as "a liberal action, founded on large principles of equity, where the defendant cannot conscientiously hold the money". In later decisions it was said to be based not merely on an equitable doctrine but was a Common Law right[ See for instance Royal Bank of Canada v.Reh, 1913 AC 283]. The jural basis on which the action was originally supported, was a promise to pay by the defendant implied or imputed by law. Lord Mansfield explained: "If the defendant be under an obligation from the ties of natural justice to refund, the law implies a debt and gives this action, founded on the equity of the plaintiffs case, as it were upon a contract.?"

Moses v. Macferlan [(1760) 2 Burr 1005] itself was an action of assumpsit and the imputed promise was an extension of the principle on which it was in its origin based as stated in Cheshire & Fitfoot. In the third Edition of Bullen and Leake published in 1868 they said: [ILR 32 Cal 527] "The action for money had and received is the most comprehensive of all the common counts. It is applicable wherever the defendant has received money, which, in justice and equity, belongs to the plaintiff under circumstances which render the receipt of it a receipt by the defendant to the use of the plaintiff."

"But, despite this formidable measure of unanimity, the abolition of the forms of action in the middle of the nineteenth century and the temptations of a new analytical jurisprudence gradually undermined Lord Mansfield"s position. So long as the common lawyers thought in terms of procedure and associated quasi- contract with the writ of Indebitatus Assumpsit, they were content to accept the implications of unjust benefit. But when they abandoned their traditional forms and substituted a dichotomy of tort and contract, the old explanation seemed no longer to suffice. The various actions grouped under the insidious title of quasi~contract were clearly not tortious: if the new antithesis of 6\14 https://www.mhc.tn.gov.in/judis W.A. No. 1872 of 2019 the common law was inevitable, they must perforce be contractual. And, as they were equally clearly not based upon any genuine consent, they must rest upon an implied or hypothetical agreement."

59. Having considered the matter carefully we are inclined to prefer the interpretation of the Article by Mookerjee, J. In Mahomed Wahib case[ILR 32 Cal 527] . What we are solely concerned with is the meaning of the words employed in the first column of the Article which specifies the nature of the suit dealt with. That they were derived and adopted from the terminology employed in the English action for money had and received is not disputed. The Courts in India being courts administering both law and equity, no doubt we are not concerned with the technicalities of the English forms of action which originated at a time before the Judicature Acts when law and equity were administered by different Courts. But that is only as regards the merits of a claim and its maintainability in a Court. With great respect to the learned Judges who decided Anatram [ILR 50 Cal 475 at p 480] andLingangouda cases[ILR 1953 Bom 214] , we are unable to agree that the changes which the doctrine has undergone in England have any bearing on what the Article meant in 1871 when the legislature lifted the words descriptive of a form of an English action and incorporated it in the Indian statute. Nor are we impressed with the argument that if the terms of a specific Article do apply to a specific case, one could ignore it and seek a general Article merely on the ground that the latter affords a longer period of limitation for the filing of a suit.

60. So far as the present claim for recovery of a tax illegally collected is concerned the authorities are fairly uniform that the period of limitation for a suit making such a claim is governed by Article 62.Rajputana Malwa Railway Cooperative Stores Ltd. v. Ajmere Municipal Board[ILR 32 All 491] arose out of a suit against a Municipal Board for refund of certain octroi duty which they were not legally entitled to levy. The suit for that claim was held to be governed by Article 62, the learned Judges stating:

"The language of Article 62 is borrowed from the form of count in vogue in England under the Common Law Procedure Act of 1852. Prior to the passing of the Supreme Court of Judicature Acts of 1873 and 1875, there was a number of forms of pleading known as the common indebitatus counts, such as counts for money lent, money paid by the plaintiff for the use of the defendant at his 7\14 https://www.mhc.tn.gov.in/judis W.A. No. 1872 of 2019 request, money received by the defendant for the use of the plaintiff, & co" The most comprehensive of the old common law counts was that for money received by the defendant for the use of the plaintiff. This count was applicable where a defendant received money which in justice and equity belonged to the plaintiff under circumstances which rendered the receipt by the defendant to the use of the plaintiff... It was a form of claim which was applicable when the plaintiffs money had been wrongfully obtained by the defendant."

A similar view was taken of claims of a like nature in Municipal Council Dindigul v.Bombay Co. Ltd., Madras[ILR 52 Mad 207],India Sugar and Refinery Ltd.v.Municipal Council Hosper[ILR 43 Mad 521],State of Madras v. A.M.N.A. Abdul Kader[AIR 1953 Mad 995], and Municipal Committee, Amritsarv.Amar Dass[AIR 1953 Punjab 99] . Learned Counsel submitted that these cases proceeded, in great part, on the inapplicability of the shorter periods of limitation provided in the particular statutes for amounts improperly collected thereunder. We do not, however, consider that this militates, in any manner, from the reasoning upon which the decisions are based, for they all refer to the terms of Article 62, to its scope and their applicability in terms to cases of suit for refund of tax illegally collected. In addition, we might point out that in India Sugar and Refinery Ltd.v. Municipal Council, Hospet [ILR 43 Mad 521] the claim for some of the years for which the suit was filed was dismissed as barred by limitation by applying the three year rule. In fact, learned Counsel conceded that save a solitary decision in Govind Singh v. State of Madhya Pradesh [12 STC 825] to which we shall presently refer, the decisions were uniform in applying Article 62 to cases of suits for refund of taxes illegal collected. We consider that these decisions are correct and they have applied the proper article of limitation."

146. In the above case, the Apex Court was dealing with claims against the State for refund of tax collected illegally or without authority. Any tax collected without authority would certainly amount to unjust enrichment as we have seen in the cases referred to earlier. The Apex Court has held that Article 62 of the Limitation Act, 1908 would appear implying that the period of limitation would be three years from the date of receipt of tax that has been retained by the Revenue. Article 62 is pari materia to Article 24 of 8\14 https://www.mhc.tn.gov.in/judis W.A. No. 1872 of 2019 the present Limitation Act, 1963. The plea to invoke the residuary Article 120 under the old Act was turned down. Therefore, for the assessees to claim refund of the tax collected or retained by the State, steps must have been taken by them within three years from the date of their payments to the department. Thus, any claim for refund may have to be examined keeping in view the doctrine of "unjust enrichment" as explained by the decisions cited supra and the findings rendered hereinabove and in the preceding paragraph.

Conclusion.

147. Therefore, the position as regards section19(2)(ii) and the proviso inserted vide Act 28 of 2013 and its subsequent omission vide Amendment Act 5 of 2015 and the claim of refund, shall be examined in the light of the principles as set out above. To that extent, the appeals filed by the State are partly allowed.

148. Insofar as W.A Nos.1446 and 1447/2021 are concerned, the same have been preferred against the orders of the learned Judge dismissing the writ petitions as barred by limitation, based on the decision of the Apex Court in Glaxo Smith Kline Consumer Health Care Pvt lTd.

149. It is brought to the knowledge of this court, a subsequent judgment of a Co~ordinate Bench of this court in W.A No.493/2021, wherein after considering the observations of the Hon?ble Apex Court, it was held that “no bar has been imposed by the Apex Court in entertaining a writ petition under Article 226 of the Constitution of India? and the same is quoted below for ready reference:

"5. In our respectful view, the decision of the Hon-ble Supreme Court in the said decision has not held that a writ petition under Article 226 of the Constitution of India is an absolute bar. We are of the said view after noting the observations/findings rendered by the Hon-ble Supreme Court in the following paragraphs :

"11. In the backdrop of these facts, the central question is: whether the High Court ought to have entertained the writ petition filed by the respondent? As regards the power of the High Court to issue directions, orders or writs in exercise of its jurisdiction under Article 226 of the Constitution of India, the same is no more res integra. Even though the High Court can entertain a writ petition against any order or direction passed/action taken by the State under Article 226 of the Constitution, it ought not to 9\14 https://www.mhc.tn.gov.in/judis W.A. No. 1872 of 2019 do so as a matter of course when the aggrieved person could have availed of an effective alternative remedy in the manner prescribed by law (see Baburam Prakash Chandra Maheshwari vs. Antarim Zila Parishad now Zila Parishad, Muzaffarnagar [AIR 1969 SC 556] and also Nivedita Sharma vs. Cellular Operators Association of India & Ors. [2011 (14) SCC 337]. In Thansingh Nathmal & Ors. vs. Superintendent of Taxes, Dhubri & Ors. [AIR 1964 SC 1419], the Constitution Bench of this Court made it amply clear that although the power of the High Court under Article 226 of the Constitution is very wide, the Court must exercise self imposed restraint and not entertain the writ petition, if an alternative effective remedy is available to the aggrieved person.....

15. ........ The High Court may accede to such a challenge and can also non suit the petitioner on the ground that alternative efficacious remedy is available and that be invoked by the writ petitioner. However, if the writ petitioner chooses to approach the High Court after expiry of the maximum limitation period of 60 days prescribed under Section 31 of the 2005 Act, the High Court cannot disregard the statutory period for redressal of the grievance and entertain the writ petition of such a party as a matter of course. Doing so would be in the teeth of the principle underlying the dictum of a three Judge Bench of this Court in Oil and Natural Gas Corporation Limited (supra). In other words, the fact that the High Court has wide powers, does not mean that it would issue a writ which may be inconsistent with the legislative intent regarding the dispensation explicitly prescribed under Section 31 of the 2005 Act. That would render the legislative scheme and intention behind the stated provision otiose. ......

19........ Pertinently, no finding has been recorded by the High Court that it was a case of violation of principles of natural justice or non compliance of statutory requirements in any manner. Be that as it may, since the statutory period specified for filing of appeal had expired long back in August, 2017 itself and the appeal came to be filed by the respondent only on 24.9.2018, without substantiating the plea about inability to file appeal within 10\14 https://www.mhc.tn.gov.in/judis W.A. No. 1872 of 2019 the prescribed time, no indulgence could be shown to the respondent at all.?

6. On a reading of the above extracted paragraphs, it is seen that the Hon-ble Supreme Court, after referring to the decision of the Constitution Bench in the case of Thansingh Nathmal, held that although the power of the High Court under Article 226 of the Constitution is very wide, the Court must exercise self imposed restraint and not entertain the writ petition. Further, in paragraph 15, the Hon'ble Supreme Court observed that the High Court may accede to such a challenge and can also non suit the petitioner on the ground that alternative efficacious remedy is available and that be invoked by the writ petitioner. In addition, in paragraph 19, the Hon-ble Supreme Court took note of the fact that when the High Court refuses to exercise the jurisdiction under Article 226 of The Constitution of India, it would be necessary for the Court to record that there was no case of violation of the principles of natural justice or non~compliance of statutory requirements in any manner. "

7. Therefore, there are certain broad parameters, within which, the Court has to exercise its jurisdiction under Article 226 of The Constitution of India, which read as hereunder :

(i) if there is unfairness in the action of the Statutory Authority;

(ii) if there is unreasonableness in the action of the Statutory Authority;

(iii) if perversity writs large in the action taken by the Authority;

(iv) if the Authority lacks jurisdiction to decide the issue and

(v) if there has been violation of the principles of natural justice, the Court will step in and exercise its jurisdiction under Article 226 of The Constitution of India.

8. Further, it would be highly beneficial to refer to the celebrated decision of the Constitution Bench of the Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. Vs. Union of India [reported in 1997 (5) SCC 536] wherein it was held that the jurisdiction of the High Courts under Article 226 and that of the Hon-ble Supreme Court under Article 32 of The Constitution of India could not be circumscribed by the provisions of the Enactment (Central Excise Act) and they would certainly have due regard to the legislative intent evidenced by the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the Act. Further, the Court directed that the writ petition would be considered and disposed of in the light of and in accordance with the provisions of Section 11B of the Central Excise Tax Act and for such a reason, the 11\14 https://www.mhc.tn.gov.in/judis W.A. No. 1872 of 2019 power under Article 226 of The Constitution of India has to be exercised to effectuate rule of law and not for abrogating it.

9. In the light of the above, we have no hesitation to hold that the observation of the learned Single Judge to the effect that there is absolute bar for entertaining a writ petition does not reflect the correct legal position. Hence, we are inclined to interfere with the observation made in the impugned order."

150. With utmost respect, the Hon'ble Supreme Court has held that such writs should not be entertained as a matter of course, even though, the court has wide powers under Article 226 of the Constitution. The writ court ought to have seen that the High Court under Article 226 of Constitution is rather circumscribed by the theory of laches and not by limitation, because the Constitution is above a statute as held by the Apex Court in the Judgment in the matter of Samjuben Gordhanbhai Koli Vs State of Gujarat, reported in MANU/SC/0826/2010. The effect of "laches" depends upon the facts of each case and is left to the discretion of the court to either reject or entertain a writ petition. In taxing matters, whenever a levy or demand is made without authority of law, the court would be within its power to set aside the same, because any illegality cannot be perpetuated on technicalities. Further, as per the provisions of the TNVAT Act, Section 84 empowers rectification of orders within five years from the date of any order passed by the assessing officer. It is settled law that the error contemplated therein is not just factual, but also legal error. When the power to the statutory authority is granted upto five years to modify the order, it cannot be said that the constitutional authorities would not have power to review the action. Therefore, concurring with the Division Bench, we do not concur with the decision of the Learned Judge to dismiss the writ petitions on the technicality of limitation, that too, when the batch was pending. We set aside the said order of the learned Judge and dispose of the writ appeals in WA.Nos.1446 and 1447/2021 accordingly.

151. In view of the fact that the batch of cases has been partially decided in favour of the assessees and partially in favour of the revenue, the writ petitioners are disposed of, in terms of the ratio laid down by this court.

152. With respect to W.P No 24535 of 2018, the same is disposed of, granting liberty to the petitioner to file an appeal before the appellate authority within a period of 30 days from the date of receipt of a copy of this order as the only ground raised therein is that the challenge to the vires of the Act was pending before the Apex Court, which subsequently was held 12\14 https://www.mhc.tn.gov.in/judis W.A. No. 1872 of 2019 in favour of the Revenue.

153. In the upshot, the appeals filed by the Revenue and the appeals and writ petitions filed by the assessees are partially allowed. There will be no order as to costs. Consequently, connected miscellaneous petitions are closed."

3. Though there is a request for adjournment stating that the State is proposing to file an appeal, we are inclined to dismiss this writ appeal considering the fact that the issues are now covered against the State.

However, we leave it open to the State to work out their remedy before the Hon'ble Supreme Court along with other cases where an order has been passed as referred to supra.

4. Accordingly, the writ appeal stands dismissed with the above observation. No costs. Connected C.M.P. is closed.




                                                                                     (S.V.N.J.) (C.S.N.J.)
                     nv                                                                   08.09.2022




                     13\14


https://www.mhc.tn.gov.in/judis
                                      W.A. No. 1872 of 2019




                                  S. VAIDYANATHAN,J.

                                                     AND

                                     C. SARAVANAN,J.

                                                        nv




                                   W.A. No. 1872 of 2019




                                               08.09.2022


                     14\14


https://www.mhc.tn.gov.in/judis

Unlock Advanced Research with PRISMAI

Madras High Court