Bombay High Court
Doctor Beck & Co. (India) Ltd. vs Assistant Collector on 10 September, 1990
Equivalent citations: 1991(51)ELT263(BOM)
JUDGMENT Pendse, J.
1. The petitioners are a company incorporated under the Companies Act, 1956 and inter alia manufacture insulating enamels varnishes and resins for electrical industry in the factory at Pimpri, Pune. The petitioners manufacture a product known as 'Insulation Adhesive P80'. The adhesive is obtained by dissolving duty paid polyvinyl alcohol powder in water. The petitioners classified the manufacture of adhesive under Tariff Item No. 15(1)(i) of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the 'Act') and paid excise duty thereon at the rate of 30 per cent. ad valorem initially and later on at 40 per cent. ad valorem. Sometime in December 1979, the petitioners learnt that the Collector of Central Excise, Pune, has issued a communication dated November 17, 1979, relating to excise duty of aqueous solution of polyvinyl alcohol powder. The communication inter alia stated that change in the form of duty paid artificial or synthetic resins from solid/powder form into liquid or paste form by simple process of adding water would not amount to manufacture and therefore not liable to duty.
2. After receipt of the communication, the petitioners became aware that excise duty was paid in respect of manufacture of adhesive under mistake of law. The petitioners thereupon forwarded revised classification list dated March 12, 1980, to the Assistant Collector. The revised classification list was approved by the Assistant Collector on September 20, 1980. The petitioners thereafter on September 30, 1980 sought refund of duty wrongly paid for the period commencing from March 12, 1980 to September 30, 1980. The claim was granted by the Asst. Collector. The company also filed another refund application dated October 20, 1980 for refund of duty of Rs. 2,28,852.14 paid under mistake between the period March 14, 1977 and March 11, 1980. This refund claim was rejected by the Asst. Collector of Central Excise. Pune, by order dated March 27, 1981. The Asst. Collector held that the refund application is not entertainable both under the provisions of erstwhile Rule 11 of the Central Excise Rules and the provisions of Rule 11-E of the amended Rules. The Assistant Collector recorded positive finding that the petitioners had paid duty under Tariff Item No. 15A under mistake of low. The decision of the Assistant Collector is under challenge.
3. Mr. Setalvad, learned counsel appearing on behalf of the petitioners, submitted that the view taken by the Asst. Collector holding that the claim is barred by Rule 11 is not correct. The learned counsel submitted that even otherwise, the defence of limitation is not available to the department in a proceedings under Article 226 of the Constitution, when the duty was paid by the assessee under a mistake of law. By catena of decisions of this Court and of the Supreme Court, it is settled law that duty recovered by the department without any authority of law cannot be retained by resort to the provisions of limitation under the rules and the writ Court is bound to grant relief, if it is established that the duty was paid under mistake of law. In the present case, the Asstt. Collector has recorded a clear-cut finding that duty was paid by the petitioners under mistake of law and, therefore, it is obvious that the plea of limitation is not available to the department in the present proceedings under Article 226 of the Constitution.
4. Mr. Desai, learned counsel appearing for the respondents, submitted that the order for refund to the petitioner would involve the concept of unjust enrichment. The learned counsel submitted with reference to the decision of Full Bench of the Court in New India Industries Ltd. v. Union of India (1990 (46) E.L.T. 23) that the writ Court is required to satisfy that the tax burden is in fact shifted by the assessee to others and an order of refund would result in unjust enrichments. It is undoubtedly true that in accordance with the Full Bench decision, it is necessary for the Court to ascertain whether the tax burden has been shifted by the assessee, but the Full Bench also demands that the revenue should raise the plea of unjust enrichment and it is for the department to establish that the tax burden has been shifted by the assessee to the customers. Mr. Desai very fairly stated that this requirement set out in the decision of the Full Bench is not met in the present case by the department by filing the return. It is, therefore, not permissible for the department to decline refund by resort to the concept of unjust enrichment. In our judgment, the impugned order of the Asstt. Collector cannot be sustained and the petitioners are entitles to order of refund of duty wrongly paid.
5. Accordingly, rule is made absolute and the order of the Asst. Collector of Central Excise, Pune, dated March 27, 1981, copy of which is annexed as exhibit 'L' to the petition, is set aside and proceedings are remitted back to the Asst. Collector for determination of amount of refund payable. The Asstt. Collector should complete the process and refund the duty on or before December 31, 1990. In case the Asstt. Collector fails to do so, then the department will be liable to pay interest on the amount of duty repayable at the rate of 15 per cent. per annum payable from today till the date of actual refund. In the circumstances of the case, there will be no order as to costs.