Bombay High Court
Shalimar Textile Mfg. Pvt. Limited vs Union Of India And Others on 16 July, 1986
Equivalent citations: 1986(10)ECC83, 1986(25)ELT625(BOM)
JUDGMENT
1. The petitioners are a Company incorporated under the provisions of the Companies Act and carry on business of manufacturing various types of tubes at their factory situated at Kandivli, Bombay. The Petitioners manufacture rigid and collapsible tubes from aluminium through a process known as impact extrusion, that is by forcing slugs of lumps and aluminium through a die under pressure. After the extrusion is complete and the extruded tube comes into existence, number of other processes or operations are carried out to suit the convenience of the customers. The manufacture of extruded tube was liable for excise duty under Sub-item 27(e) of the First Schedule to the Central Excises and Salt Act, 1944. Sub-item 27(e) reads as under :
"27. Aluminium -
(e) Extruded shapes and sections including extruded pipes and tubes."
Till April 1, 1970 duty on extruded aluminium tubes was imposed on tariff value as determined by the Superintendent of Central Excise and subsequent to that date excise duty was charged on the value of such extruded tubes. After April 1, 1970, the Superintendent of Central excise used to include in the assessable value of aluminium extruded tubes the costs and charges of painting, printing and lacquering and also the value of plastic caps and the fitting charges. The petitioners paid the duty from January 1, 1974 to June 17, 1980 on the basis of value determined by adding the costs of painting, printing, lacquering and the value of plastic caps.
2. It is the claim of the petitioners that judgment delivered by a single Judge of this Court in Miscellaneous Petition No. 511 of 1973 on July 24, 1970 in the case of Metal Box India Ltd. v. Union of India & Ors. came to their notice in October 1981. The petitioners also learnt that Appeal No. 129 of 1979 preferred against the judgment before the Division Bench of this Court was summarily dismissed on March 24, 1980. The judgment in the Metal Box held that while assessing the value of extruded tubes it is not permissible for the excise Authorities to include costs of painting, printing and lacquering and the value of plastic caps and fitting charges. The Judgment of this Court clearly holds that the action of the Excise Authorities in including the value of operations and processes carried out after the manufacture of extruded tubes for the purpose of levy of duty under Tariff Item 27(e) of the Excise Act was clearly illegal and the duty recovered on that basis was without jurisdiction.
On February 15, 1982 the petitioners filed refund claim before the Excise Authorities claiming refund of excise duty recovered by the authorities for the period commencing from January 1, 1974 till June 17, 1980. On May 31, 1982 the petitioners were directed by the authorities to file the refund claim in Form Appendix I and the petitioners complied with the demand. But the refund applications were not considered and decided. The petitioners thereupon filed the present petition on July 17, 1982 under Article 226 of the Constitution of the India seeking refund of Rs. 18,30,509/- along with interest on the ground that the excess duty was levied and recovered from the petitioners without authority of law.
3. Shri Hidayatullah, learned counsel appearing on behalf of the petitioners, submitted that in view of the dictum laid down by this Court in the case of Metal Box Company the recovery of excess duty by the Excise authorities was clearly without authority and illegal and the authorities are liable to refund the said amount. Shri Rege, learned counsel appearing on behalf of the Department, did not dispute that excess duty recovered from the petitioners was without authority of law in view of the decision in the case of Metal Box. The principal contention urged by Shri Rege on behalf of the department is that the petitioners are not entitled to claim the refund for the period commencing from Jan. 1, 1974 to June 17, 1980. The learned counsel urged that the petitioners would be entitled at the most to claim refund of excess duty recovered by the Department for the period of three years prior to the date on which the petitioners learnt of mistake of law under which the duty was paid. Shri Rege urged that accepting submission of the petitioners that mistake of law was known to the petitioners in October 1981 the refund can be for the period of three years prior to that date and not for the entire period commencing from January 1, 1974. The submission urged by Shri Rege was seriously controverted by Shri Hidayatullah by pointing out that this Court has repeatedly held that in case duty is recovered by the Department illegally and without authority of law, then it is permissible for the writ court to direct refund of such duty irrespective of the period covered by the refund application. The submission of Shri Hidayatullah is correct and deserves acceptance.
4. It would be appropriate to start with reference to the decision of the Supreme Court reported in 1978 ELT (J 154), D. Cawasji & Co. & Ors. v. State of Mysore and another. D. Cawasji & Co. had filed writ petition before the High Court of Mysore under Article 226 of the Constitution of India for a declaration that the Mysore Elementary Education Act, 1941 and the amendments to it providing for levy and collection of Education cess were beyond the competence of the Legislature and for refund of cess paid during 1951-52 to 1965-66. The High Court had rejected the petition on the ground of delay. The Supreme Court observed in paragraph 8 of the Judgment that as the suit will lie to recover moneys paid under a mistake of law, a writ petition for refund of tax within the period of limitation prescribed, that is within three years of the knowledge of mistake, would also lie. What the Supreme Court says thereafter is crucial and is required to be set out in extenso.
"For filing a writ petition to recover the money paid under a mistake of law, this Court has said that the starting point of limitation is from the date on which the judgment declaring as void the particular law under which the tax was paid was rendered, as that would normally be the date on which the mistake becomes known to the party. If any writ petition is filled beyond three years after that date, it will almost always be proper for the court to consider that it is unreasonable to entertain that petition through, even in cases where it is filed within three years, the court has a discretion, having regard to the facts and circumstances of each case, not to entertain the application.
We are aware that the result of this view would be to enable a person to recover the amount paid as tax even after several years of the date of payment, if some other party would successfully challenge the validity of the law under which the payment was made and if only a suit or writ petition is filed for refund by the person within three years from the date of declaration of the invalidity of the law. That might both be inexpedient and unjust so far as the State is concerned.
A tax is intended for immediate expenditure for the common good and it would be unjust to require its repayment after it has been in whole or in part expended, which would often be the case, if the suit or application could be brought at any time within three years of a court declaring the law under which it was paid to be invalid, be it a hundred years after the date of payment. Nor is there any provision under which the court could deny refund of tax even if the person who paid it has collected it from the customers and has no subsisting liability or intention to refund it to them, or, for any reason, it is impracticable to do so.
In the U.S.A., it is generally held that in the absence of a statute to the contrary, taxes voluntarily paid under a mistake of law with full knowledge of facts cannot be recovered back while taxes paid under a mistake of fact may ordinarily be recovered back (see Corpus Juris Secundum, Vol. 84 p. 637). Although section 72 of the Contract Act has been held to cover cases of payment of money under a mistake of law, as the State stands in a peculiar position in respect of taxes paid to it, there are perhaps practical reasons for the law according a different treatment both in the matter of the heads under which they could be recovered and the period of limitation for the recovery.
The task of writing legislation to protect the interest of the nation is committed to Parliament and the legislatures of the States. We are referring to this aspect only to alert their attention to the present state of law."
Shri Hidayatullah submits, and in my judgment with considerable merit, that the afore quoted observations of Mr. Justice Methew clearly indicate that in case a writ petition is filed within three years from the time of knowledge of mistake of law under which the duty was paid, then the duty which can be refunded need not be restricted to the period of three years prior to the date of filing of the petition of three years prior to the date of knowledge of mistake of law, but can cover even a hundred years. The Supreme Court had invited attention of the Legislature by pointing out the hardship to the State exchequer and the law in existence in United States of America, but the legislature did not think it expedient to make suitable provision.
5. The decision in D. Cawasji & Co.'s was referred to by Division Bench of this Court in 1981 ELT 468 (Maharashtra Vegetable Products Pvt. Ltd. & Anr. v. Union of India and others. In the case before the Division Bench a refund application was made on September 1, 1976 claiming refund of excise duty collected in excess on account of packing costs, freight, marketing and distribution expenses of Vanaspati for the period from April 15, 1970 to November 30, 1974. Before the Division Bench a contention was raised that the claim beyond the period of three years was barred by limitation, but the Division Bench turned it down holding that any recovery which is unauthorised will be recovery without authority of law and the petitioners would be entitled to claim refund of excess amount for the period beyond three years from the date of knowledge of mistake. The Division Bench observed that the writ court would not desist from exercising jurisdiction in favour of the petitioner, when under the Constitution recovery of every single rupee must be an authorised recovery. The Division Bench had obviously in mind provisions of Article 265 of the Constitution. The Division Bench thereupon granted refund for the period commencing from April 15, 1970, though refund application was filed in September 1976 and the writ petition also in the year 1976.
The decision of the Division Bench was referred with approval by another Division Bench of this Court in the case reported in 1981 ELT page 531, Wipro Products Ltd. and another v. Union of India and another. In this case refund was sought for illegally recovered duty between the period October 1, 1975 to March 31, 1979 and the writ petition was filed in the year 1981. On behalf of the Department, a claim of limitation was raised on the basis of Rule 11 of the Central Excise Rules and also on the ground that claim beyond three years prior to the date of filing of the petition is barred by principles of Limitation Act. The Division Bench turned down both the pleas by reference to the decision in the case of Maharashtra Vegetable Products (supra) and Associated Bearing Company Limited v. Union of India & Ors. reported in 1980 E.L.T. page 415. The Division Bench observed on the question of bar of limitation beyond a period of three years prior to the date of filing of the petition that it has been repeatedly held that the claim for refund is not governed by the rules of limitation, if recovery is illegal and without jurisdiction. The Division Bench granted the refund for the entire period as demanded by the tax payer.
There is one more decision of this Court reported in 1983 ELT 2238, Golden Tobacco Co. Ltd. v. Union of India & Anr., where Mr. Justice Madon, as he then was, granted refund for the period commencing from March 1, 1965 and ending with August 31, 1972 on the petition filed on August 11, 1975. The learned Judge rejected the contention about the claim being barred by limitation by referring to the decisions of Division Bench referred to herein above.
6. In view of the dictum laid down by this Court, it is obvious that the contention of Shri Rege that it is not permissible to grant refund for a period beyond three years prior to the date of knowledge of mistake of law cannot be accepted. The recovery made by the department was illegal and without any authority of law. Article 265 of the Constitution prescribes that no tax shall be levied or collected except by authority of law, and in case any tax is levied and collected without any authority of law, then it would not be possible for the department to refuse refund of such amount on the spacious ground that the claim for refund was made belatedly. An authority which recovers the tax without jurisdiction cannot be permitted to retain the amount merely because the tax payer was not aware that the recovery was without jurisdiction. Shri Rege was unable to point out any decision in support of this claim that refund cannot be granted for a period beyond three years prior to the date of knowledge of mistake of law.
7. Shri Rege made a faint submission that the assessments were already completed and it is not permissible now to disturb those assessment orders. The submission overlooks that the recovery was without authority of law, and therefore, whenever the assessment orders might have been passes that would not entitle the department to retain the wrongful gain made. In my judgment, the petitioners are entitled to the refund as claimed.
8. Accordingly, petition succeeds and the respondents are directed to calculate the amount of refund of duty for the period commencing from January 1, 1974 to June 17, 1980 and refund the said amount within a period of three months from to-day. As I am directing the respondents to refund the excess duty paid within a period of three months from to-day I am not giving any direction about payment of interest.
9. In the circumstances of the case, there will be no order as to costs.