Custom, Excise & Service Tax Tribunal
Tamilnadu Water Supply And Drainage ... vs Cst Ch - Ii on 28 July, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. I
Service Tax Appeal No.40347 of 2016
(Arising out of Order-in-Appeal No.449/2015 (STA-II) dated 31.12.2015 passed by
Commissioner of Service Tax(Appeals-II), Chennai)
M/s. Tamil Nadu Water Supply and
Drainage Board .... Appellant
No.31, Kamarajar Salai,
Chepauk,
Chennai-600 005.
VERSUS
Commissioner of GST & Central Excise ... Respondent
Chennai Outer Commissionerate
Newry Towers, No.2054, I Block,
II Avenue, 12th Main Road,
Anna Nagar, Chennai-600 040.
APPEARANCE :
Shri V. Swaminathan, Consultant for the Appellant
Shri M. Selvakumar, Authorized Representative for the Respondent
CORAM :
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
HON'BLE MR. AJAYAN T.V., MEMBER (JUDICIAL)
FINAL ORDER No.40766/2025
DATE OF HEARING : 17.04.2025
DATE OF DECISION :28.07.2025
Per: Shri Ajayan T.V.
M/s. Tamil Nadu Water Supply and Drainage Board (TWAD
Board), the appellant herein, has taken exception to the Order-in-
Appeal No.449/2015 (STA-II) dated 31.12.2015 where by the
Appellate Authority has upheld the Order-in-Original No.2/2015(R)
dated 25.06.2015 of the Adjudicating Authority rejecting the refund
claim of Rs.1,54,65,028/- filed by the appellant for the period from
October 2011 to June 2013.
2. The brief facts are that the appellant, who is engaged in
implementation of water supply and drainage schemes in Tamil Nadu is
a registered Service Tax Assessee. The appellant filed a refund claim
dated 13.06.2014 claiming refund of Rs.1,54,65,028/- on the ground
that they had paid the above Service Tax to the service providers who
rendered consultancy service to them. The appellant was of the view
that vide Entry No. 25 of Notification No.25/2012-ST dated
2
20.06.2012, the service provided in relation to water supply, public
health, sanitation conservancy, solid waste management or slum
improvement is exempt and hence the services that were received by
the Appellant from the service providers, for which they have paid
service tax to these service providers, which in fact ought not to have
been collected, were refundable to them.
3. The department being of the view that the appellant was not entitled
to the said refund claim, issued Show Cause Notice No.31/2014(R)
dated 17-09-2014. Pursuant to the reply filed by the appellant, after
due process of law, the Adjudicating Authority rejected the refund
claim on the grounds that the appellant is not the service provider who
had paid service tax to the Government and the eligible person to
claim the refund would be the service providers. The adjudicating
authority further held that the appellant has not filed any declaration
to the effect that the consultancy firms/service providers will not claim
the Service Tax and in view of this the appellant is not eligible to claim
the refund of Service Tax. It was further held that in terms of clause
12 and clause 25(a) of Notification No.25/2012 (ST) dated
20.06.2012, exemption is available only for the services by way of
water supply, public health, construction and erection etc and no
exemption is available for consultancy services received by the
appellant. It was further held by the Adjudicating Authority that
Department of Revenue vide DOF 334/15/2014-TRU dated 10-07-2014
in para 2.2.2(ii) has mentioned that "Services by way of water supply,
public health, sanitation conservancy, solid waste management or slum
improvement and up-gradation will continue to remain exempted but
the exemption would not be extendable to other services such as
consultancy, designing, etc., not directly connected with these
specified services". That the clause was also amended by Notification
06/2014-ST dated 01-07-2014 and the exemption is not available to
other outsourced services such as architect or consultant. It was thus
held that the appellant are not eligible to claim the refund and that it
was also hit by limitation.
4. Aggrieved by the same, the appellant preferred an appeal before the
Appellate Authority contending that since the service tax was paid
3
under mistake of law, the provisions of Section 17 of the limitation act
is applicable; that they have not been "unjustly enriched" by the
refund claim and that the service providers have filed affidavits stating
that they have received Service Tax from the appellant and confirming
the payment of Service Tax to the Government and they have no
objection in granting refund to the appellant. The Appellate Authority
found that the refund claim was filed on 13.06.2014 and that one of
the grounds for rejection of the refund claim is that it was filed after
expiry of the period of one year from the relevant date, namely, date
of payment of service tax. The appellate authority held that by virtue
of Section 83 of the Finance Act, Section 11B of the Central Excise Act,
1944 is applicable to service tax and admittedly a major portion of the
impugned service tax was paid before 13.06.2013, and thus the refund
claim is time barred. The Appellate Authority further held that Section
17 of the limitation act is not applicable by relying on the decisions of
the Apex Court in Mafatlal Industries vs Union of India 1997 (87)
ELT 247. It was further held that on the aspect of unjust enrichment
since the rejection of the refund claim on time bar aspect and on merit
is not interfered with, the unjust enrichment aspect need not be gone
into, since the same requires examination only when the refund claim
succeeds on merits/time bar. Finding thus, the Appellate Authority
upheld the impugned Order-in-Original in toto and rejected the
appellant's appeal. Aggrieved by the same the appellant has preferred
the appeal and is before this Tribunal.
5. Shri V. Swaminathan, Ld. Consultant appearing on behalf of the
appellant submitted as under:
i) That the appellant is covered under Serial No.25 of Notification
No.25/2012 as it stood before amendment by notification 6/2014
ST dated 11.07.2014. That prior to the amendment, the
notification provided exemption to service provided to government,
a local authority or a governmental authority by way of carrying
out any activity in relation to any function ordinarily entrusted to a
municipality in relation to water supply, public health, sanitation
conservancy, solid waste management or slum improvement and
upgradation; and that proof of the service by the consultants as
4
project management consultants and not for service by way of
construction, is enclosed.
ii) The appellant being the service recipient has borne the burden of
service tax and is entitled for refund and therefore the refund claim
filed is maintainable. Reliance is placed on the decisions in Chambal
Fertilizers & Chemicals Ltd. v. Commissioner of Central Excise,
Jaipur-I (2016) 69 taxmann.com 328 (New Delhi-CESTAT) and Ms.
Jindal Steel & Power Ltd. vs. CC & CE (2015) 64 taxmann.com 383
(New Delhi-CESTAT) Hon'ble Allahabad High Court in the case of
CC, CE & ST vs. Indian Farmar Fertilizers Co-op. Ltd. [2014] 47
GST 4/48 taxmann.com 79.
iii) The service providers have furnished affidavits for collection of
Service Tax from the Board and remitting the tax collected to the
Exchequer and that they will not claim for refund of service tax
remitted submitted to the Assistant Commissioner that the
appellant is attaching an affidavit of the appellant board stating
that the service tax paid are not claimed as input since the
consultancy fees are consumed by the Board and not forming part
of any services rendered by the Board.
iv) Refund claim of amounts that are paid erroneously as service tax
are covered by Section 17(1) (c) of the Limitation Act and not by
Sec 11B of Central Excise Act, 1944. Reliance is placed on
judgements in Way2wealth Brokers VS Commissioner of central
Tax Karnataka High Court CEA No. 20/2018, M/s Sodecia India Ltd.
vs The Commissioner of GST & Central Excise- EXCISE APPEAL
No.41832 of 2016 and EXCISE APPEAL No.41833 of 2016-Cestat
Chennai, .K. Ramani vs Commissioner of GST & Central Excise-
CESTAT Appeal No.40620 of 2023
v) that the tax paid inadvertently will take the character of deposit
placing reliance on Way2wealth Brokers VS Commissioner of
central Tax Karnataka High Court CEA no. 20/2018
vi) that the appellant is entitled to refund with interest, placing
reliance on the decision in Executive Engineer, Transmission
System, Haryana Vidyut Prasaran Nigam Ltd. vs Central Excise
Service Tax Appellate Tribunal, Chandigarh and another-CEA-46-
2018 (O&M)-in the High Court of Punjab and Haryana
5
vii) that the refund claim by the appellant is out of mistake outside the
provisions of the Act or not contemplated by the Act and hence
Section 11B will not apply.
6. Shri M. Selvakumar, Ld. AR appearing for the Respondent reiterated
the findings in the impugned Order-in-Appeal. Ld. A.R argued that the
appellate authority has rightly upheld the lower adjudicating
authority's order rejecting the refund claim of the appellant on both
the grounds of merits as well as limitation. Ld. A.R. cited the
Judgement of the Apex Court in Dilip Kumar case for his contention as
regards strict interpretation of exemption notification.
7. Heard both sides and perused the appeal records and the citation
submitted as relied upon.
8. The principal issues that arise for determination are :
i) Whether the Appellant's claim for refund premised on the
availability of benefit of exemption under Sl.No.25(a) of the
Exemption Notification 25/2012-ST ibid to its service provider is
tenable?
ii) Whether the claim though tenable on merits, is however barred by
limitation under Section 11B of the Central Excise Act, 1944 as
made applicable to Finance Act by virtue of Section 83 of the
Finance Act, 1994?
9. At the outset, the notifications and its amendments, as are necessary
for determination of the issues at hand are reproduced infra.
10. Exemption Notification No.25/2012-ST dated 20-06-2012 which came
into force from 01-07-2012, stipulated that the Central Government,
being satisfied that it is necessary in the public interest so to do,
thereby exempts the taxable services stipulated therein from the
whole of the service tax leviable thereon under section 66B of the said
Act and Sl.No.25 of the said notification ibid stipulated as under: -
"25. Services provided to Government, a local authority or a
governmental authority by way of -
(a) carrying out any activity in relation to any function ordinarily
entrusted to a municipality in relation to water supply, public health,
6
sanitation conservancy, solid waste management or slum
improvement and upgradation; or
(b) repair or maintenance of a vessel or an aircraft;"
11. The Central Government, vide paragraph 1(viii) of the notification
No.6/2014-ST dated 11.07.2014, amended the Notification
No.25/2012-ST dated 20.06.2012 by stipulating as under:
1. In the said notification, in the opening paragraph,-
(viii) in entry 25, for item (a) , the following item shall be
substituted, namely :-
"(a) water supply, public health, sanitation conservancy, solid waste
management or slum improvement and up-gradation; or";
12. Be that as it may, it is seen that the CBEC vide D.O Letter F.
No.334/15/2014-TRU dated 10th July, 2014, on the subject of Union
Budget 2014-15-Changes in Service Tax, has stated interalia as under:
"1.3 The changes being made by amendments in notifications and
rules can be categorized into two broad categories based on when
they would come into effect: (i) changes which will have immediate
effect; and (ii) changes which are proposed to be given effect to only
from 1st October, so as to coincide with the Service Tax Return cycle.
As far as statutory amendments are concerned, they would come into
effect only from the date on which the Bill receives the assent of the
President. Regarding certain amendments proposed for
widening the tax base, they would come into effect on a date
to be notified after the Bill receives the assent of the
President. Entries in the Bill and the notifications may be
carefully read, for this purpose.
1.4 The changes being made are discussed below under three broad
categories:
(i) Measures to widen the tax base; [Para 2]
(ii) Measures for compliance enhancement; [Para 3] and
(iii) Facilitation measures. [Para 4]
2. Measures to widen the tax base :
Broadening the tax base is a fiscal objective justified in itself. Primary
objective of the negative list approach which came into effect from
1st July, 2012 was also to broaden the tax base.
Keeping this in view, the negative list and exemptions have been
reviewed.
2.1 Review of the Negative List of services :
Xxxxxx
2.2 Review of General Exemptions :
7
The following changes are being made as a result of the review of
exemptions.
2.2.1: Exemptions being withdrawn (Notification 25/2012-
S.T.] :
(i) Presently service of passenger transportation by a contract
carriage other than for the purposes of tourism, conducted tour,
charter or hire, is exempt from service tax [Sl. No. 23(b)]. The scope
of exemption is being reduced by withdrawing the exemption in
respect of air-conditioned contract carriages. As a result, any service
provided for transport of passenger by air-conditioned contract
carriage including which are used for point to point travel, will attract
service tax, with immediate effect. Service tax will be charged at an
abated value of 40% of the amount charged from service receiver;
therefore, effective tax will be 4.944%. Services by non-air
conditioned contract carriages for purposes other than tourism,
conducted tour, charter or hire continue to be exempted.
(ii) Exemption to services by way of technical testing or analysis of
newly developed drugs, including vaccines and herbal remedies on
human participants by a clinical research organization approved to
conduct clinical trials by the Drug Controller General of India [Sl. No.
7] is being withdrawn. This would be taxable with immediate effect.
2.2.2 Rationalization of Exemptions :
(i) Education :
Xxxx
(ii) Services ordinarily provided by a Municipality :
For greater clarity, the exemption in respect of services
provided to Government or local authority or governmental
authority [in entry at Sl. No. 25], has been made more
specific. Services by way of water supply, public health,
sanitation conservancy, solid waste management or slum
improvement and up-gradation will continue to remain
exempted but the exemption would not be extendable to other
services such as consultancy, designing, etc., not directly
connected with these specified services.
(iii) Services by a Hotel, Inn or Guest House :"
(emphasis supplied)
13. Thus, the above clarification from CBEC makes it evident that as a
measure to widen the tax base, upon a review of General Exemptions,
in respect of services ordinarily provided by a Municipality, for greater
8
clarity, the exemption in respect of services provided to Government or
local authority or governmental authority [in entry at Sl. No. 25], has
been made more specific. Services by way of water supply, public
health, sanitation conservancy, solid waste management or slum
improvement and up-gradation will continue to remain exempted but
the exemption would not be extendable to other services such as
consultancy, designing, etc., not directly connected with these
specified services. It is also pertinent that the CBEC has stated that
regarding certain amendments proposed for widening the tax base,
they would come into effect on a date to be notified after the Bill
receives the assent of the President and that entries in the Bill and the
notifications may be carefully read, for this purpose. In CCE v Parle
Exports (P) Ltd, 1988 (38) ELT 741 (SC), the Apex Court has held
that it is a well-settled principle of interpretation that courts in
construing a statute or notification will give much weight to the
interpretation put up on it at the time of enactment or issue, by those
who have to construe, execute and apply the said enactments. They
are in the nature of contemporanea expositio, furnishing legitimate aid
the construction to the relevant provisions. It can thus be seen that
there is no express or clear intent emanating from the Notification
No.6/2014-ST dated 11.07.2014, amended the Notification
No.25/2012-ST dated 20.06.2012 so as to substitute the item (a) of
entry Sl.No.25, that it is retrospective in its operation. Moreover, since
it has been stated by CBEC to be with an intent to expand the tax
base, it fortifies our view that the said substitution of item (a) in
Sl.No.25 is only prospective in nature. Further, we note that the refund
claim was in respect of Service Tax paid during the period from July
2012 to September 2013 and has been filed on 13.06.2014, even prior
to the issue of the Notification No.6/2014-ST dated 11.07.2014, which
amended the Notification No.25/2012-ST dated 20.06.2012. Therefore,
we are of the considered view that it is the unamended entry at
Sl.No.25(a) of the notification No.25/2012-ST ibid that would have to
be applied while evaluating the appellant's claim of refund.
14. At this juncture, we address the Judgement relied upon by the Learned
Authorised Representative, namely, the Judgement of the Honourable
Apex Court in Commissioner of Cus. (Import), Mumbai v. Dilip
9
Kumar & Company, 2018 (361) ELT 577 (SC), wherein the
Honourable Supreme Court has held that when an assessee claims tax
exemption under a notification, the burden to prove its entitlement to
the benefit of such exemption notification is on the assessee who is
claiming such exemption. The relevant portions are as under:
"41. After thoroughly examining the various precedents
some of which were cited before us and after giving our
anxious consideration, we would be more than justified
to conclude and also compelled to hold that every
taxing statute including, charging, computation and
exemption clause (at the threshold stage) should be
interpreted strictly. Further, in case of ambiguity in a
charging provisions, the benefit must necessarily go in
favour of subject/assessee, but the same is not true
for an exemption notification wherein the benefit of
ambiguity must be strictly interpreted in favour of the
Revenue/State.
Xxxx
48. The next authority, which needs to be referred is the
case in Mangalore Chemicals (supra). As we have already
made reference to the same earlier, repetition of the same is
not necessary. From the above decisions, the following
position of law would, therefore, clear. Exemptions
from taxation have tendency to increase the burden on
the other unexempted class of taxpayers. A person
claiming exemption, therefore, has to establish that his
case squarely falls within the exemption notification,
and while doing so, a notification should be construed
against the subject in case of ambiguity.
Xxxxx
52. To sum up, we answer the reference holding as under -
(1) Exemption notification should be interpreted
strictly; the burden of proving applicability would be on
the assessee to show that his case comes within the
10
parameters of the exemption clause or exemption
notification.
(2) When there is ambiguity in exemption notification
which is subject to strict interpretation, the benefit of
such ambiguity cannot be claimed by the
subject/assessee and it must be interpreted in favour
of the revenue.
(3) The ratio in Sun Export case (supra) is not correct and all
the decisions which took similar view as in Sun Export case
(supra) stands overruled." (emphasis supplied)
15. We possibly cannot, and in fact do not, have any quarrel with the
aforesaid proposition. However, in the facts of the appellant's case, we
find that the Show Cause Notice No.31/2014(R) dated 17-09-2014
itself acknowledges that the appellant is an implementing agency for
Hogenakkal Water Supply and Flourosis Mitigation Project for
Dharmapuri and Krishnagiri Districts of Tamilnadu appointed by the
Government of Tamilnadu. The notice concedes that the appellant has
appointed consultancy firms for receiving consultancy services and
have paid for such Project Management Consultancy services for the
services received for the period from October 2011 to June 2013, the
payment towards which were made over a period of time upto
September 2013. It is a well settled proposition in law that admitted
facts need not be proved. The decisions of the Apex Court in CCE v.
Gas Authority of India Ltd, 2008(232)ELT 7 (SC), and CCE
Madras v. Systems & Components Pvt Ltd, 2004 (165) ELT 136
(SC) are authorities for the aforesaid proposition. Thus, when the
Department itself has admitted in the show cause notice that that the
appellant is an implementing agency for Hogenakkal Water Supply and
Flourosis Mitigation Project for Dharmapuri and Krishnagiri Districts of
Tamilnadu appointed by the Government of Tamilnadu, and that the
appellant has appointed consultancy firms for receiving consultancy
services and have paid for such Project Management Consultancy
services for the services received for the period from October 2011 to
June 2013, the payment towards which were made over a period of
time upto September 2013, in our considered view, the appellant does
not have to labour on proving the same yet again. The exemption as
11
provided in the unamended clause 25(a) of the Notification
No.25/2012-ST ibid provided exemption to Services provided to
Government, a local authority or a governmental authority by way of
carrying out any activity in relation to any function ordinarily
entrusted to a municipality in relation to water supply, public
health, sanitation conservancy, solid waste management or slum
improvement and upgradation. Hence, given the fact that the
appellant's status as a governmental authority is not in dispute, and in
light of the facts as stated in the show cause notice itself as to the
nature of the activities of the services provided by the service
providers to the appellant, as well as in view of the expansive nature
of the exemption as it existed when the service providers rendered the
service to the appellant as provided in the unamended exemption
clause 25(a) of the notification ibid; which brought within its ambit
"any activity in relation to water supply"; we are satisfied that the
appellant's case comes within the parameters of the unamended
exemption clause 25(a) of the exemption notification No.25/2012-ST
ibid.
16. At this juncture, we may profitably refer to the Judgement of a
Constitution Bench of the Honourable Supreme Court in CIT (Central-
I), New Delhi v Vatika Township Private Limited, 2015 (1) SCC
1, wherein while dealing with an issue of determining the effective
date of proviso appended to Section 113 of the Income Tax Act vide
Finance Act 2002, the Apex Court had delved into the general
principles governing retrospectivity. The Honourable Apex Court, sitting
in a combination of five, have laid down the following principles which
bear reiteration and are hence reproduced below:
"General Principles concerning retrospectivity
30. A legislation, be it a statutory Act or a statutory Rule or a
statutory Notification, may physically consists of words printed on
papers. However, conceptually it is a great deal more than an
ordinary prose. There is a special peculiarity in the mode of verbal
communication by a legislation. A legislation is not just a series of
statements, such as one finds in a work of fiction/non fiction or even
in a judgment of a court of law. There is a technique required to draft
a legislation as well as to understand a legislation. Former technique
is known as legislative drafting and latter one is to be found in the
12
various principles of 'Interpretation of Statutes'. Vis-àvis ordinary
prose, a legislation differs in its provenance, lay-out and features as
also in the implication as to its meaning that arise by presumptions as
to the intent of the maker thereof.
31. Of the various rules guiding how a legislation has to be
interpreted, one established rule is that unless a contrary intention
appears, a legislation is presumed not to be intended to have a
retrospective operation. The idea behind the rule is that a current law
should govern current activities. Law passed today cannot apply to
the events of the past. If we do something today, we do it keeping in
view the law of today and in force and not tomorrow's backward
adjustment of it. Our belief in the nature of the law is founded on the
bed rock that every human being is entitled to arrange his affairs by
relying on the existing law and should not find that his plans have
been retrospectively upset. This principle of law is known as lex
prospicit non respicit : law looks forward not backward. As was
observed in Phillips vs. Eyre (1870) LR 6 QB 1, a retrospective
legislation is contrary to the general principle that legislation by which
the conduct of mankind is to be regulated when introduced for the
first time to deal with future acts ought not to change the character
of past transactions carried on upon the faith of the then existing law.
32. The obvious basis of the principle against retrospectivity is the
principle of 'fairness', which must be the basis of every legal rule as
was observed in the decision reported in L'Office Cherifien des
Phosphates v. Yamashita-Shinnihon Steamship Co.Ltd (1994) 1 AC
486. Thus, legislations which modified accrued rights or which impose
obligations or impose new duties or attach a new disability have to be
treated as prospective unless the legislative intent is clearly to give
the enactment a retrospective effect; unless the legislation is for
purpose of supplying an obvious omission in a former legislation or to
explain a former legislation. We need not note the cornucopia of case
law available on the subject because aforesaid legal position clearly
emerges from the various decisions and this legal position was
conceded by the counsel for the parties. In any case, we shall refer to
few judgments containing this dicta, a little later.
33. We would also like to point out, for the sake of completeness,
that where a benefit is conferred by a legislation, the rule against a
retrospective construction is different. If a legislation confers a
benefit on some persons but without inflicting a corresponding
detriment on some other person or on the public generally, and
13
where to confer such benefit appears to have been the legislators
object, then the presumption would be that such a legislation, giving
it a purposive construction, would warrant it to be given a
retrospective effect. This exactly is the justification to treat
procedural provisions as retrospective. In Government of India & Ors.
v. Indian Tobacco Association (2005) 7 SCC 396, the doctrine of
fairness was held to be relevant factor to construe a statute
conferring a benefit, in the context of it to be given a retrospective
operation. The same doctrine of fairness, to hold that a statute was
retrospective in nature, was applied in the case of Vijay v. State of
Maharashtra & Ors. (2006) 6 SCC 286 It was held that where a law is
enacted for the benefit of community as a whole, even in the absence
of a provision the statute may be held to be retrospective in nature.
However, we are confronted with any such situation here.
34. In such cases, retrospectively is attached to benefit the persons
in contradistinction to the provision imposing some burden or liability
where the presumption attaches towards prospectivity. In the instant
case, the proviso added to Section 113 of the Act is not beneficial to
the assessee. On the contrary, it is a provision which is onerous to
the assessee. Therefore, in a case like this, we have to proceed with
the normal rule of presumption against retrospective operation. Thus,
the rule against retrospective operation is a fundamental rule of law
that no statute shall be construed to have a retrospective operation
unless such a construction appears very clearly in the terms of the
Act, or arises by necessary and distinct implication. Dogmatically
framed, the rule is no more than a presumption, and thus could be
displaced by out weighing factors.
35. Let us sharpen the discussion a little more. We may note that
under certain circumstances, a particular amendment can be treated
as clarificatory or declaratory in nature. Such statutory provisions are
labeled as "declaratory statutes". The circumstances under which a
provision can be termed as "declaratory statutes" is explained by
Justice G.P. Singh Principles of Statutory Interpretation, 13th Edition
2012 published by LexisNexis Butterworths Wadhwa, Nagpur in the
following manner:
"Declaratory statutes
The presumption against retrospective operation is not applicable to
declaratory statutes. As stated in CRAIES and approved by the
Supreme Court : "For modern purposes a declaratory Act may be
defined as an Act to remove doubts existing as to the common law,
14
or the meaning or effect of any statute. Such Acts are usually held to
be retrospective. The usual reason for passing a declaratory Act is to
set aside what Parliament deems to have been a judicial error,
whether in the statement of the common law or in the interpretation
of statutes. Usually, if not invariably, such an Act contains a
preamble, and also the word 'declared' as well as the word 'enacted'.
But the use of the words 'it is declared' is not conclusive that the Act
is declaratory for these words may, at times, be used to introduced
new rules of law and the Act in the latter case will only be amending
the law and will not necessarily be retrospective. In determining,
therefore, the nature of the Act, regard must be had to the substance
rather than to the form. If a new Act is 'to explain' an earlier Act, it
would be without object unless construed retrospective. An
explanatory Act is generally passed to supply an obvious omission or
to clear up doubts as to the meaning of the previous Act. It is well
settled that if a statute is curative or merely declaratory of the
previous law retrospective operation is generally intended. The
language 'shall be deemed always to have meant' is declaratory, and
is in plain terms retrospective. In the absence of clear words
indicating that the amending Act is declaratory, it would not be so
construed when the pre-amended provision was clear and
unambiguous. An amending Act may be purely clarificatory to clear a
meaning of a provision of the principal Act which was already implicit.
A clarificatory amendment of this nature will have retrospective effect
and, therefore, if the principal Act was existing law which the
Constitution came into force, the amending Act also will be part of the
existing law." The above summing up is factually based on the
judgments of this Court as well as English decisions.
A Constitution Bench of this Court in Keshavlal Jethalal Shah v.
Mohanlal Bhagwandas & Anr. (1968) 3 SCR 623, while considering
the nature of amendment to Section 29(2) of the Bombay Rents,
Hotel and Lodging House Rates Control Act as amended by Gujarat
Act 18 of 1965, observed as follows:
"The amending clause does not seek to explain any pre-existing
legislation which was ambiguous or defective. The power of the High
Court to entertain a petition for exercising revisional juris-diction was
before the amendment derived from s. 115, Code of Civil Procedure,
and the legislature has by the amending Act attempted to explain the
meaning of that provision. An explanatory Act is generally passed to
15
supply an obvious omission or to clear up doubts as to the meaning
of the previous Act."
36. It would also be pertinent to mention that assessment creates a
vested right and an assessee cannot be subjected to reassessment
unless a provision to that effect inserted by amendment is either
expressly or by necessary implication retrospective. (See Controller of
Estate Duty Gujarat-I v. M.A. Merchant 1989 Supp (1) SCC 499. We
would also like to reproduce hereunder the following observations
made by this Court in the case of Govinddas v. Income-tax Officer
(1976) 1 SCC 906, while holding Section 171 (6) of the Income- Tax
Act to be prospective and inapplicable for any assessment year prior
to 1st April, 1962, the date on which the Income Tax Act came into
force:
"11. Now it is a well settled rule of interpretation hallowed by time
and sanctified by judicial decisions that, unless the terms of a statute
expressly so provide or necessarily require it, retrospective operation
should not be given to a statute so as to take away or impair an
existing right or create a new obligation or impose a new liability
otherwise than as regards matters of procedure. The general rule as
stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and
reiterated in several decisions of this Court as well as English courts
is that all statutes other than those which are merely declaratory or
which relate only to matters of procedure or of evidence are prima
facie prospectively and retrospective operation should not be given to
a statute so as to affect, alter or destroy an existing right or create a
new liability or obligation unless that effect cannot be avoided without
doing violence to the language of the enactment. If the enactment is
expressed in language which is fairly capable of either interpretation,
it ought to be construed as prospective only."
17. In light of the aforesaid principles as laid down by the Honourable
Apex Court, when we examine the notification No.6/2014-ST dated
11.07.2014, by which the Notification No.25/2012-ST ibid came to be
amended to substitute the clause 25(a), we find that it does not
convey any clear legislative intent to give the amendment brought
about by the said notification, a retrospective effect. By the said
substitution of clause 25(a), it does not confer any benefit and in
contradistinction it widens the tax base by taking away the benefit of
exemption from services that were hitherto excluded. The restriction of
the exemption to the specified services post the substitution, thus
16
imposes fresh burden on services that had till then remained excluded,
thereby attracting the presumption of prospectivity. Given that the
clause 25(a) as it existed was clear and unambiguous, we cannot
consider the substitution to be clarificatory or declaratory either and
therefore, its operation can only be construed to be prospective in
nature. Hence, being fortified in our view by the aforesaid Apex Court
decision, we hold that the findings regarding ineligibility of the
impugned services to exemption provided under the Notification
No.25/2012-ST ibid, as was held by the appellate authority, is
unsustainable and is liable to be set aside. Resultantly, we hold that
the appellant's claim for refund is tenably premised on the availability
of the benefit of the exemption as provided in the unamended clause
25(a) of the Notification 25/2012-ST ibid to its service providers.
However, we hasten to add that the appellant has to cross the hurdle
of limitation and unjust enrichment to secure the benefit of refund as
further elucidated infra.
18. As regards the contention of the appellant as to the non-applicability
of the time limit prescribed under Section 11B, as made applicable to
the Finance Act, 1994 by virtue of Section 83 of the Finance Act ibid,
we find that the Ld. Consultant has relied on the judgement of
Paripoornan J in the case of Mafatlal Industries, in support of the
appellant's contentions on this count. We are afraid that the said
reliance placed is misconceived for our reasons elucidated below.
19. When it comes to the issues pertaining to the claim of refund being
made pertaining to the Central Excise or Customs Enactments, we
need to look no further than advert to the locus classicus, namely, the
Judgement of the 9 Judge Constitution Bench in the case of
Mafatlal Industries Ltd v. Union of India, 1996 INSC 1514:
(1997) 5 SCC 536: 1997 (89) E.L.T. 247 (S.C.), wherein, in the
Judgement of Hon'ble J.S. Verma, S.C.Agrawal, B.P. Jeevan Reddy,
A.S. Anand and B.N. Kripal JJl, delivered by B.P. Jeevan Reddy, J., per
majority, the matter has been thrashed out exhaustively. S.C. Sen, J.
has authored the lone dissenting opinion. The celebrated Judgement also comprises of two other separate, albeit, more or less concurring views, authored by Ahmadi, C.J. and Paripoornan, J. (speaking for 17 Justice Hansaria and himself), that captures the opinion of these three Honourable Judges. These two judgements while substantially concurring with the views of Jeevan Reddy, J., however, differ in few details on the issue of the remedy of refund from that of the views expressed in the Judgement of Jeevan Reddy, J on behalf of the other four Honourable Judges and himself. Presumably inadvertently, there have been decisions rendered premised on the concurring judgements without noticing the majority Judgment. However, being the view taken by only three Judges, they are normally accorded less significance and it is the opinion of Jeevan Reddy, J. which is the unanimous verdict of five Judges, out of the nine Judges, that becomes the effective and binding judgment in this case. The relevant portions of the said majority judgement are reproduced as under:
"17. We must, however, pause here and explain the various situations in which claims for refund may arise. They may arise in more than one situation. One is where a provision of the Act under which tax is levied is struck down as unconstitutional for transgressing the constitutional limitations. This class of cases, we may call, for the sake of convenience, as cases of "unconstitutional levy". In this class of cases, the claim for refund arises outside the provisions of the Act, for this is not a situation contemplated by the Act.
18. Second situation is where the tax is collected by the authorities under the Act by mis-construction or wrong interpretation of the provisions of the Act, Rules and Notifications or by an erroneous determination of the relevant facts, i.e., an erroneous finding of fact. This class of cases may be called, for the sake of convenience, as illegal levy. In this class of cases, the claim for refund arises under the provisions of the Act. In other words, these are situations contemplated by, and provided for by, the Act and the Rules. Xxxxxx
22. There is as yet a third and an equally important category. It is this : a manufacturer (let us call him "X") pays duty either without protest or after registering his protest. It may also be a case where he disputes the levy and fights it out up to first Appellate or second Appellate/Revisional level and gives up the fight, being unsuccessful therein. It may also be a case where he approaches the High Court too, remains unsuccessful and gives up the fight. He pays the duty demanded or it is recovered from him, as the case may be. In other words, so far as `X' in concerned, the levy of duty becomes final and his claim that the duty is not leviable is finally rejected. But it so happens that sometime later - may be one year, five years, ten years, twenty years or even fifty years - the Supreme Court holds, in the case of some other manufacturer that the levy of that kind is not exigible in law. (We must reiterate - we are not speaking of a case where a provision of the Act whereunder the duty is struck down as unconstitutional. We are speaking of a case involving interpretation of the provisions of the Act, Rules and Notification.) The question is whether `X' can claim refund of the duty paid by him on the ground that he has discovered the mistake of law when the Supreme Court has declared the law in the case of another manufacturer and whether he can say that he will be entitled to file a suit or a writ 18 petition for refund of the duty paid by him within three years of such discovery of mistake? Instances of this nature can be multiplied. It may not be a decision of the Supreme Court that lead `X' to discover his mistake; it may be a decision of the High Court. It may also be a case where `X' fights up to first appellate or second appellate stage, gives up the fight, pays the tax and then pleads that he has discovered the mistake of law when the High Court has declared the law."
20 Furthermore, B.P. Jeevan Reddy, J., per majority, after stating that the discussions in the Judgement yields the following propositions, have laid them down in para 99, as under:
(i) Where a refund of tax/duty is claimed on the ground that it has been collected from the petitioner/plaintiff - whether before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991 or thereafter - by mis-
interpreting or mis-applying the provisions of the Central Excises and Salt Act, 1944 read with Central Excise Tariff Act, 1985 or Customs Act, 1962 read with Customs Tariff Act or by mis-interpreting or mis-applying any of the rules, regulations or notifications issued under the said enactments, such a claim has necessarily to be preferred under and in accordance with the provisions of the respective enactment before the authorities specified thereunder and within the period of limitation prescribed therein. No suit is maintainable in that behalf. While the jurisdiction of the High Courts under Article 226 - and of this Court under Article 32 - cannot be circumscribed by the provisions of the said enactments, they will certainly have due regard to the legislative intent evidenced by the provisions of the said Acts and would exercise their jurisdiction consistent with the provisions of the Act. The writ petition will be considered and disposed of in the light of and in accordance with the provisions of Section 11B. This is for the reason that the power under Article 226 has to be exercised to effectuate the rule of law and not for abrogating it.
The said enactments including Section 11B of Central Excises and Salt Act and Section 27 of the Customs Act do constitute "law" within the meaning of Article 265 of the Constitution of India and hence, any tax collected, retained or not refunded in accordance with the said provisions must be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the enactments are self-contained enactments providing for levy, assessment, recovery and refund of duties, imposed thereunder . Section 11B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to. Section 72 of the Contract Act has no application to such a claim of refund and cannot form a basis for maintaining a suit or a writ petition. All refund claims except those mentioned under Proposition (ii) below have to be and must be filed and adjudicated under the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be. It is necessary to emphasize in this behalf that Act provides a complete mechanism for correcting any errors whether of fact or law and that not only an appeal is provided to a Tribunal - which is not a departmental organ - but to this Court, which is a civil court.
19(ii) Where, however, a refund is claimed on the ground that the provision of the Act under which it was levied is or has been held to be unconstitutional, such a claim, being a claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception:
where a person approaches the High Court or Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be re-opened on the basis of a decision on another person's case; this is the ratio of the opinion of Hidayatullah, CJ. in Tilokchand Motichand and we respectfully agree with it.
Such a claim is maintainable both by virtue of the declaration contained in Article 265 of the Constitution of India and also by virtue of Section 72 of the Contract Act. In such cases, period of limitation would naturally be calculated taking into account the principle underlying Clause (c) of sub-section (1) of Section 17 of the Limitation Act, 1963. A refund claim in such a situation cannot be governed by the provisions of the Central Excises and Salt Act or the Customs Act, as the case may be, since the enactments do not contemplate any of their provisions being struck down and a refund claim arising on that account. In other words, a claim of this nature is not contemplated by the said enactments and is outside their purview.
(iii) A claim for refund, whether made under the provisions of the Act as contemplated in Proposition (i) above or in a suit or writ petition in the situations contemplated by Proposition (ii) above, can succeed only if the petitioner/plaintiff alleges and establishes that he has not passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State, i.e., by the people. There is no immorality or impropriety involved in such a proposition.
The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched.
(iv) It is not open to any person to make a refund claim on the basis of a decision of a Court or Tribunal rendered in the case of another person. He cannot also claim that the decision of the Court/Tribunal in another person's case has led him to discover the mistake of law under which he has paid the tax nor can he claim that he is entitled 20 to prefer a writ petition or to institute a suit within three years of such alleged discovery of mistake of law. A person, whether a manufacturer or importer, must fight his own battle and must succeed or fail in such proceedings. Once the assessment of levy has become final in his case, he cannot seek to reopen it nor can he claim refund without re-opening such assessment/order on the ground of a decision in another person's case. Any proposition to the contrary not only results in substantial prejudice to public interest but is offensive to several well established principles of law. It also leads to grave public mischief. Section 72 of the Contract Act, or for that matter Section 17(1)(c) of the Limitation Act, 1963, has no application to such a claim for refund.
(v) Article 265 of the Constitution has to be construed in the light of the goal and the ideals set out in the Preamble to the Constitution and in Articles 38 and 39 thereof. The concept of economic justice demands that in the case of indirect taxes Central Excises duties and Customs duties, the tax collected without the authority of law shall not be refunded to the petitioner-plaintiff unless he alleges and establishes that he has not passed on the burden of duty to a third party and that he has himself borne the burden of the said duty.
(vi) Section 72 of the Contract Act is based upon and incorporates a rule of equity. In such a situation, equitable considerations cannot be ruled out while applying the said provision.
(vii) While examining the claims for refund, the financial chaos which would result in the administration of the State by allowing such claims is not an irrelevant consideration. Where the petitioner-plaintiff has suffered no real loss or prejudice, having passed on the burden of tax or duty to another person, it would be unjust to allow or decree his claim since it is bound to prejudicially affect the public exchequer. In case of large claims, it may well result in financial chaos in the administration of the affairs of the State.
(viii) The decision of this Court in Sales Tax Officer, Benaras v. Kanhaiyalal Mukundlal Saraf [1959 S.C.R. 1350] must be held to have been wrongly decided insofar as it lays down or is understood to have laid down propositions contrary to the propositions enunciated in (i) to (vii) above. It must equally be held that the subsequent decisions of this Court following and applying the said propositions in Kanhaiyalal have also been wrongly decided to the above extent. This declaration - or the law laid down in propositions (i) to (vii) above - shall not however entitle the State to recover the taxes/duties already refunded and in respect whereof no proceedings are pending before any Authority/Tribunal or Court as on this date. All pending matters shall, however, be governed by the law declared herein notwithstanding that the tax or duty has been refunded pending those proceedings, whether under the orders of an Authority, Tribunal or Court or otherwise.
(ix) The amendments made and the provisions inserted by the Central Excises and Customs Law (Amendment) Act, 1991 in the Central Excises and Salt Act and Customs Act are constitutionally valid and are unexceptionable.
(x) By virtue of sub-section (3) to Section 11B of the Central Excises and Salt Act, as amended by the aforesaid Amendment Act, and by virtue of the provisions contained in sub-section (3) of Section 27 of the Customs Act, 1962, as amended by the said Amendment Act, all claims for refund (excepting those which arise as a result of declaration of unconstitutionality of a provision whereunder the levy was created) have to be preferred and adjudicated only under the provisions of the respective enactment. No suit for refund of duty is maintainable in that behalf. So far as the jurisdiction of the 21 High Courts under Article 226 of the Constitution or of this Court under Article 32 - is concerned, it remains unaffected by the provisions of the Act. Even so, the Court would, while exercising the jurisdiction under the said articles, have due regard to the legislative intent manifested by the provisions of the Act. The writ petition would naturally be considered and disposed of in the light of and in accordance with the provisions of Section 11B. This is for the reason that the power under Article 226 has to be exercised to effectuate the regime of law and not for abrogating it. Even while acting in exercise of the said constitutional power, the High Court cannot ignore the law nor can it over-ride it. The power under Article 226 is conceived to serve the ends of law and not to transgress them.
(xi) Section 11B applies to all pending proceedings notwithstanding the fact that the duty may have been refunded to the petitioner/plaintiff pending the proceedings or under the orders of the Court/Tribunal/Authority or otherwise. It must be held that Union of India v. Jain Spinners [1992 (61) E.L.T. 321 (SC) = 1992 (4) S.C.C. 389] and Union of India v. I.T.C. [1993 (67) E.L.T. 3 (SC) = 1993 Suppl. (4) S.C.C. 326] have been correctly decided. It is, of course, obvious that where the refund proceedings have finally terminated - in the sense that the appeal period has also expired - before the commencement of the 1991 (Amendment) Act [September 19, 1991], they cannot be re-opened and/or governed by Section 11B(3) [as amended by the 1991 (Amendment) Act]. This, however, does not mean that the power of the Appellate Authorities to condone delay in appropriate cases is affected in any manner by this clarification made by us.
(xii) Section 11B does provide for the purchaser making the claim for refund provided he is able to establish that he has not passed on the burden to another person. It, therefore, cannot be said that Section 11B is a device to retain the illegally collected taxes by the State. This is equally true of Section 27 of the Customs Act, 1962." (emphasis supplied) 21 In fact, while laying down the aforesaid propositions, the Honourable Apex Court has also stated that these propositions are set out merely for the sake of convenient reference and are not supposed to be exhaustive and in case of any doubt or ambiguity in these propositions, reference must be had to the discussion and propositions in the body of the judgment. Therefore, even if one were to look at the main body of the Judgement, it is seen that the application of Section 11B to the exclusion of Section 72 of the Contract Act has been expressly stated in paragraphs 67 and 68 of the aforesaid decision. In fact, the entire discussion on whether Kanhaiyalal was correctly decided and if not in what respects, makes profitable reading and since it merits reproduction, is therefore reproduced as under:
22"PART - II WAS KANHAIYALAL CORRECTLY DECIDED AND IF NOT, IN WHAT RESPECTS ?
67. The first question that has to be answered herein is whether Kanhaiyalal has been rightly decided insofar as it says (1) that where the taxes are paid under a mistake of law, the person paying it is entitled to recover the same from the State on establishing a mistake and that this consequence flows from Section 72 of the Contract Act; (2) that it is open to an assessee to claim refund of tax paid by him under orders which have become final - or to reopen the orders which have become final in his own case - on the basis of discovery of a mistake of law based upon the decision of a court in the case of another assessee, regardless of the time-lapse involved and regardless of the fact that the relevant enactment does not provide for such refund or reopening; (3) whether equitable considerations have no place in situations where Section 72 of the Contract Act is applicable; and (4) whether the spending away of the taxes collected by the State is not a good defence to a claim for refund of taxes collected contrary to law.
68. Re. : (I) : Hereinbefore, we have referred to the provisions relating to refund obtaining from time to time under the Central Excises and Salt Act. Whether it is Rule 11 (as it stood from time to time) or Section 11B (as it obtained before 1991 or subsequent thereto), they invariably purported to be exhaustive on the question of refund. Rule 11, as in force prior to August 6, 1977, stated that "no duties and charges which have been paid or have been adjusted....shall be refunded unless the claimant makes an application for such refund under his signature and lodges it to the proper officers within three months from the date of such payment or adjustment, as the case may be". Rule 11, as in force between August 6, 1977 and November 17, 1980 contained sub-rule (4) which expressly declared: "(4) Save as otherwise provided by or under this rule, no claim of refund of any duty shall be entertained". Section 11B, as in force prior to April, 1991 contained sub-section (4) in identical words. It said : "(4) Save as otherwise provided by or under this Act, no claim for refund of any duty of excise shall be entertained". Sub-section (5) was more specific and emphatic. It said :
"Notwithstanding anything contained in any other law, the provisions of this section shall also apply to a claim for refund of any amount collected as duty of excise made on the ground that the goods in respect of which such amount was collected were not excisable or were entitled to exemption from duty and no court shall have any jurisdiction in respect of such claim." It started with a non-obstante clause; it took in every kind of refund and every claim for refund and it expressly barred the jurisdiction of courts in respect of such claim. Sub- section (3) of Section 11B, as it now stands, is to the same effect - indeed, more comprehensive and all-encompassing. It says, "(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provision of this Act or the rules made thereunder or in any law for the time being in force, no refund shall be made except as provided in sub- section".
The language could not have been more specific and emphatic. The exclusivity of the provision relating to refund is not only express and unambiguous but is in addition to the general bar 23 arising from the fact that the Act creates new rights and liabilities and also provides forums and procedures for ascertaining and adjudicating those rights and liabilities and all other incidental and ancillary matters, as will be pointed out presently. This is a bar upon a bar - an aspect emphasised in Para 14, and has to be respected so long as it stands. The validity of these provisions has never been seriously doubted. Even though in certain writ petitions now before us, validity of the 1991 (Amendment) Act including the amended Section 11B is questioned, no specific reasons have been assigned why a provision of the nature of sub-section (3) of Section 11B (amended) is unconstitutional. Applying the propositions enunciated by a seven-Judge Bench of this Court in Kamala Mills, it must be held that Section 11B [both before and after amendment] is valid and constitutional. In Kamala Mills, this Court upheld the constitutional validity of Section 20 of the Bombay Sales Tax Act (set out hereinbefore) on the ground that the Bombay Act contained adequate provisions for refund, for appeal, revision, rectification of mistake and for condonation of delay in filing appeal/revision. The Court pointed out that had the Bombay Act not provided these remedies and yet barred the resort to civil court, the constitutionality of Section 20 may have been in serious doubt, but since it does provide such remedies, its validity was beyond challenge. To repeat - and it is necessary to do so - so long as Section 11B is constitutionally valid, it has to be followed and given effect to. We can see no reason on which the constitutionality of the said provision - or a similar provision - can be doubted. It must also be remembered that Central Excises and Salt Act is a special enactment creating new and special obligations and rights, which at the same time prescribes the procedure for levy, assessment, collection, refund and all other incidental and ancillary provisions. As pointed out in the Statement of Objects and Reasons appended to the Bill which became the Act, the Act along with the Rules was intended to "form a complete central excise code". The idea was "to consolidate in a single enactment all the laws relating to central duties of excise". The Act is a self- contained enactment. It contains provisions for collecting the taxes which are due according to law but have not been collected and also for refunding the taxes which have been collected contrary to law, viz., Sections 11A and 11B and its allied provisions. Both provisions contain a uniform rule of limitation, viz., six months, with an exception in each case. Sections 11 and 11B are complimentary to each other. To such a situation, Proposition No. 3 enunciated in Kamala Mills becomes applicable, viz., where a statute creates a special right or a liability and also provides the procedure for the determination of the right or liability by the Tribunals constituted in that behalf and provides further that all questions about the said right and liability shall be determined by the Tribunals so constituted, the resort to civil court is not available - except to the limited extent pointed out therein. Central Excise Act specifically provides for refund. It expressly declares that no refund shall be made except in accordance therewith. The Jurisdiction of a civil court is expressly barred - vide sub-section (5) of Section 11B, prior to its amendment in 1991, and sub-section (3) of Section 11B, as amended in 1991. It is relevant to notice that the Act provides for more than one appeal against the orders made under Section 24 11B/Rule 11. Since 1981, an appeal is provided to this Court also from the orders of the Tribunal. While Tribunal is not a departmental organ, this court is a civil court. In this view of the matter and the express and additional bar and exclusivity contained in Rule 11/Section 11B, at all points of time, it must be held that any and every ground including the violation of the principles of natural justice and infraction of fundamental principles of judicial procedure can be urged in these appeals, obviating the necessity of a suit or a writ petition in matters relating to refund. Once the constitutionality of the provisions of the Act including the provisions relating to refund is beyond question, they constitute "law" within the meaning of Article 265 of the Constitution. lt follows that any action taken under and in accordance with the said provisions would be an action taken under the "authority of law", within the meaning of Article 265.
In the face of the express provision which expressly declares that no claim for refund of any duty shall be entertained except in accordance with the said provision, it is not permissible to resort to Section 72 of the Contract Act to do precisely that which is expressly prohibited by the said provisions. In other words, it is not permissible to claim refund by invoking Section 72 as a separate and independent remedy when such a course is expressly barred by the provisions in the Act, viz., Rule 11 and Section 11B. For this reason, a suit for refund would also not lie. Taking any other view would amount to nullifying the provisions in Rule 11/Section 11B, which, it needs no emphasis, cannot be done. It, therefore, follows that any and every claim for refund of excise duty can be made only under and in accordance with Rule 11 or Section 11B, as the case may be, in the forums provided by the Act. No suit can be filed for refund of duty invoking Section 72 of the Contract Act. So far as the jurisdiction of the High Court under Article 226 - or for that matter, the jurisdiction of this court under Article 32 - is concerned, it is obvious that the provisions of the Act cannot bar and curtail these remedies. It is, however, equally obvious that while exercising the power under Article 226/Article 32, the Court would certainly take note of the legislative intent manifested in the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the enactment. (emphasis supplied)
69. There is, however, one exception to the above proposition, i.e., where a provision of the Act whereunder the duty has been levied is found to be unconstitutional for violation of any of the constitutional limitations. This is a situation not contemplated by the Act. The Act does not contemplate any of its provisions being declared unconstitutional and therefore it does not provide for its consequences. Rule 11/Section 11B are premised upon the supposition that the provisions of the Act are good and valid. But where any provision under which duty is levied is found to be unconstitutional, Article 265 steps in. In other words, the person who paid the tax is entitled to claim refund and such a claim cannot be governed by the provisions in Rule 11/Section 11B. The very collection and/or retention of tax without the authority of law entitles the person, from whom it is collected, to claim its refund. A corresponding obligation upon the State to refund it can also be said to flow from it. This can be called the right to refund arising under and by virtue of the Constitutional provisions, viz., Article 265. But, it does not follow from this that refund follows automatically. Article 25 265 cannot be read in isolation. It must be read in the light of the concepts of economic and social justice envisaged in the Preamble and the guiding principles of State Policy adumbrated in Articles 38 and 39 - an aspect dealt with at some length at a later stage. The very concept of economic justice means and demands that unless the claimant (for refund) establishes that he has not passed on the burden of the duty/tax to others, he has no just claim for refund. It would be a parody of economic justice to refund the duty to a claimant who has already collected the said amount from his buyers. The refund should really be made to the persons who have actually borne its burden - that would be economic justice. Conferring an unwarranted and unmerited monetary benefit upon an individual is the very anti-thesis of the concept of economic justice and the principles underlying Articles 38 and 39. Now, the right to refund arising as a result of declaration of unconstitutionality of a provision of the enactment can also be looked at as a statutory right of restitution. It can be said in such a case that the tax paid has been paid under a mistake of law which mistake of law was discovered by the manufacturer/assessee on the declaration of invalidity of the provision by the court. Section 72 of the Contract Act may be attracted to such a case and a claim for refund of tax on this score can be maintained with reference to Section 72. This too, however, does not mean that the taxes paid under an unconstitutional provision of law are automatically refundable under Section 72. Section 72 contains a rule of equity and once it is a rule of equity, it necessarily follows that equitable considerations are relevant in applying the said rule - an aspect which we shall deal with a little later. Thus, whether the right to refund of taxes paid under an unconstitutional provision of law is treated as a constitutional right flowing from Article 265 or as a statutory right/equitable right affirmed by Section 72 of the Contract Act, the result is the same - there is no automatic or unconditional right to refund.
70. Re : (II) : We may now consider a situation where a manufacturer pays a duty unquestioningly - or he questions the levy but fails before the original authority and keeps quiet. It may also be a case where he files an appeal, the appeal goes against him and he keeps quiet. It may also be a case where he files a second appeal/revision, fails and then keeps quiet. The orders in any of the situations have become final against him. Then what happens is that after an year, five years, ten years, twenty years or even much later, a decision is rendered by a High Court or the Supreme Court in the case of another person holding that duty was not payable or was payable at a lesser rate in such a case. (We must reiterate and emphasise that while dealing with this situation we are keeping out the situation where the provision under which the duty is levied is declared unconstitutional by a court; that is a separate category and the discussion in this paragraph does not include that situation. In other words, we are dealing with a case where the duty was paid on account of mis-construction, mis-application or wrong interpretation of a provision of law, rule, notification or regulation, as the case may be.) Is it open to the manufacturer to say that the decision of a High Court or the Supreme Court, as the ease may be, in the case of another person has made him aware of the mistake of law and, therefore, he is entitled to refund of the duty paid by him? Can he invoke Section 72 of the Contract Act in such a case and claim refund and whether in such a case, it can be held that reading Section 72 of the Contract Act along with Section 17(1)(c) of the Limitation Act, 1963, the period of limitation for making such a claim for refund, whether by way of a suit or by way of a writ petition, is three years from the date of discovery of such mistake of law? Kanhaiyalal is 26 understood as saying that such a course is permissible. Later decisions commencing from Bhailal Bhai have held that the period of limitation in such cases is three years from the date of discovery of the mistake of law. With the greatest respect to the learned Judges who said so, we find ourselves unable to agree with the said proposition. Acceptance of the said proposition would do violence to several well-accepted concepts of law. One of the important principles of law, based upon public policy, is the sanctity attaching to the finality of any proceeding, be it a suit or any other proceeding. Where a duty has been collected under a particular order which has become final, the refund of that duty cannot be claimed unless the order (whether it is an order of assessment, adjudication or any other order under which the duty is paid) is set aside according to law.
So long as that order stands, the duty cannot be recovered back nor can any claim for its refund be entertained. But what is happening now is that the duty which has been paid under a proceeding which has become final long ago - may be an year back, ten years back or even twenty or more years back - is sought to be recovered on the ground of alleged discovery of mistake of law on the basis of a decision of a High Court or the Supreme Court. It is necessary to point out in this behalf that for filing an appeal or for adopting a remedy provided by the Act, the limitation generally prescribed is about three months (little more or less does not matter). But according to the present practice, writs and suits are being filed after lapse of a long number of years and the rule of limitation applicable in that behalf is said to be three years from the date of discovery of mistake of law : The incongruity of the situation needs no emphasis. And all this because another manufacturer or assessee has obtained a decision favourable to him. What has indeed been happening all these years is that just because one or a few of the assessees succeed in having their interpretation or contention accepted by a High Court or the Supreme Court, all the manufacturers/Assessees all over the country are filing refund claims within three years of such decision, irrespective of the fact that they may have paid the duty, say thirty years back, under similar provisions - and their claims are being allowed by courts. All this is said to be flowing from Article 265 which basis, as we have explained hereinbefore, is totally unsustainable for the reason that the Central Excise Act and the Rules made thereunder including Section 11B/Rule 11 too constitute "law" within the meaning of Article 265 and that in the face of the said provisions - which are exclusive in their nature - no claim for refund is maintainable except under and in accordance therewith. The second basic concept of law which is violated by permitting the above situation is the sanctity of the provisions of the Central Excises and Salt Act itself. The Act provides for levy, assessment, recovery, refund, appeals and all incidental/ancillary matters. Rule 11 and Section 11B, in particular, provide for refund of taxes which have been collected contrary to law, i.e., on account of a mis- interpretation or mis-construction of a provision of law, rule, notification or regulation. The Act provides for both the situations represented by Sections 11A and 11B. As held by a seven - Judge Bench in Kamala Mills, following the principles enunciated in Firm & Illuri Subbaiya Chetty, the words "any assessment made under this Act" are wide enough to cover all assessments made by the appropriate authorities under the Act whether the assessments are correct or not and that the words "an assessment made" cannot mean an assessment 27 properly and correctly made. It was also pointed out in the said decision that the provisions of the Bombay Sales Tax Act clearly indicate that all questions pertaining to the liability of the dealer to pay assessment in respect of their transactions are expressly left to be decided by the appropriate authorities under the Act as matters falling within their jurisdiction. Whether or not a return is correct and whether a transaction is exigible to tax or not are all matters to be determined by the authorities under the Act. The argument that the finding of the authority that a particular transaction is taxable under the Act is a finding on a collateral fact and, therefore, resort to civil court is open, was expressly rejected and it was affirmed that the whole activity of assessment beginning with the filing of the return and ending with the order of assessment falls within the jurisdiction of the authorities under the Act and no part of it can be said to constitute a collateral activity not specifically or expressly included in the jurisdiction of the authorities under the Act. It was clarified that even if the authority under the Act holds erroneously, while exercising its jurisdiction and powers under the Act that a transaction is taxable, it cannot be said that the decision of the authority is without jurisdiction. We respectfully agree with the above propositions and hold that the said principles apply with equal force in the case of both the Central Excises and Salt Act and the Customs Act. Once this is so, it is un-understandable how an assessment/adjudication made under the Act levying or affirming the duty can be ignored because some years later another view of law is taken by another court in another person's case. Nor is there any provision in the Act for re- opening the concluded proceedings on the aforesaid basis. We must reiterate that the provisions of the Central Excise Act also constitute "law" within the meaning of Article 265 and any collection or retention of tax in accordance or pursuant to the said provisions is collection or retention under "the authority of law" within the meaning of the said article.
In short, no claim for refund is permissible except under and in accordance with Rule 11 and Section 11B. An order or decree of a court does not become ineffective or unenforceable simply because at a later point of time, a different view of law is taken. If this theory is applied universally, it will lead to unimaginable chaos. It is, however, suggested that this result follows only in tax matters because of Article 265. The explanation offered is untenable as demonstrated hereinbefore. As a matter of fact, the situation today is chaotic because of the principles supposedly emerging from Kanhaiyalal and other decisions following it. Every decision of this Court and of the High Courts on a question of law in favour of the assessee is giving rise to a wave of refund claims all over the country in respect of matters which have become final and are closed long number of years ago. We are not shown that such a thing is happening anywhere else in the world. Article 265 surely could not have been meant to provide for this. We are, therefore, of the clear and considered opinion that the theory of mistake of law and the consequent period of limitation of three years from the date of discovery of such mistake of law cannot be invoked by an assessee taking advantage of the decision in another assessee's case. All claims for refund ought to be, and ought to have been, filed only under and in accordance with Rule 11/Section 11B and under no other provision and in no other forum. An assessee must succeed or fail in his own proceedings and the finality of the proceedings in his own case cannot be ignored and refund ordered in his favour just because in another assessee's case, 28 a similar point is decided in favour of the manufacturer/assessee. (See the pertinent observations of Hidayatullah, CJ. in Tilokchand Motichand extracted in Para 37). The decisions of this Court saying to the contrary must be held to have been decided wrongly and are accordingly overruled herewith. (emphasis supplied)
71. Re. : (III) : For the purpose of this discussion, we take the situation arising from the declaration of invalidity of a provision of the Act under which duty has been paid or collected, as the basis, inasmuch as that is the only situation surviving in view of our holding on (I) and (II). In such cases, the claim for refund is maintainable by virtue of the declaration contained in Article 265 as also under Section 72 of the Contract Act as explained hereinbefore, subject to one exception: where a person approaches the High Court or Supreme Court challenging the constitutional validity of a provision but fails, he cannot take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be re-opened on the basis of a decision on another person's case; this is the ratio of the opinion of Hidayatullah, CJ. in Tilokchand Motichand and we respectfully agree with it. In such cases, the plaintiff may also invoke Section 17(1)(c) of the Limitation Act for the purpose of determining the period of limitation for filing a suit. It may also be permissible to adopt a similar rule of limitation in the case of writ petitions seeking refund in such cases. But whether the right to refund or restitution, as it is called, is treated as a constitutional right flowing from Article 265 or a statutory right arising from Section 72 of the Contract Act, it is neither automatic nor unconditional. The position arising under Article 265 is dealt with later in Paras 75 to 77. Here we shall deal with the position under Section
72. Section 72 is a rule of equity. This is not disputed by Sri F.S. Nariman or any of the other counsel appearing for the appellants- petitioners. Once it is a rule of equity, it is un-understandable how can it be said that equitable considerations have no place where a claim is made under the said provision. What those equitable considerations should be is not a matter of law. That depends upon the facts of each case. But to say that equitable considerations have no place where a claim is founded upon Section 72 is, in our respectful opinion, a contradiction in terms. Indeed, in Kanhaiyalal, the Court accepts that the right to recover the taxes - or the obligation of the State to refund such taxes - under Section 72 of the Contract Act is subject to "questions of estoppel, waiver, limitation or the like", but at the same time, the decision holds that equitable considerations cannot be imported because of the clear and unambiguous language of Section 72. With great respect, we think that a certain amount of inconsistency is involved in the aforesaid two propositions. "Estoppel, waiver....or the like", though rules of evidence, are yet based upon rules of equity and good conscience. So is Section 72. We are, therefore, of the opinion that equitable considerations cannot be held to be irrelevant where a claim for refund is made under Section 72. Now, one of the equitable considerations may be the fact that the person claiming the refund has passed on the burden of duty to another. In other words, the person claiming the refund has not really suffered any prejudice or loss. If so, there is no question of reimbursing him. He cannot be recompensated for what he has not lost. The loser, if any, is the person who has really borne the burden of duty; the manufacturer who is the claimant has certainly net borne the duty notwithstanding the fact that it is he who has paid the duty.
29Where such a claim is made, it would be wholly permissible for the court to call upon the petitioner/plaintiff to establish that he has not passed on the burden of duty to a third party and to deny the relief of refund if he is not able to establish the same, as has been done by this Court in I.T C. In this connection, it is necessary to remember that whether the burden of the duty has been passed on to a third party is a matter within the exclusive knowledge of the manufacturer. He has the relevant evidence - best evidence - in his possession. Nobody else can be reasonably called upon to prove that fact. Since the manufacturer is claiming the refund and also because the fact of passing on the burden of duty is within his special and exclusive knowledge, it is for him to allege and establish that he has not passed on the duty to a third party. This is the requirement which flows from the fact that Section 72 is an equitable provision and that it incorporates a rule of equity. This requirement flows not only because Section 72 incorporates a rule of equity but also because both the Central Excise duties and the Customs duties are indirect taxes which are supposed to be and are permitted to be passed on to the buyer. That these duties are indirect taxes, meant to be passed on, is statutorily recognised by Section 64A of the Sale of Goods Act, 1930 [which was introduced by Indian Sale of Goods (Amendment) Act, 1940 and substituted later by Act 33 of 1963]. As originally introduced, Section 64A read :
"64A. In the event of any duty of customs or excise on any goods being imposed, increased, decreased or remitted after the making of any contract for the sale of such goods without stipulation as to the payment of duty where duty was not chargeable at the time of the making of the contract, or for the sale of such goods duty-paid where duty was chargeable at that time -
(a) if such imposition or increase so takes effect that the duty or increased duty, as the case may be, or any part thereof, is paid, the seller may add so much to the contract price as will be equivalent to the amount paid in respect of such duty or increase of duty, and he shall be entitled to be paid and to sue for and recover such addition; and
(b) if such decrease or remission so takes effect that the decreased duty only or no duty, as the case may be, is paid, the buyer may deduct so much from the contract price as will be equivalent to the decrease of duty or remitted duty, and he shall not be liable to pay, or be sued for or in respect of, such deduction."
72. As substituted in 1963, and as it stands today, Section 64A reads thus :
"64A. In contracts of sale, amount of increased or decreased taxes to be added or deducted. -- (1) Unless different intention appears from the terms of the contract in the event of any tax of the nature described in sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such goods tax paid where tax was chargeable at that time, --
(a) if such imposition or increase so takes effect that the decreased tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and sue for and recover such addition, and
(b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract price as will be 30 equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction. (2) The provisions of sub-section (1) apply to the following taxes, namely :
(a) any duty of customs or excise on goods;
(b) any tax on the sale or purchase of goods."
73. Sub-section (2), it may be noted, expressly makes the said provision applicable to duty of customs and duties of excise on goods. This fact was also recognised by the Federal Court in The Province of Madras v. M/s. Boddu Paidanna & Sons [1942 F.C.R. 90] and by this Court in R.C. Jall v. Union of India [1962 Suppl. S.C.R. 436]. In such a situation, it would be legitimate for the court to presume, until the contrary is established, that a duty of excise or a customs duty has been passed on. It is a presumption of fact which a court is entitled to draw under Section 114 of the Indian Evidence Act. It is undoubtedly a rebuttable presumption but the burden of rebutting it lies upon the person who claims the refund (plaintiff/petitioner) and it is for him to allege and establish that as a fact he has not passed on the duty and, therefore, equity demands that his claim for refund be allowed. This is the position de hors 1991 (Amendment) Act - and as we shall point out later, the said Amendment Act has done no more than to give statutory recognition to the above concepts. This is the position whether the refund is claimed by way of a suit or by way of a writ petition. It needs to be stated and stated in clear terms that the claim for refund by a person who has passed on the burden of tax to another has nothing to commend itself; not law, not equity and certainly not a shred of justice or morality. In the case of a writ petition under Article 226, it may be noted, there is an additional factor : the power under Article 226 is a discretionary one and will be exercised only in furtherance of interests of justice. This factor too obliges the High Court to enquire and find out whether the petitioner has in fact suffered any loss or prejudice or whether he has passed on the burden. In the latter event, the court will be perfectly justified in refusing to grant relief. The power cannot be exercised to unjustly enrich a person.
74. Re : (IV) : We are also of the respectful opinion that Kanhaiyalal is not right in saying that the defence of spending away the amount of tax collected under an unconstitutional law is not a good defence to a claim for refund. We think it is, subject to this rider : where the petitioner-plaintiff alleges and establishes that he has not passed on the burden of the duty to others, his claim for refund may not be refused. In other words, if he is not able to allege and establish that he has not passed on the burden to others, his claim for refund will be rejected whether such a claim is made in a suit or a writ petition. It is a case of balancing public interest vis-a-vis private interest. Where the petitioner-plaintiff has not himself suffered any loss or prejudice (having passed on the burden of the duty to others), there is no justice or equity in refunding the tax (collected without the authority of law) to him merely because he paid it to the State. It would be a windfall to him. As against it, by refusing refund, the monies would continue to be with the State and available for public purposes. The money really belongs to a third party - neither to the petitioner/plaintiff nor to the State - and to such third party it must go. But where it cannot be so done, it is better that it is retained by the State. By any standard of reasonableness, it is difficult to prefer the petitioner-plaintiff over the State. Taxes are necessary for running the State and for various public purposes and this is the view taken in all jurisdictions. It has also been emphasised by this Court In D. Cawasji wherein Mathew, J. not only pointed out the irrational and unjust consequences flowing from the holding in Bhailal Bhai and 31 Aluminium Industries but also pointed out the adverse impact on public interest resulting from the holding that expending the taxes collected by the State is not a valid defence. (see Paras 39 and 40). This would not be a case of unjust enrichment of the State, as suggested by the petitioners-appellants. The very idea of "unjust enrichment" is inappropriate in the case of the State, which is in position of parens patrea, as held in Charan Lal Sahu v. Union of India [1990 (1) S.C.C. 613 at 649]. And even if such a concept is tenable, even then, it should be noticed that the State is not being enriched at the expense of the petitioner-plaintiff but at someone else's expense who is not the petitioner-plaintiff. As rightly explained by Saikia, J. in Mahabir Kishore & Ors. v. State of Madhya Pradesh [1989 (43) E.L.T. 205 (SC) = 1989 (3) S.C.R. 596], "the principle of unjust enrichment requires - first that the defendant has been `enriched' by the receipt of a `benefit'; secondly, that this enrichment is `at the expense of the plaintiff'; and thirdly, that the retention of the enrichment be just. This justifies restitution." We agree with the holding in Air Canada (quoting Professor George C. Palmer) that in such a case, "it seems preferable to leave the enrichment with the tax authority instead of putting the judicial machinery in motion for the propose of shifting the same enrichment to the tax-payer". The Canadian Supreme Court has further emphasised - and, in our opinion, rightly - the "fiscal chaos that would result if the general rule favoured recovery, particularly where the long standing taxation measure is involved". In this connection, the majority decision refers to what happened in United States. In United States v. Butler [(1936) 80 L. Ed. 477] the Agricultural Adjustment Act was held unconstitutional, the result of which was refund of almost one billion dollars collected under the said statute. In such a situation, it is pointed out, the Congress passed an Act which provided that no refunds shall be allowed unless the claimant establishes that he himself bore the burden of tax. Similar provision was also made in another enactment, viz., Section 424 of the Revenue Act, 1928, the validity of which has been upheld by the United States Supreme Court in Jefferson (supra).
75. In this connection, Sri K. Parasaran has rightly emphasised the distinction between the constitutional values obtaining in countries like United States of America, Canada and Australia - or for that matter, United Kingdom - and the values obtaining under our Constitution. Unlike the economically neutral - if not pro-capitalist - Constitutions governing those countries, the Indian Constitution has set before itself the goal of "Justice, Social, Economic and Political" - a total re-structuring of our society - the goal being what is set out in Part IV of the Constitution and, in particular, in Articles 38 and 39. Indeed, the aforesaid words in the preamble constitute the motto of our Constitution, if we can call it one. Article 38 enjoins upon the State to "strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political shall inform all the institutions of the national life". Article 39 lays down the principles of policy to be followed by the State. It says that the State shall, in particular, direct its policy towards securing "(b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good; and (c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment". Refunding the duty paid by a manufacturer/assessee in situations where he himself has not suffered any loss or prejudice (i.e., where he has passed on the burden to others) is no economic justice; it is the very negation of economic justice. By doing so, the State would be conferring an 32 unearned and unjustifiable windfall upon the manufacturing community thereby contributing to concentration of wealth in a small class of persons which may not be consistent with the common good. The preamble and the aforesaid articles do demand that where a duty cannot be refunded to the real persons who have bore the burden, for one or the other reason, it is but appropriate that the said amounts are retained by the State for being used for public good (See Amar Nath Om Prakash). Indeed, even in an economically neutral Constitution, like that of United States of America, such a course has been adapted by the State and upheld by the Courts. It would be rather curious - nay, ridiculous - if such a course were held to be bad under our Constitution which speaks of economic and distributive justice, opposes concentration of wealth in a few hands and when the Forty-Second (Amendment) Act describes our Republic as a Socialist Republic.
76. It is true that some of the concepts now affirmed by us, e.g., effect of passing on and the relevance of our Constitutional values in the matter of judging the legitimacy of a claim for refund were not presented to the Bench which decided Kanhaiyalal but that can be no ground for not entertaining or accepting those concepts. As observed by Thomas Jefferson, as far back as 1816, "laws and institutions must go hand-in-hand with the progress of the human mind.... as new discoveries are made, new truths are discovered and manners and opinions change with the change of circumstances, institutions must advance also and keep pace with the time......". The very same thought was expressed by Krishna Iyer, J. in State of Karnataka v. Ranganath Reddy [1978 (1) S.C.R. 641] with particular reference to our Constitutional philosophy and values :
"Constitutional problems cannot be studied in a socio-economic vacuum, since socio-cultural changes are the source of the new values, and sloughing off old legal thought is part of the process of the new equity-loaded legality.... It is right that the rule of law enshrined in our Constitution must and does reckon with the roaring current of change which shifts our social values and shrivels of feudal roots, invades our lives and fashions our destiny."
The learned Judge quoted Granville Austin, saying :
"The Judiciary was to be the arm of the social revolution upholding the quality that Indians had longed for in colonial days.... the courts were also idealised because, as guardians of the Constitution, they would be the expression of a new law created by Indians for Indians,"
77. That "the material resources of the community" are not confined to public resources but include all resources, natural and man-made, public and private owned" is repeatedly affirmed by this Court. [See Ranganatha Reddy, Sanjeev Coke Manufacturing Co. v. Bharat Coking Coal [1983 (1) S.C.R. 1000] and State of Tamil Nadu etc. etc. v. L. Abu Kavur Bai & Ors. etc. [1984 (1) S.C.R. 725]. We are of the considered opinion that Sri Parasaran is right in saying that the philosophy and the core values of our Constitution must be kept in mind while understanding and applying the provisions of Article 265 of the Constitution of India and Section 72 of the Contract Act (containing as it does an equitable principle) - for that matter, in construing any other provision of the Constitution and the laws. Accordingly, we hold that even looked at from the constitutional angle, the right to refund of tax paid under an unconstitutional provision of law is not an absolute or an unconditional right. Similar is the position even if Article 265 can be invoked - we have held, it cannot be - for claiming refund of taxes collected by misinterpretation or misapplication of a provision of law, rules, notifications or regulation." (emphasis supplied) 33 22 To our mind, with the deliberations in the aforesaid paragraphs being the guiding factors, the answers to the four questions posed by the Apex Court in paragraph 67, as given by the Honourable Supreme Court in the subsequent paragraphs, can be distilled as under:
1) In answer to the first question, whether where the taxes are paid under a mistake of law, the person paying it is entitled to recover the same from the State on establishing a mistake and that this consequence flows from Section 72 of the Contract Act, the Hon'ble Apex Court has emphatically answered that the Act is a self-contained enactment. It contains provisions for collecting the taxes which are due according to law but have not been collected and also for refunding the taxes which have been collected contrary to law, and it, therefore, follows that any and every claim for refund of excise duty can be made only under and in accordance with Rule 11 or Section 11B, as the case may be, in the forums provided by the Act. No suit can be filed for refund of duty invoking Section 72 of the Contract Act. It was also held that while exercising the power under Article 226/Article 32, the Court would certainly take note of the legislative intent manifested in the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the enactment. The Apex Court has also gone ahead to state that one exception to the above proposition is where a provision of the Act whereunder the duty has been levied is found to be unconstitutional for violation of any of the constitutional limitations. But where any provision under which duty is levied is found to be unconstitutional, the person who paid the tax is entitled to claim refund and such a claim cannot be governed by the provisions in Rule 11/Section 11B. It is in this context of the duty levied being found to be unconstitutional that it is stated that the very collection and/or retention of tax without the authority of law entitles the person, from whom it is collected, to claim its refund.
The Apex Court then goes on to hold that the right to refund arising as a result of declaration of unconstitutionality of a provision of the enactment can also be looked at as a statutory right of restitution. It can be said in such a case that the tax paid has been paid under a 34 mistake of law which mistake of law was discovered by the manufacturer/assessee on the declaration of invalidity of the provision by the court. Section 72 of the Contract Act may be attracted to such a case and a claim for refund of tax on this score can be maintained with reference to Section 72. This too, however, does not mean that the taxes paid under an unconstitutional provision of law are automatically refundable under Section 72. The Apex Court further cautions that the very concept of economic justice means and demands that unless the claimant (for refund) establishes that he has not passed on the burden of the duty/tax to others, he has no just claim for refund. It would be a parody of economic justice to refund the duty to a claimant who has already collected the said amount from his buyers. The refund should really be made to the persons who have actually borne its burden - that would be economic justice. Conferring an unwarranted and unmerited monetary benefit upon an individual is the very anti- thesis of the concept of economic justice and the principles underlying Articles 38 and 39.
2) To the second query, whether it is open to an assessee to claim refund of tax paid by him under orders which have become final - or to reopen the orders which have become final in his own case - on the basis of discovery of a mistake of law based upon the decision of a court in the case of another assessee, regardless of the time-lapse involved and regardless of the fact that the relevant enactment does not provide for such refund or reopening, the Apex Court after reiterating and emphasising that while dealing with this situation the Apex Court is keeping out the situation where the provision under which the duty is levied is declared unconstitutional by a court and further stating that the Court was dealing with a case where the duty was paid on account of mis-construction, mis-application or wrong interpretation of a provision of law, rule, notification or regulation, as the case may be, goes on to hold that where a duty has been collected under a particular order which has become final, the refund of that duty cannot be claimed unless the order (whether it is an order of assessment, adjudication or any other order under which the duty is paid) is set aside according to law. So long as that order stands, the duty cannot be recovered back nor can any claim 35 for its refund be entertained. The Apex Court goes on to lament that it is un-understandable how an assessment/adjudication made under the Act levying or affirming the duty can be ignored because some years later another view of law is taken by another court in another person's case. Nor is there any provision in the Act for re- opening the concluded proceedings on the aforesaid basis. The Apex Court then reiterates that the provisions of the Central Excise Act also constitute "law" within the meaning of Article 265 and any collection or retention of tax in accordance or pursuant to the said provisions is collection or retention under "the authority of law"
within the meaning of the said article. The Apex Court then holds that in short, no claim for refund is permissible except under and in accordance with Rule 11 and Section 11B and that an order or decree of a court does not become ineffective or unenforceable simply because at a later point of time, a different view of law is taken. The Apex Court further goes on to hold that the Court therefore, is of the clear and considered opinion that the theory of mistake of law and the consequent period of limitation of three years from the date of discovery of such mistake of law cannot be invoked by an assessee taking advantage of the decision in another assessee's case. All claims for refund ought to be, and ought to have been, filed only under and in accordance with Rule 11/Section 11B and under no other provision and in no other forum. An assessee must succeed or fail in his own proceedings and the finality of the proceedings in his own case cannot be ignored and refund ordered in his favour just because in another assessee's case, a similar point is decided in favour of the manufacturer/assessee. (See the pertinent observations of Hidayatullah, CJ. in Tilokchand Motichand extracted in Para 37). The Apex Court then states that the decisions of the Apex Court saying to the contrary must be held to have been decided wrongly and are accordingly overruled herewith.
3) To the third question formulated by the Apex Court whether equitable considerations have no place in situations where Section 72 of the Contract Act is applicable; the Apex Court itself emphatically states that in view of what has been held by the Apex Court with respect to the questions posed at (1) and (2) ( which is 36 at paragraph 67 of its decision), the only situation surviving is the situation arising from the declaration of invalidity of a provision of the Act under which duty has been paid or collected, and is taken as the basis for its discussion with regard to the third question. The Apex Court then stating that the Court is of the opinion that equitable considerations cannot be held to be irrelevant where a claim for refund is made under Section 72 goes on to observe that one of the equitable considerations may be the fact that the person claiming the refund has passed on the burden of duty to another. In other words, the person claiming the refund has not really suffered any prejudice or loss. If so, there is no question of reimbursing him.
He cannot be recompensated for what he has not lost. The loser, if any, is the person who has really borne the burden of duty; the manufacturer who is the claimant has certainly not borne the duty notwithstanding the fact that it is he who has paid the duty. The Court then holds that where such a claim is made, it would be wholly permissible for the court to call upon the petitioner/plaintiff to establish that he has not passed on the burden of duty to a third party and to deny the relief of refund if he is not able to establish the same. The Court also states that in this connection, it is necessary to remember that whether the burden of the duty has been passed on to a third party is a matter within the exclusive knowledge of the manufacturer. He has the relevant evidence - best evidence - in his possession. Nobody else can be reasonably called upon to prove that fact. Since the manufacturer is claiming the refund and also because the fact of passing on the burden of duty is within his special and exclusive knowledge, it is for him to allege and establish that he has not passed on the duty to a third party. The Apex Court goes on to hold that this is the requirement which flows from the fact that Section 72 is an equitable provision and that it incorporates a rule of equity. It is also held that this requirement flows not only because Section 72 incorporates a rule of equity but also because both the Central Excise duties and the Customs duties are indirect taxes which are supposed to be and are permitted to be passed on to the buyer. The Apex Court then goes on to hold that it would be legitimate for the court to presume, until the contrary is established, that a duty of excise or a customs duty has been 37 passed on. It is a presumption of fact which a court is entitled to draw under Section 114 of the Indian Evidence Act. It is undoubtedly a rebuttable presumption but the burden of rebutting it lies upon the person who claims the refund (plaintiff/petitioner) and it is for him to allege and establish that as a fact he has not passed on the duty and, therefore, equity demands that his claim for refund be allowed. This is the position de hors 1991 (Amendment) Act - and as the Apex Court point out later, the said Amendment Act has done no more than to give statutory recognition to the above concepts. The Apex Court emphasizes that this is the position whether the refund is claimed by way of a suit or by way of a writ petition and further observes "It needs to be stated and stated in clear terms that the claim for refund by a person who has passed on the burden of tax to another has nothing to commend itself; not law, not equity and certainly not a shred of justice or morality. In the case of a writ petition under Article 226, it may be noted, there is an additional factor : the power under Article 226 is a discretionary one and will be exercised only in furtherance of interests of justice. This factor too obliges the High Court to enquire and find out whether the petitioner has in fact suffered any loss or prejudice or whether he has passed on the burden. In the latter event, the court will be perfectly justified in refusing to grant relief. The power cannot be exercised to unjustly enrich a person." Thus, to our mind, the Apex Court has in unequivocal terms, confined the applicability of equitable consideration as flowing from Section 72 only to the context of the declaration of invalidity of a provision of the Act under which duty has been paid or collected, and that too only in the case of an assessee who has succeeded in such a challenge in his own case, and furthermore, only when he demonstrates that has passed it on to no other and has himself borne the burden of tax.
4) To the fourth and last query, whether the spending away of the taxes collected by the State is not a good defence to a claim for refund of taxes collected contrary to law, the Apex Court has held that Kanhaiyalal is not right in saying that the defence of spending away the amount of tax collected under an unconstitutional law is not a good defence to a claim for refund. The Apex Court held that it thought it is a good defence, subject to the rider that where the 38 petitioner-plaintiff alleges and establishes that he has not passed on the burden of the duty to others, his claim for refund may not be refused. The Apex Court then went on to state that if he is not able to allege and establish that he has not passed on the burden to others, his claim for refund will be rejected whether such a claim is made in a suit or a writ petition. The Apex Court went on to hold that it is a case of balancing public interest vis-a-vis private interest and where the petitioner-plaintiff has not himself suffered any loss or prejudice (having passed on the burden of the duty to others), there is no justice or equity in refunding the tax (collected without the authority of law) to him merely because he paid it to the State, as it would be a windfall to him. The Apex Court observed that as against it, by refusing refund, the monies would continue to be with the State and available for public purposes; the money really belongs to a third party - neither to the petitioner/plaintiff nor to the State - and to such third party it must go. The Apex Court held that but where it cannot be so done, it is better that it is retained by the State. The Supreme Court held that by any standard of reasonableness, it is difficult to prefer the petitioner-plaintiff over the State; Taxes are necessary for running the State and for various public purposes and this is the view taken in all jurisdictions. The Apex Court therefore went on to hold that even looked at from the constitutional angle, the right to refund of tax paid under an unconstitutional provision of law is not an absolute or an unconditional right. The Apex Court also held that similar is the position even if Article 265 can be invoked for claiming refund of taxes collected by misinterpretation or misapplication of a provision of law, rules, notifications or regulation and hastened to add that they have held that Article 265 cannot be invoked for claiming refund of taxes collected by misinterpretation or misapplication of a provision of law, rules, notifications or regulation.
23 In the instant case, the appellant's service provider has self-assessed the duty and paid the service tax during the relevant period. Later on, being of the view that the service provider is entitled to the benefit of Sl.No.25(a) of the exemption notification 25/2012-ST ibid, the appellant has preferred the claim for refund contending that the 39 service tax has been collected mistakenly from the appellant by the service provider and paid to the Government, and is therefore a case of mistake. In light of the aforesaid decision of the Apex Court, we are of the considered view that even if the appellant feels that it's service provider was entitled to the benefit of notification and had not claimed it while assessing its tax liability, that at best is a payment made out of non-applying the notification that was perceived as available and is squarely covered by the Apex Court decision, particularly as dealt with in para 67 and 68 of the Mafatlal Judgement reproduced supra.
24 We also cannot subscribe to the appellant's contention that the levy was unconstitutional. It is evident from the Apex Court decision in Mafatlal case reproduced supra that only when tax levied is struck down as unconstitutional for transgressing the constitutional limitations, it becomes an unconstitutional levy, which clearly is not the case in the appellant's context.
25 In Sum, when the Apex Court, sitting in a combination of nine, has categorically held that in the case of mis-interpreting or mis-applying any of the rules, regulations or notifications issued under the Central Excise or Customs Enactments, such a claim has necessarily to be preferred under and in accordance with the provisions of the respective enactment before the authorities specified thereunder and within the period of limitation prescribed therein, we are of the view that even a case of payment of service tax, made without knowledge of an exemption notification, or failing to apply an exemption notification to which the appellant's service provider was purportedly entitled, and the consequent refund claim preferred by the appellant, would still have to be dealt with under the refund provisions as provided for in the Finance Act 1994, namely Section 11B as made applicable vide Section 83 of the Finance Act, 1994. When the Apex Court has categorically held that the Central Excise and Customs Enactments are self-contained enactments providing for levy, assessment, recovery and refund of duties, imposed thereunder and that Section 11B of the Central Excises and Salt Act and Section 27 of the Customs Act, both before and after the 1991 (Amendment) Act are constitutionally valid and have to be followed and given effect to, no assessee under these 40 enactments, or any other lower judicial forum, can tenably contend to the contrary. It is also pertinent that the Apex Court has in no uncertain terms held that Section 72 of the Contract Act has no application to such a claim of refund as elucidated supra. In light of the categorical finding of the Honourable Supreme Court in the aforesaid judgement in Mafatlal Industries case that all claims for refund (excepting those which arise as a result of declaration of unconstitutionality of a provision whereunder the levy was created) have to be preferred and adjudicated only under the provisions of the respective enactment, this Tribunal, as a creature of statute is well aware of its jurisdiction. Thus, we have no hesitation to hold that the appellant's contentions to the contrary as to the inapplicability of the time limit prescribed under Section 11B, are wholly untenable and cannot be countenanced. We also notice that the larger bench of this Tribunal in two decisions, Veer Overseas Ltd v. CCE, Panchkula, 2018 (15) GSTL 59 (Tri-LB) and M/s. Oil and Natural Gas Corporation Limited v The Commissioner of GST & Central Excise, Tiruchirappalli, 2024(6) TMI 1417-CESTAT CHENNAI (LB) have held that claims for refund under the Central Excise and Service Tax enactments are governed by the provisions of Section 11B for period of limitation. The decision of the Jurisdictional High Court in Enmaz Andritz Pvt Ltd v CESTAT, Chennai, 2017 (6) GSTL 12 (Mad) is also noticed as apposite in this context.
26 In the case laws relied upon by the Appellant, the aforesaid binding decision of the majority as laid down in paragraph 99 of the decision of the Honourable Supreme Court in Mafatlal Industries Ltd v. Union of India, 1996 INSC 1514 : (1997) 5 SCC 536: 1997 (89) E.L.T. 247 (S.C.), were not brought to the notice of the Honourable Courts and Tribunals resulting in them being rendered without having the benefit of the Judgement itself in its entirety, and especially paragraphs 67 and 68 as well as the aforesaid principles as crystallised in the said paragraph 99 of the Binding Judgement of an ennead Judge constellation of the Supreme Court, in particular. In as much as the Apex Court decision is binding on this Tribunal, the decisions relied upon by the appellant, which are different from the facts and 41 circumstances of the appellant's case herein, are distinguishable and thus inapplicable on this count too.
27 We hold that, given our finding on merits already elucidated above, and in light of our discussions supra addressing the contentions raised by the appellant on inapplicability of time limit under Section 11B of the Central Excise Act, 1944 as made applicable to Finance Act by virtue of Section 83 of the Finance Act, 1994, the outcome of our analysis is that the appellant's refund claim although found to be sustainable on merits, but nevertheless, are found to attract the limitation prescribed under Section 11B of the Central Excise Act, ibid. Therefore, it is only the amount of tax paid within the period of limitation prescribed under Section 11B of the Central Excise Act, which the appellant can legally claim a stake to, subject however to satisfying the refund sanctioning authority that the appellant is not being unjustly enriched.
28 In this regard, we find from the appeal records while the appellant has furnished affidavits from the service providers before the lower authorities averring that they have collected service tax from the Board and remitting the tax collected to the Exchequer and that they will not claim for refund of service tax remitted, however it is only before this Tribunal that the appellant has attached an affidavit of the appellant board stating that the service tax paid are not claimed as input since the consultancy fees are consumed by the Board and not forming part of any services rendered by the Board. Inasmuch as it is only before this Tribunal that the appellant has produced an affidavit attested by the Chief Audit Officer of the appellant in support of the claim that there is no unjust enrichment of the appellant, we find that the same is merely a self-certification. We are of the view that in matters involving refund of tax that has already been paid to the Government Exchequer, the evidence adduced should be a certification by an independent professional, so that it carries the credibility of impartiality. However, given that the refund claim of the appellant for the period within limitation merits consideration and has to be quantified, for which purpose, we are remitting the matter to the adjudicating authority, we permit the appellant to produce before the 42 adjudicating authority, a certificate by an independent chartered accountant to the effect that the appellant's records and relevant documents have been verified and it has been found that the appellant is not being unjustly enriched.
29 In light of our discussions above, in as much as we have on merits found that the appellant is entitled to refund of the amount due which is not barred by the period of limitation specified under Section 11B, we hold that the impugned Order in Appeal is untenable and cannot sustain. Therefore, we set aside the impugned Order in Appeal and remit the matter back to the jurisdictional adjudicating authority to quantify and refund the amount due which is not barred by the period of limitation specified under Section 11B, duly putting the appellant to notice as to the amount so quantified and subject to the appellant producing a chartered accountant's certificate to substantiate that the appellant is not being unjustly enriched. The adjudicating authority is directed to complete the denovo proceedings within 90 days of receipt of this order, duly adhering to the principles of natural justice.
The appeal is disposed of in the above terms.
(Order pronounced in the open court on 28.07.2025) (AJAYAN T.V.) (VASA SESHAGIRI RAO) Member (Judicial) Member (Technical) vl