Customs, Excise and Gold Tribunal - Mumbai
Collector Of Central Excise vs C.P. Shukla Pumps, Kopran Chemicals And ... on 7 October, 1991
Equivalent citations: 1991(37)ECR7(TRI.-MUMBAI)
ORDER
P.K. Desai, M(J).
1. Invoking the provisions of Section 35G(1) of the Central Excises and Salt Act, 1944, the Departmental authorities have filed these applications, seeking reference to the concerned High Courts, in relation to the questions of law, duly formulated by them in their respective applications, pleading that those questions of law arise out of various orders passed by this Bench, as detailed below:
Ref. Appln. Bench's Order Appeal No. High Court Remarks
No. No. and date to which
reference
could be
made
E/Ref-7/91 1812/90 E/195/89 Gujarat --
dt. 1.11.1990
E/Ref-9/91 2053/57/90 dt. E/632/90 Bombay Single Ref Appln for both
30.11.1990 E/645/90 the appeals.
E/Ref-10/91 714-737/90 E/120/90 Bombay Single Ref Appl No 12/91
to dt. 10.5.1990 E/134/90 for Appeal Nos. 148/90
E/Ref-13/91 E/145- and 150/90 and Ref App
and 148/90 No 19/91 for Appeal Nos.
E/Ref-15/91 E/150/90 134/90 and 135/90
to E/173-
E/Ref-19/91 175/90
E/Ref-22/91 2217- E/109/90 Bombay
and 2224/90 dt. E/l11/90 (For Ref
E/Ref-29/91 28.12.1990 E/137- E/22/91
to 139/90 Appeal No.
E/Ref-35/91 E/168/90 E/356/90)
E/218/90 Gujarat for
E/356/90 the rest
The principal question that was raised in all the aforementioned appeals, and the findings given by this Bench, thereon, was whether refund of the excise duty paid by the manufacturers-assessee, if otherwise admissible, could be denied to them, invoking the principle of unjust enrichment, by the departmental authorities working within the framework of the Central Excises and Salt Act and this Bench placing reliance on several judicial pronouncements, has held that, it is not permissible for the authorities created and functioning under the statute, to go beyond the statutory provisions, and when Section 11B of CESA, 1944, does not provide for refusal of refund claim on that count, the refund cannot be denied on that count.
2. Though, in the different sets of applications, different phraseology is used in formulating the questions on which reference is sought, and more than one question are formulated, considering the crux of the pleadings as also the submissions made, the question of law, on which reference to High Courts, is sought for can be formulated as under:
Whether the doctrine of unjust enrichment can be introduced by the authority working under the specific Tax Statute (Central Excises and Salt Act, 1944), so as to enable itself to reject the claim by the manufacturers for refund of duty paid by them, and who are otherwise eligible to get the refund, on the ground that burden of the duty amount, for which the refund is claimed, has been passed over to the consumers?
3. Before taking up the main issue for consideration, decision on one minor aspect is called for. Reference Application No. E/7/91 as filed, is beyond the stipulated period of limitation of sixty days from the date of communication of this Bench's order No. 1812/91 WRB dt. 1.11.1990. The order was communicated on 27.11.1990 and period of sixty days stood expired on the day ending 26.1.1991. The application for reference is however filed on 30.1.1991. Excluding the date of filing of the application, the delay is only of 3 days and the applicants have filed E/COD-13/91, for condonation of delay. It is permissible to the Tribunal to condone the delay. The delay of three days, has been duly explained, and in exercise of our powers, we condone the delay. Application No. E/COD-13/91 is therefore allowed.
4. Advancing his submissions on the principal issue for consideration, Mr. Mondal, the Ld SDR, laying down foundation for the same, has stated that while interpreting and implementing any law, certain basic and fundamental principles have to be borne in mind, and one of them is that none should be permitted to enrich himself at the cost of others, and that, any refund of the amount, has to go to the person who has actually paid the same. Referring to the provisions of Section 11B of the CESA, 1944 he has pleaded that the word "any person", need not be read as to mean, only the person who is instrumental in handing over the duty amount to the Government. He has submitted that the Central Excises and Salt Act, 1944, belongs to the family group of statutes providing for Indirect Tax Structure, where though the excise duty levied on any manufactured product is collectable from the manufacturers, they act merely as intermediaries and the collecting agencies, who pass over the burden of the duty amount paid by them to the consumers of the manufactured product, by formulating appropriate price structure. Referring to the CEGAT Special Bench 'C decision in Hindustan Fertilizers Corporation v. Collector of Customs, Mr. Mondal, has submitted that the Tribunal has also recognised the manufacturers as intermediaries. Referring to the same decision, he has further submitted that the Tribunal has also recognised the equitable principle that the ultimate user would be entitled to the refund and not the manufacturer. Submitting on the main issue raised for consideration, Mr. Mondal, has conceded that, in all the subject appeals, the department had relied upon the decision of the Bombay High Court in Roplas (India) Ltd. v. Union of India but thereafter the same High Court has, vide full Bench decision in New India Industries Ltd. v. Union of India 1990 (46) ELT 23 (Bom) : 1990 (30) ECR 145 (Bombay), taken a contrary view, holding that the view, holding that the view expressed in Re: Roplas (India) Ltd. is not the correct view and the same High Court, has, in Caprihans India Ltd. v. Union of India categorically observed that the view expressed in Re: Roplas (India) Ltd. is not a good law, and that the Bombay High Court has thereafter been confining and endorsing to the view that doctrine of unjust enrichment could not be invoked in rejecting the claim for refund by the manufacturers. He has however submitted that, against a similar decision taken by the Bombay High Court, in the matter filed by one Mr. Lalit Bhaichand Ravani, (details not supplied) the Supreme Court has admitted the SLP No. 4170/91 (Union of India v. Lalit Bhaichand Ravani), where contention of grant of refund being in violation of the principles of unjust enrichment has been raised, and placement of the same for early hearing has been ordered. To substantiate his said statement, Mr. Mondal has shown to us the news item as published in 1991 (31) ECR at page 61J. He has also pleaded that this Bench has been basically relying upon the CEGAT Special Bench 'D' decision in Re: Anand Metal and Steel Works 1989 (23) ECR 154 to hold that the authorities working under the statute, could not deny the refund on the ground of unjust enrichment, and has submitted that based on the ratio of the same decision, CEGAT Special Bench B-l, also held accordingly in Electric Controls and Switch Boards (Pvt.) Ltd. v. CCE, Meerut, 1991 (34) ECR 223 and the Supreme Court has admitted (CA No. 271/1991/CCE, Meerut v. Electric Controls), where, though stay has not been granted, furnishing of security is ordered. To substantiate his statement, Mr. Mondal has referred to news item published in 1991 (34) ECR at page 21J. In his submission, therefore, the issue is still sub judice, and findings given by us for which reference under Section 35G(1) of CESA, 1944, is sought for, has not assumed finality, so as to refuse to refer the issue, as rested on the settled principles of law. Mr. Mondal has then submitted, that the Gujarat High Court has been holding a divergent view, as is reflected from the decision of the said Court in Union of India v. Bnarat Vijay Mills Co. Ltd. . Mr. Mondal has submitted that though the said decision of the Gujarat High Court is given while entertaining first appeal against the decision in a Civil Suit filed in Civil Court, where principles and provisions of Indian Contract Act have also been taken into consideration, the Court has also considered the provisions of Section 11B of CESA, 1944, and referring to the provisions of Section 64A of the Sale of Goods Act, 1930, as also referring to the decision of the Supreme Court in Chhotabhai v. Union of India AIR 1962 SC 1006 : ECR C 147 SC, has come to the conclusion that provisions of Section 64A of the Sale of Goods Act, have to be read as part and parcel of every legislation imposing a duty of excise, and the said High Court has further held that the word "remission" used in Section 64A(1)(b) of the Sale of Goods Act would also include refund, and that the provisions of Section 11B of CESA, 1944, have to be read subject to provisions of Section 64A of Sale of Goods Act, and it could be only the ultimate consumer who could be entitled to refund, and refund to the manufacturer would tantamount to unjust enrichment, which is not permissible. Mr. Mondal has submitted that with two divergent views of two different High Courts within the regional jurisdiction of the Tribunal, the question of law as formulated requires to be referred for getting finality on the point. He has also submitted that, in view of the existing circumstances, the question could and should be referred to the Supreme Court, where even otherwise, the similar points have been pending for decision.
5. Mr. A.V. Naik, the Ld. JDR, representing the Department in some of the applications, which adopting the arguments advanced by Mr. Mondal, the Ld. SDR, has submitted that, the duties are levied as a part of fiscal measures, and excise duty is a part of indirect taxation, where the person to be taxed is the consumer of the product, and it could be only he, who could be deemed to have paid the duty, and the refund, if payable, ought to go to him, and if that is not feasible, refund could be refused to the person, who has not suffered any burden of the duty payment. He has submitted that this aspect has to be taken as an in-built provision, and has also relied upon the decision of Gujarat High Court in Re: Bharat Vijay Mills (supra).
6. Mr. S.N. Parikh, the Ld. Advocate appearing for one of the Respondents, referred to the decision of CEGAT, SRB, in CCE v. Sahu Cylinders and Udyog P. Ltd. , where the Single Member has refused to make reference to the High Court on this issue, and submitted, that as such the application deserved rejection.
7. Mr. Prakash Shah, the Ld. Advocate for one set of Respondents has pleaded that the Bombay High Court has, even in its latest judgment in Amar Dye Chem Ltd. v. Union of India, reiterated that refund cannot be denied on the ground of unjust enrichment, and that the legal position, vis-a-vis matters arising within the jurisdiction of Bombay High Court, being settled, no question of law can be said to have arisen, requiring any reference to the said High Court. Referring to the Supreme Court judgments in Miles (India) Ltd. v. Asst. Collector of Customs, 1987 (30) ELT 641 (SC) : 1985 ECR 289 (SC) and in Collector of Central Excise v. Doaba Co-operative Sugar Mills , Mr. Shah has submitted that, the Supreme Court has given a clear mandate that the authorities functioning under an Act, are bound by its provisions, and submitted that, no provisions exist in Section 11B of CESA, 1944, to refuse refund on the ground of unjust enrichment, and hence, no uncertainty exists as to the legal proposition as formulated.
8. Mr. F.D. Sorabjee, the Ld. counsel, also representing some of the Respondents, has pleaded that the larger issue, whether the principles of unjust enrichment should or should not be invoked and made applicable to CESA, 1944, is beyond the scope of the Tribunal, who has to examine the issue under a narrow compass, namely, whether under the existing statute, it is permissible to the departmental authorities working under the statute, to refuse the refund claim on that ground. He has pleaded that assuming, without conceding, that the High Court rejected the grant of refund under the doctrine of unjust enrichment, it was under their Writ Jurisdiction, and not by way of holding that the principle was an in-built one under the existing provisions of the statute. Referring to the decisions of the Supreme Court in Nalinakhya v. Shyam Sunder , and British India General Insurance Co. v. Itbar Singh , Mr. Sorabjee has pleaded that it is not open to the Courts of law to reframe the statute nor can they add any word in the section, unless the section as it stands is meaningless or carries a doubtful meaning, and referring to Section 11B of CESA, 1944, he has pleaded that when the section is clear and unambiguous, neither the Supreme Court, nor any High Court can give any finding in relation to the issue formulated and as such, the reference on the question formulated could be only a futile exercise. Citing the Supreme Court decision in Rajaram Mahadev Pranjype v. Abu Maruti Mali , he has pleaded that no authority could act de hors the statutory provisions. In his submission, the doctrine of unjust enrichment is based on equitable principles, but when the same does not flow from the statute, the same can neither override nor be incorporated therein, and with no uncertainty prevailing on this point reference to any Court is not called for.
9. Mr. A.V. Phadnis, the Ld. Adv. Appearing for some of the Respondents has pleaded that there is no scope for any divergence of opinion and hence applications deserve to be rejected.
10. The other Ld. Advocates representing the Respondents have adopted all the aforementioned submissions, and have submitted for rejection of the applications.
11. Considering the submissions made, we agree with the submissions made by Mr. Sorabjee, that it is not open to the Courts of Law to reframe the statute or to add or alter any word in the statute nor is it permissible for any Court of Law as also the Tribunals, to act de hors the statutory provisions and if that was the only aspect requiring our consideration, we would have certainly rejected the applications in limine. To the best of our understanding however, the issue before us is not whether the doctrine of unjust enrichment ought or ought not to be introduced in the statute. The issue posed before us is whether the statutory provisions as they exist, have to be read as impliedly attracting the principles of unjust enrichment and by virtue thereof, the departmental authorities could refuse grant of refund to the manufacturers.
12. We have no reservation on this point, as propounded by the Supreme Court in Re: Miles (India) Ltd., (supra) and in Re: Doaba Co-operative Sugar Mills (also supra) that the authorities working under the statute cannot go beyond the statutory provisions.
13. The issue, whether it is permissible to deny grant of refund on the ground of unjust enrichment, to the manufacturers who, after paying the excise duty, have passed over the burden thereof to the consumer and have now been claiming refund of the duty, which could not be a mere reimbursement of the amount paid, as nothing is lost to them, has been engaging the attention of various judicial forum, and series of pronouncements exist, most of which are referred to and discussed at reasonable length by the Full Bench of the Bombay High Court in Re: New India Industries Ltd. v. Union of India (supra).
14. The Central Excises and Salt Act, 1944, is a part of the fiscal measures adopted by the State, and falls within the family group of indirect taxation, where the tax in the form of duty is attached to the goods and not the individual, which ultimately has to be paid by the consumer of the said goods. Complex machinery exists in levy and recovery thereof. To put it in a simplified manner, the duty of excise is charged on the manufactured product and the manufacturer thereof, is made responsible to pay the same. The manufacturer, in turn adds the duty amount in the sale price, and passes over the burden to the ultimate consumer. Situations often arise, where, after having so passed over the burden to the ultimate consumer, it is realised that the excise duty so collected on that item was not recoverable and the amount so charged has become refundable and there the question arises who should be held entitled to get the refund, whether the actual consumer who has borne the burden or the manufacturer who has actually paid the amount, and it is at this stage that applicability of doctrine of unjust enrichment, comes into picture, by raising of a point that the manufacturer having already passed over the burden to the consumer, would become unjustly rich, by getting the refund amount.
15. The viability of the doctrine of unjust enrichment and its applicability to the CESA, 1944, gives rise to multi facet issues, both in favour and against. It is beyond the compass of this Tribunal to examine the larger issue raised, namely, the said doctrine could or could not be applied here. The Ld. Advocates for the Respondents have however, laboured to impress upon us that the issue has been laid at rest, by some decisions of the Supreme Court, and by plethora of judgments of the Bombay High Court, and have pleaded that, when the larger issue itself is decided, the issue of applicability of the said doctrine in matters adjudicated upon by the departmental authorities, would not survive at all. The departmental authorities have however emphasised that the larger issue is still subjudice, and there does exist a view, as held by the Supreme Court, that the doctrine of unjust enrichment is virtually a built-in provision, and has to be read in the existing provisions of the statute, and as such, the departmental authority has to take the same into consideration.
16. The Full Bench of the Bombay High Court, in New India Industries Ltd. v. Union of India (supra) has practically dealt with several decisions both of the Supreme Court and of some of the High Courts, including the Bombay High Court and have ultimately drawn the conclusion as under:
Thus, we reach the conclusion that when tax has been collected without authority of law, the State is bound to refund the same. Ordinarily, the tax illegally collected ought to be returned to the person from whom it has been collected. The concept of unjust enrichment is, however, not altogether irrelevant in the matter of granting refund of tax which has been collected without authority of law.
Before the close of the judgment, they have also put a clarificatory note as under:
We clarify that the learned Single Judge had referred to the Full Bench the question of applicability of doctrine of unjust enrichment to Writ Petitions filed for obtaining refund of illegal tax. Therefore, we have not examined the further question whether the said doctrine has any application to suits before Civil Courts or to departmental proceedings for refund.
It is in Caprihans India Ltd. v. Union of India (supra) that the Bombay High Court has held that:
The doctrine of unjust enrichment is not available for the Assistant Collector and even otherwise the Roplas case judgment is no longer a good law in view of the subsequent decision of the Full Bench of this Court reported in 1990 (46) ELT 23 1990 (30) ECR 145 Bombay (New India Industries Ltd. v. Union of India) we direct the Assistant Collector to ignore the decision in Roplas case while ascertaining whether the assessee is entitled to refund and strictly follow the decision of the CEGAT which is referred to herein above.
Their Lordships have referred to the decision of the CEGAT, in Collector of Central Excise v. Weldekar Industries Pvt. Ltd. where it is held that it is not permissible for the authorities created under the statute to deny the relief by resort to doctrine of unjust enrichment. In the said decision, reliance have also been placed on the Tribunal's decision in Re: Anand Metal & Steel Works (supra). In the subsequent judgment of the Bombay High Court, in Amar Dye Chem. Ltd. v. Union of India referred to by the Ld. Advocate Mr. Prakash Shah, their Lordships have hinted at the earlier decision in Re: Caprihans India Ltd. (supra) and has referred to the CEGAT decision in Re: Anand Metal Works (supra) and have directed the Asst. Collector to examine the refund claims.
17. Referring to the above-mentioned judgments as also some other judgments given on the same line, there could remain no iota of doubt that the judgment in Re: Roplas (India) Ltd. which had formulated the basis for the department to file the present set of appeals, has by the same High Court, been declared to be not a good law. All the same, the question still hovers around as to whether, can it be said to have assumed finality, particularly when the Full Bench of the Bombay High Court has, in their judgment, made observation in paras 29 and 35 as reproduced above.
18. With this, we have before us, an information that, the doctrine of unjust enrichment, has been taken to the Supreme Court, in SLP No. 4170/91 (Union of India v. Lalit Bhaichand Ravani), we have also the information that ratio laid down by the CEGAT in Anand Metal and Steel Works v. Collector (supra), has also been taken to the Supreme Court for scrutiny in (CA. No. 271/1991 (CCE, Meerut v. Electro Controls and Switchboards Pvt. Ltd.).
19. The Gujarat High Court, has, in Union of India v. Bharat Vijay Mills Co. Ltd. though dealt with the issue in relation to the Civil Suit filed for the refund of the amount, has also examined the provisions of Section 11B of CESA, 1944 and the findings of the said Court, can best be explained by reproducing the relevant portion of para 16 of their judgment which reads thus:
It is, however, argued on behalf of the Mills that levy of excise duty is on the manufacture or on production of goods and, therefore, it is the liability of the manufacturer to pay the excise duty on the goods manufactured. It was having regard to this liability of the manufacturer that under Section 11B, Excise Act, right has been conferred on the manufacturer who has paid the duty to claim refund of duty. Under Section 11B the person who has paid duty is entitled to make application for refund within six months from the date of payment. Relying on this provision, it was argued that it is the right of the manufacturer to claim the refund. Answer to the above contention is in the decision of the Supreme Court in Chhotabhai v. Union of India . The Supreme Court observed therein that Section 64A, Sale of Goods Act, refers in express terms to "duties of excise" and has, therefore, to be read as part and parcel of every legislation imposing a duty of excise. Therefore, the provision of Section 11B, Excise Act, will have to be read subject to the provisions contained in Section 64A Sale of Goods Act. If the provisions of Section 11B are so read, it is clear that it would be the ultimate buyer who would be entitled to remission or refund of the excise duty paid on blended yarn.
Further the same High Court has, in the same paragraph of the judgment also held:
In our opinion the term "remission" used in Section 64A must be understood in wider sense so as to include refund or repayment of tax or duty not legally recoverable or due.
Again, referring to the previous judgment of the same High Court, in Union of India v. New India Industries, 1983 ELT 1763 : 1983 ECR 2002D (Gujarat), Their Lordships have observed as under:
The Division Bench observed: "We ourselves also believe that in a situation where the plaintiff himself has not suffered injury and simply on technical legal grounds claim refund and wishes to be compensated without expressing slightest intention or desire to refund the amount to the consumers who have ultimately suffered the incidence of the tax, it would be quite just and proper for the Court to refuse the relief of refund of the amount so claimed." In our opinion, as pointed out above, since the Mills have not suffered any injury, they are not entitled to claim refund of excise duty and the suits'filed by them, must, therefore, fail.
Thus, the Gujarat High Court has clearly held that refund is permissible only to the consumer, and has, in holding accordingly, further held that this ought to be deemed to be existing in the provisions of Section 11B of CESA. Going by the decision of the Gujarat High Court, if the doctrine of unjust enrichment, is deemed to have been incorporated in the existing provisions of Section 11B of CESA, the natural corollary would be that, the authority which implements the said provisions, be it a Court or the authority working under the statute, has to take the same into consideration.
20. This therefore leads us to two divergent judicial pronouncements, one of the Bombay High Court, where doctrine of unjust enrichment is held as not attracted, where again, as observed above, the Full Bench of the said High Court in Re: New India Industries (supra) has clearly observed that they have no examined the question, whether the doctrine has application to the suits or departmental proceedings, as they were principally examining the issue vide their jurisdiction under Article 226 of the Constitution of India, and whether the State had violated the provisions of Article 265 of the Constitution, and the other of the Gujarat High Court, referred to above, where the said doctrine is held to be an integral part of Section 11B of CESA. Further, the ratio laid down in CEGAT decision in Re: Anand Metal Works (supra) on which we based our finding is also reported to have been taken for scrutiny before the Supreme Court.
21. In our view therefore, a question of law does arise out of our orders, where we have held that the Departmental authorities working under the statute could not invoke the doctrine of unjust enrichment. The ratio of the decisions of the Supreme Court, in Re: Miles (India) Ltd. (supra) and in Re: Doaba Co-operative Sugar Mills (also supra), may not also come into play, as the Gujarat High Court has viewed the doctrine of unjust enrichment, as the one impliedly existing in the existing provisions of Section 11B of CESA.
22. In the result, for the appropriate determination of the prolonged deliberation of the issue, and procuring finality on the point, we refer the following issue for considered opinion:
Whether the doctrine of unjust enrichment can be introduced by the authority working under the specific Tax Statute (Central Excises and Salt Act, 1944), so as to enable itself to reject the claim of the manufacturer for refund of duty paid by them and who are otherwise eligible to get the refund, on the ground that the burden of duty amount, for which the refund is claimed, has been passed over to the consumer.
23. Vide Section 35G(1) of CESA, 1944, the matter has to be referred to the concerned High Court. As indicated above, there are two High Courts to whom the point should be referred, and as is observed, these two High Courts are holding divergent views. While studying the issue, we have also found that divergent views have also been expressed by various other High Courts. We, therefore, feel it expedient that the reference should be made directly to the Hon'ble Supreme Court, as provided for in Section 3511 of CESA, 1944, and hold that the matter be referred to the Hon'ble Supreme Court, through the President of CEGAT, vide Section 35H of the Central Excises and Salt Act, 1944.