Bombay High Court
Universal Drinks Private Ltd., Nagpur vs Union Of India And Another on 1 January, 1800
Equivalent citations: 1984(18)ELT207(BOM)
JUDGMENT Dhabe, J.
1. These are the two writ petitions filed by the petitioner Universao Drinks Private Ltd., Nagpur, which is a private limited company, registered under the provisions of the Indian Companies Act, claiming reund of excise duty from the respondents. At the relevant time the petitioner was manufacturing non-alcoholic aerated water, popularly known as 'Coca Cola' and 'Fanta'. The above products of the petitioner are subject to excise duty under the relevant provisions of the Central Excise and Salt Act, 1944 (for short 'the Act').
2. The manufacturing of the aerated waters undertaken by the petitioner involves the use of synthetic essences for sweetness and for flavouring the priducts. It is not in dispute that the excise duty leviable against the above products of the company falls under Item No.1-D of the First Schedule to the Act, which prior to 17-3-1972, was as follows : Rate of duty "1-D. Aerated waters whether or not flavoured or sweetened and -- Ten per cent advalorem whether or not containing vegatable or fruit juice or fruitpulp.
With effect from 17-3-1972, the rate of excise duty under Item 1-D of the First Schedule was raised from 10% advalorem to 20% advalorem. However on the same day, i.e. on 17-3-1972, the respondent no. 1 issued a notification in exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944 (for short 'the Rules') exempting the aerated waters falling under Item No. 1-D of the First Schedule to the Act from so much of the duty as is in excess of 10% advalorem. The effect of the above notification dated 17-3-1972 is that the aerated waters in the manufacture of which blended foavouring concertrates in any form are used are alone liable for the excise duty at the rate of 20% advalorem while the other aerated waters continued to be liable for the excise duty at the rate of 10% advalorem only.
3. In spite of the aforesaid notification of the Central Government dated 17-3-1972, the petitioner-Company continued to pay the excise duty at the rate of 20% advalorem on its products, presumably without knowing the correct position of law. It is the case of the petitioner that for the first time it realised its mistake of payment of excise duty at the enhanced rate when it received a letter dated 11-7-1977 from the 'Coca Cola Export Corporation bringing to its notice the decision of this Court in Writ Petition No. 944 of 1973 decided on 11- 10-1976, M/s. Duke & Sons Ltd. v. G. T. Kundnani, Superintendent Centtral Excise and others. Actually the copy of judgment of this Court was sent later by the aforesid Coca Cola Export Corporation along with its covering letter dated 14-7-1977. The aforesaid Coca Cola Export Corporation also gae on 11-7-1977 a certificate to the effect that the products Coca Cola and Fanta do not contain any blended flavouring concentrates. It may be noted at this stage that the aforesaid Coca Cola Export Corporation supply flavouring essence and as per its formula, which is not disclosed to any of the companies, the bottling is done in the factory of the petitioner at Nagpur.
4. After the judgment of this Court was received from the aforesaid Coca Cola Export Corporation, the petitioner took sometime to prepare its calim for refund from its books for all the relevant years and thereafter preferred clamims for refund of the excse duty paid to or as alleged by the petitioner recovered illegally by the respondents. The petitioner made an application on 30-10-1979 claiming refund of an amount of Rs. 8,08,339.61 in respect of excess duty of excise paid for Coca Cola and of an amount of Rs8,39,947.52 for the excess duty paid in respect of Fanta Orange during the period from August 1974 to August 1976. The aforesaid claim for refund is the subject matter of writ petition No. 2154 of 1980. The learned Assistant Collector, Central Excise, Division -I Nagpur, by his impugned order dated 17-1- 1980 held that the above claim of the petitioner is barred by time and cannot be entertained under rule 11 of the rules.
5. The petitioner had preferred a claim for refund of an amount of Rs. 6,07,979.68 in respect of excise duty at the duty at the enhanced rate paid on Coca Cola for a period from 8-9-1976 to 16-6-1977, which claim was allowed as is clear from the letter of the Superintendent (Tech.) for Divisional Offices, Central Excise Division No. 1, Nagpur, dated 7-1-1981. The petitioner had also made a claim for refund of excise duty amounting to Rs. 5,28,084.05 in respect of Fanta Orange for a period from 8-9-1976 to 16-6-1977, simulataneously under the same letter dated 2-9-1977, addressed to the Assistant Collector, Central Excise, Nagpur. In respect of the above claim for refund about the fanta Orange the Assistant Collector , Central Excise, Division -I , Nagpur by his orderf dated 23-5-1980 , held that the claim amounting to Rs. 4,54,850.31 covering the period from 25-2-1977 to 16-6-1977, is within limitation as provided under rule 11. He, therefore, allowed the same. He, however, rejected the claim of the petitioner for the refund of the amount of rs.73,233.74 for a period from 8-9-1976 to 24- 2-1977 in respect of fanta Orange on the ground that it is barred by limitation prescribed under rule 11 of the rules. The aforesaid order dated 23-5-1980 passed by the Assistant collector Central Excise , Nagpur rejecting the claim of refund of an amount of Rs. 73,233.74 for a period from 8-9-1976 to 24-2-1977 in respect of Fanta Orange on the ground of limitation is the subject matter of Writ Petition No.2155 of 1980 . Both these writ petitions, which relate to the refund of the excise duty paid under mistake by the petitioner, therefore, involve common question of fact and law and can be disposed of conveniently by this common judgment.
6.Before we proceed to consider the contention raised on behalf of the petitioner, it would be useful to consider the background of the provisions relating to refund of duty. Previously the matter relating to refund was governed by the Rules framed under the Act. Rule 11 as substituted by M.F. (R.D.) Nofitification No. 31-C.E., dated 29-9-1951 and referred to hereinafter as "old rule 11" reads as under:
"No duties or charges which have been paid or have adjusted in an account-current maintained with the Collector under rule 9, and of which repayment wholly or in part is claimed in consequence of the same having been paid through inadvertance, error or misconstruction, shall be refunded (unless the claimant makes an application for such refund under his signature and lodges it with the proper officer) within three months from the date of such payment or adjustment, as the case may be."
This rule was thereafter substituted by the new rule 11 by G.S.R. 554(E), dated 6-8-1977. The said rule 11 hereafter referred to as "new rule 11", reads as under :
"Claim for refund of duty. - (1) Any person claiming refund of any duty paid by him may make an application, for refund of such duty to the Assistant Collector of Central Excise before the expiry of six months from the date of payment of duty :
Provided that the limitation of six months shall not apply where any duty has been paid under protest.
Explanation . - Where any duty is paid provisionally under these rules on the basis of the value or the rate of duty, the period of six months shall be computed from the date on which the duty is adjusted after final determination of the value or the rate of duty, as the case may be.
(2) If on receipt of any such application the Assistant Collector of Central Excise is satisfied that the whole or any part of the duty paid by the applicant should be refunded to him, he may make an order accordingly.
(3) Where, as a result of any order, passed in appeal or revision under the Act, refund the amount to such person without his having to make any claim in that behalf.
(4) Save as otherwise provided by or under these rules, no claim for refund of any duty shall be entertained.
Explanation. - For the purpose of this rule, 'refund' includes rebate referred to in rules 12 and 12-A."
The new rule 11 was also deleted with effect from 17-11-1980 by Notification No. 177/80-CE, dated 12-11-1980, because the provisions relating to refund of duty were thereafter governed by Section 11-B of the Act itself which was inserted in the Act by Section 21 of the Customs, Central Excises and Salt and Central Boards of Revenue (Amendment) Act, 1978 (No. 25 of 1978) which was brought into force with effect from 17-11-1980 vide Notification No. 182/80-C.E., dated 16-10-1980. It is not necessary to reproduce Section 11-B if the Act as it is not relevant for the purposes of these petitions.
7. According to the petitioner, it is the old rule 11 and not the new rule 11 which would have been applicable, if at all, to the claim for refund in these ptitions. According to it, the respondent No. 2 has considered the claims of the petitioner for refund under new rule 11 referred to above. The first contention raised on behalf of the petitioner is that when a duty recovered or voluntarily paid by mistake in excess of what is prescribed under the Act is illegal, without jurisdiction or is outside the purview of the Act, the provisions of the old rule 11 will not apply and hence the claim for refund will not be governed by the period of limitation prescribed therien. It is the further contention on behalf of the petitioner, that if the old rule 11 does not apply, the claim for refund can be made by either filing a civil suit which would be maintainable and not barred on the footing that there is a selfcontained code provided for refund of the duty. If the civil suit is maintainable, it is submitted on behalf of the petitioner, that the period of limitation for a claim for refund would be three years, which period in the instant case will start from the date the mistake was known to the petitioner i.e. 13-7- 1977 when it received a letter from Coca Cola Export Corporation that what the peritioner was using was a flavouring essence and not the concentrate as contemplated in the notification dated 17-3-1972, and that the same was not liable to the enhanced levy of 20% ad valorem in view of the decision of this Court in Writ Petiton No. 944 of 1973 decided on 11-10-1976. It is also contended that at any rate, the petitioner is entitioner is entitled to enforce its claim for refund of excise duty illegally levied upon it by a writ petition under Article 226 of the Constitution of India.
8. Both the respondents do not dispute the fact that what is used by the petitioner is not a concentrate as contemplated by the aforesaid notification dated 17-3-1972. However, all the above contentions raised by the petitioner are refuted by them. There cannot be any doubt that the flavouring concentrate is not used in the products of the petitioner because the respondent no. 2 himself has allowed on this ground refund in respect of Coca Cola for an amount of Rs. 6,07,979.68 vide memo dated 7-1-1981 of the Central Excise, Division- 1, Nagpur and also because under the impugned order dated 23-5-1980, in Writ Petition No. 2155/1980, a part of the claim for refund in respect of Fanta Orange which was within limitation, has also been allowed by the respondent No. 2, on this ground. The claims of the petitioner for refund are rejected only on the ground of limitation. Besides this reason, the other reason is that there is a certificate dated 23-8-1980 of the Deputy Chief Chemist, Central Revenues addressed to the Assistant collector, Central Excise, Division-1, Nagpur, who, after examining the samples of the products of the petitioner, has given an opinion that the blended flavouring concentrates have not been used in the manufacture of the products of the petitioner.
9. As regards the question of the applicability of the old rule 11 the contention on behalf of the petitioner is that the claims for refund are for a period prior to 6-8-1977 i.e. when the old rule 11 was in force. The submission is that the law which was in existence on the date the payment was made will apply in case of refund and not the law which was in force on the date the application for refund was made because admittedly, it was the new rule 11 which was in force on the dates on which the applications for refund were made by the petitioner in both these petitions. In support of the contention that the new rule 11 will apply, it is the submission on behalf of the respondents that the new rule 11 is partly substantive and partly procedural, meaning thereby that in so far as a right to refund, according to the respondents, is created under the said rule, it is substantive and in so far as a procedure for recovery is prescribed, it is procedural. Further submission on behalf of the respondents is that the new rule 11 provides a self-contained code in so far as it creates a right to get refund of any duty of excise and provides a remedy for getting the same further barring any other remedy in regard thereto. The net result of the submission, therefore, on behalf of the respondents is that a civil suit to get a refund is barred in view of the provisions of the new rule 11 and further that a writ petion in the High Court in its original jurisdiction under Article 226 of the Constitution should not be entertained to enforce a right to get the refund in supersession of or in disregard of the provisions of the new rule 11.
10. A bare reading of rule 11, whether old or new, clearly negatives the construction that a substantive right to refund is created thereunder. The right to refund, in our view is a common law right of the assessee to recover back the amount of excise duty which is eithe illegally levied upon him or wrongly paid by him or recovered from him by the excise officer. It is worthwhile to notice the provisions of Section 72 of the Contract Act, which casts an obligation upon the person who has received the money under a mistake to repay the same to the person from whom it is received. The claim for refund of the duty arises as soon as the duty is illegally recovered by the Excise Officers or is wrongly paid by the assessee.
11. In these petitions, it is clear that the payment of the excise duty, of which refund is claimed, is made and a right to refund thereof arose prior to 6-8-1977 i.e. the date on which the new rule 11 has come into force. The said right to calim refund is a vested right which has accrued to the petitioner prior to new rule 11, or at any rate is an existing right. It is a settled principle of interpretation of statutes that a vested right or even an existing right, including a right of action is not affected or allowed to be taken away unless it is so affected or taken away by the enactment expressly or by necessary implication. It is only a declaratory or a procedural enactment which is normally held to be retrospective. A remedial Act, on the contrary, is not necessarily retrospective, it may be either enlarging or restraining and it takes effect prospectively, unless it has retrospective effect by express terms or necessary intendment. [See The Central Bank of India and others v. Their Workman and also The Workment of M/s. Firestone Tyre and Rubber Co. of India P. Ltd. v. The management and others]. It is, therefore, necessary to be seen whether the provisions of new rule 11 can be held to be retrospective so as to affect the existing or the vested right which has accrued to the petitioner prior to the said rule.
12. In our view, the new rule 11 is clearly prospective in its operation in the sense that it will apply to the cases in which the right to claim refund has arisen after it came into force. This view is supported by the language of the new rule 11 itself. The said rule provides a limitation for making an application which is six months from the date of payment of duty. If the said rule was intended to apply to claims of refund prior to its coming into force, in many cases the claims would be barred by limiation because the limitation of six months is to be computed from the date of payment of duty. It is useful to notice at this stage that whatever may be the interpretation of the new rule 11, on the question whether it enacts complete code in itself on the matters relating to refund of duty, the old rule 11 did not enact a complete code but provided only for certain contingencies such as payment through inadvertence, error or a mis-construction and as held in several decisions, a civii suit or a writ petition under Article 226 could always be filed for refund of any duty illegally or wrongfully recovered or wrongly paid by an assessee under a mistake. In such cases, where the assessee waited for the suit to be filed, or a writ petition to be preferred, which could be done by him normally within the period of three years, as the limitation for civil suit was three years from the date of knowledge of the mistake, the said claim would be barred by limitation in some cases even before new rule 11 came into force if the limitation of six months prescribed thereunder to be computed from the date of payment of duty were to be made applicable. There is no provision made in the new rule 11 that such claims could be preferred within the stipulated period from the date of application of the said rule. A right to a suit is itself a vested right and in the absence of clear provisions or clear intendment the said right cannot be allwed to be taken away by the provisions of the new rule 11. Looked at it from another angle, there is noprovision in the new rule 11 that the claims which are barred by limitation of three months under the old rule 11, can be preferred under the new rule 11 if they are within six months from the date of payment of duty as provided thereunder.
13. In these circumstances, it must be held that the new rule 11 is only prospective and is not applicable to the claims of refund in the instant writ petitions and, therefore, the contention raised on behalf of the respondents that the new rule 11 provides a self-contained code and, therefore, bars the civil suit as well as the original proceeding directly under Article 226 of the Constitution for claiming refund of the excise duty does not survive for consideration.
14. There is a castena of decisions of this Court as well as other High Courts in which interpreting the old rule 11, it has been held that it does not bar either the civil suit or the writ petition under Article 226 of the Constituttion for enforcing the claim of refund of the excise duty illegally recovered or wrongly paid by the assessee by mistake, which may be a mistake of fact or a mistake of law. Some such decisions of our High court are reported in Associated Bearing Company Limited v. Union of India and another [1980 E.L.T. 415 (Bombay), Wipro Products Ltd. and another v. Union of India and another [1981 E.L.T. 531 (Bombay)].
15. It was thus open to the petitioner to enforce its claim of the refund of excise duty paid through mistake by recourse either to a civil suit or by filing a writ petition under Article 226 of the Constitution. The petitioner has chosen to enforce the claim by preferring a writ petition in this Court after his applications with the Department for granting refund have failed on the ground that the claim is barred by limitation under the new rule 11 of the rules. if the old rule 11 does not enact a self-contained code, the petitioner cannot be precluded from moving this Court under Article 226 of the Constitution in regard to a claim which is held to be barred by time by the Department.
16. As regards the invo,ing of the jurisdiction of the High Court under Article 226 of the Constitution of India, it is well-settled that it is a discretionary relief and that the said discretion has to be exercised upon sound principles of law. The jurisdiction of the High Court under Article 226 is not controlled by the provisions of the Limitation Act would be, however, one of the important considerations which would guide the Court in the exercise of its extraordinary discretionary jurisdiction under Article 226 of the Constitution of India. Similarly, the question of delay or laches is not a matter which affects the jurisdiction of teh Court as such but is a matter to be taken into consideration in exercising the discretion under Article 226 of the Constitution of India [See 1982 ECR 165-D (Bombay) = 1982 E.L.T. 237 (Bom.) - The Swadeshi Mills v. Union of India]. The decisions of this Court cited supra, have taken a view that a claim for refund preferred within a period of three years which is a period of limitation prescribed under the Limitation Act can normally be enforced by a writ petition under Article 226 of the Constitution of India. A similar view has been taken by the Supreme Court in the case of M/s. D. Cawasji Co. etc. v. State of Mysore and another .
17. The next question that needs to be considered is whether the claim for refund is barred by limiktation under the Limitation Act, 1963, and that this Court should not, therefore, exercise its discretion to entertain the said claim under Article 226 of the Constitution of India. It is, however, the contention on behalf of the petitioner that the claim is made within a period of three years. The dispute really is about the starting point of limitation. The submission on behalf of the petitioner is that it is only when the petitioner received on 13- 7-1977 a letter dated 11-7-1977 from the Coca Cola Export Corporation and thereafter the certified copy of the unreported judgment of this Court cited supra along with its covering letter dated 14-7-1977, that the petitioner came to know that the payment of excise duty in question is made by it under a mistake because it s products 'Coca Cola' and 'Fanta' did not contain any blending flavouring concentrates. If three years limitation is calculated from this date, it is not in dispute that the claim is within limitation. The two-fold submission made on behalf of the respondents in this regard is that the date of decision of this Court referred to above i.e. 11-10-1976 is and should alone be the date of the discovery of mistake and not the date 13-7-1977 on which the petitioner preceived information on receipt of the letter dated 11-7-1977 from the Coca Cola Export Corporation and further that the said mistake could be discovered earlier with due diligence on the part of the petitioner. We do not think that in the facts and circumstances of the instant case the aforesaid submissions on behalf of the respondents are justified.
18. As regards the first submission on behalf of the respondents that the date of decision of this Court referred to above i.e. 11-10-1976 is and should alone be the date of discovery of the mistake, the petitioner has sought to support the same by relying upon a decision of the Rajasthan High Court in the case reported in Shiv Steel Works and another v. Union of India (1982 E.L.T. 373 para 13 of the report). A perusal of para 13 of the aforesaid decision would show that the said decision does not lay down as a hard and fast rule that in every case the date of knowledge of mistake would be the date of judgment of the Court. In fact the Rajasthan High Court in para 13 of the aforesaid decision has rejected on merits the plaintiffs' case that they came to know of the judgment of the Allahabad High Court in February, 1976. Since the plaintiffs in the said case failed to prove that they came to know of the judgment of the Allahabad High Court was delivered. The learned counsel for the respondents also relied in this regard upon a decision of the Supreme Court in Cawasji's case cited supra, particularly para 8 thereof, but the said case does not lay down any such absolute proposition.
19. The question as to the starting point of limitation in the cases relating to discovery of mistake has to be determind in the light of the provisions of Section 17 of the Limitation Act, 1963. It is provided in section 17(1)(c) of the Limitation Act, that in a suit or an application for relief from the consequences of a mistake, the period of limitation shall not begin to run until the plaintiff or the applicant has discovered the mistake or could with reasonable diligence have discovered it. it is true that in the case of mistake of law normally the mistake can be said to be discovered when the Court has rendered a decision taking a particular view. Hoever, knowledge of the date of decision cannot be attributed to the person concerned, particularly when by proper evidence he satisfies that he could learn about the same only at a later date. The observations of the Supreme Court in para 15 of Cawasji's case cited supra can be usefully referred to is this regard. it is not, therefore, correct to say that the date of decision would laways be the date of the discovery of mistake. In the instant writ petitions, the question, theefore, would be whether the petitioner knew about the decision of this Court cited supra when it was rendered on 11-10-1976 or could learn about the said decision at that time with due diligence. The first submission, therefore, that the date of decision is and should alone be the date of discovery of mistake, therefore, stands rejected.
20. Turning to the question whether the mistake could be discovered with due diligence earlier than 13-7-1977 when the petitioner learnt about it from the letter dated 11-7-1977 received from the Coca Cola Export Corporation, the submission is that the petitioner should have in fact learnt about it even much earlier to the decision of this Court cited supra rendered on 11-10-1976. At any rate, the further submission is that the petitioner must be presumed to know the mistake when the aforesaid unreported judgment of this Court was rendered on 11-10-1976. There is no merit in both of these submissions.
21. It is clear from the facts on record in the instant writ petitions that the formula of composition of the products of the petitioner is the guarded secret of the Coca Cola Export Corporation and the sid formula was, thjerefore, not known to the petitioer. There was, therefore, no reason for the petitioner to entertain any doubt on the question whether any blended flavouring conventrates are used in the manufacture of its products. The petitioner has, therefore, no reason to make any enquiry in regard to the said petitioner has, therefore, no reason to make any enquiry in regard to the said matter and particularly in regard to the question of law involved in the same viz, whether the excise duty paid by it upon its products is in excess of the duty prescribed under the Act. The petitioner, therefore, could not have nay occasion to look into the judgments of the Courts on this question much less the unreported ones. it is but natural that the petitioner could learn about the lbended flavouring concentrates being not used in its products and also about the unreported judgment of this Court cited supra only when the Coca Cola Export Corporation informed it about the same by its letter dated 11-7-1977. It is not, therefore, correct to say that the petitioner could learn about the mistake in payment of excise duty prior to 13-7-1977, as urged by the respondents. It is further clear that after receipt of the letter dated 11-7-1977 from the Coca Cola Export Corporation, the petitioner has taken diligent steps in preparing its claim for the refund of excise duty for all the back years and prefering it within the period of three years by filing the instant writ petitions.
22. The learned counsel for the respondents has clallenged the genuineness of the letter dated 11-7-1977 sent by the Coca Cola Export Corporation to the petitioner which is placed on record in the instant writ petitions by the additional affidavit filed on behalf of the petitioner during the hearing of the said petitions. In the reply filed on behalf of teh rewpondents to the said additional affidavit for taking documents on record except a statement that the said documents are filed at a later stage, there is nothing else to show that the said document is not a genuine document. In fact, in the original application for refund dated 2-9-1977, which is the subjec- matter of the Writ Petition No. 2155 of 1980, the petitioner has referred to the certificate of Coca Cola Export Corporation, issued on 11-7-1977 itself of which the ph9otostat copy was enclosed with the said application. it cannot, therefore, be said that the letter dated 11-7-1977 is not genuine because it is placed on record in this writ petiion very much late during its hearing. As stated earlier, it is only on 13-7-1977 when the petitioner received the letter dated 11-7- 1977 from the Coca Cola Export Corporation that the petitioner could learn about the mistake in payment of the excise duty and the claims thereafter are made with due diligence by preferring writ petitions in this Court. The instant writ petitions, therefore, cannot be dismissed either on the ground of delay, leaches or limitation. EVen otherwise, we would not decline to exercise discretion in allowing refund in these cases even assuming that the claim was barred by time, because the claim for refund in these petitions is a genuine claim, which is not disputed on merits by the respondents. In this regard we may refer to the salutary warning given by the Supreme Court to the public authorities in the case reported in Madras Port Trust v. Hymanshu that they should not resort to thechincal pleas of limitation in regard to the legitimate and just claims made aginst them by the claimants.
23. In the result, the writ petitions are allowed. The respondents are directed in Writ Petition No. 2154 of 1980, to grant to the petitioner refund of an amount of Rs. 16,48,287.13 for excess excise duty paid during the period from August 1974 to August 1976 in respect of Coca Cola as well as Fanta Orange (Rs. 8,08,339.61 and Rs. 8,39,947.52, respectively). The respondents are further directed to grant refund of an amount of Rs. 73,233.74 in Writ Petition No. 2155 of 1980 for a period from 8-9-1976 to 24-2-1977 in respect of Fanta Orange. Payment of refund be made within 3 months from today. Rule is made absolute in the above terms. There will be, however, no order as to costs.