Case Law Details

Case Name : Commissioner of Central Excise Vs M/s Dalmia Cements (Bharat) Ltd. (Supreme Court of India)
Appeal Number : Civil Appeal No. 3600 of 2006
Date of Judgement/Order : 02/09/2015
Related Assessment Year :
Courts : Supreme Court of India (1041)

CA Urvashi Porwal

Urvashi PorwalBrief of the Case

In the case of CCE V/s. M/s. Dalmia Cement (Bharat) Ltd., the Hon’ble Supreme Court of India held that Section 11B of the Central Excise Act, as amended, applies to the cases where though an   order   has   been   passed   directing   refund, implementation of the order is pending.

Brief Facts

The period involved for which the respondent wanted refund of the excise duty paid by it is 1970-1978. It may be mentioned that there was a dispute regarding the assessable value of cement cleared by the assessee during the aforesaid period, when excise duty of cement was ad valorem.  The dispute related to freight involved in the dispatch of the cement to various destinations. The Department had included the cost of freight as well while determining the assessable value in terms of Section 4 of the Central Excise and Salt Act, 1944 (hereinafter referred to as  the  ‘Act’).  It was decided in favour of the assessee vide order dated 06.06.1989 passed by the CEGAT. In spite of this decision, amount was not refunded.  This  prompted respondent to file Civil Writ No. 3225 of 1991 in the High  Court  of  Delhi seeking  writ,  order  or  direction  for  initiating  contempt   of   court proceedings against the Collector  of  Central  Excise,  Tiruchirapalli  and Assistant Collector of Central Excise, Tiruchirapalli for not  granting  the refund despite the order of the CEGAT. The said writ petition was disposed of on 18.07.1995. Taking note of the  statement  of  counsel  for  both  the parties that a date may be fixed before  the  Collector/Assistant  Collector to go into the question if the appellant should be granted refund  in  spite of Section 11B of  the  Act,  direction  was  given  to  appear  before  the Collector/Assistant Collector  on 22.09.1995  and  the  writ  petition  was disposed of. Pursuant to the said direction,  hearing  was  granted  by  the Assistant Commissioner who  passed  orders  dated  28.03.1996  holding  that assessee was not eligible to get the refund as  per  amended  provisions  of Section 11B of the Act and directed that this amount be credited to the Consumer Welfare Fund established under Section 12C of the Act.  The reason for rejecting the claim of the assessee was that the case of the respondent fell within the four walls of the concept of “unjust enrichment”.   Feeling aggrieved by this  order,  appeal  was  filed  before  the  Commissioner  of Customs and Central Excise  (Appeal)  which  was  dismissed  on  20.12.1996.

Further, appeal was preferred before the  CEGAT  and  in  this  attempt  the assessee triumphed in asmuch as  Tribunal  decided  the  case  in  favour  of assessee  holding  that  since  no  proceedings  were  pending  before   the Assistant Commissioner as far as application for refund is concerned and  it was only the execution of the order of refund that was passed much prior  to 1991,  amended  provision  of  Section  11B  would  not  be  attracted.  The appellant filed rectification application which was dismissed by the Tribunal on 20.02.2002. Thereafter, appellant  filed  reference  application before the High Court of Delhi in terms of 35G(3) of  the  Act  raising  the question of law which has already been reproduced in  the  earlier  part  of this judgment. The High Court has answered this question in favour of assessee, recording the following findings:

“(a)  It has been held that there are no merits in this  reference,  as  the question involved is clearly settled by the 9-Judge Bench decision  of  this Hon’ble Court in the case of Mafatlal Industries Ltd. (supra)  wherein  this Hon’ble Court held that if an application for refund has been disposed  off, and the order had become final before the  1991  amendment  to  Section  11B came into force, the principles of unjust enrichment will not apply.

(b)  Section 11-B, after the 1991 amendment, stated that the party  applying for refund had to establish that the incidence of such  duty  had  not  been passed  on  by  him  to  any  other  person.  It  follows,  therefore,  that Parliament did not apply  the  principles  of  unjust  enrichment  to  cases covered by  the  unamended  Section11B  and  it  was  the  reason  that  the amendment was made in Section 11-B in 1991.”

Contentions of the Assessee

The Assessee contended that pending proceedings includes a situation  where  refund had not been granted, even when the order was passed,  with  the  submission that the Assistant Commissioner even at this stage was competent to go  into the question of unjust enrichment as order regarding  grant  of  refund  was post 1991 event.  The  principle of unjust enrichment was in the domain of public interest and  intention  by incorporating provisions like proviso to sub-section (1) of Section  11  was clear, namely, so far as amount is not actually  refunded,  the  authorities were competent to invoke  this  doctrine  of  “unjust  enrichment”.  It was argued that it will be totally inequitable and unfair to the public as the party (assessee herein) would be unjustly enriched. The assessee also relied upon the orders dated 18.07.1995 by the High Court in Civil Writ No.  3225  of  1991 specifically permitting the Assistant Collector  to  go  into  the  question whether the assessee is to  be  granted  the  refund  in  spite  of  amended Section 11B of the Act.

Contentions of the Revenue

The Revenue contended that the implementation of order itself is pending and hence the same cannot be included in the pending proceedings and no question arises of applicability of Section 11B. The position is very clear as per the amended provisions of the law.

Held by Hon’ble Supreme Court of India

The Hon’ble Court referred to the judgment in the case of Mafatlal Industries Ltd. and Others v.  Union  of India and Others[1] and stated that in no  unambiguous  terms  and  with  utmost clarity and  certainty,  the  majority  interpreted  amended  provisions  of Section 11B including proviso to sub-section (1) thereof  to  hold  that  so long as refund proceedings are pending,  the  amended  provision  would  get attracted and would disentitle  the  manufacturer/payer  from  claiming  any refund contrary to the said proviso.  However,  in  those  cases  where  the refund proceedings had finally been terminated, in  the  sense  –  that  the appeal period has also expired – before  the  commencement  of  the  amended provision,  these  cannot  be  re-opened  and/or  governed  by  the  amended provision.

The Hon’ble Court stated that after examining the matter in its entirely, it requires to be remarked that only after  amendment  in  Section 11B of the Act in the year 1991, any  person  applying  for  refund  has  to establish that incidence of such duty has not been passed on by him  to any other person. The unamended provision did not contain any such stipulation.

Therefore, under the old  provision,  the  only  obligation  of  the  person claiming refund was to make such an application before  the  expiry  of  six months from the relevant date and to show how the refund was  admissible  to the applicant. In such a case, the Assistant Collector of Central Excise was to only examine as to whether excise duty was paid in excess etc.  And was refundable to the claimant as a result of adjudication of the dispute or otherwise.   It  is  only  in  the  amended  provision  that  additional stipulation is provided as per which  the  claimant  is  required  to  file, along with application  for  refund,  such  documentary  or  other  evidence including documents referred to any Section 12A  of  the  Act  to  establish that the amount of duty of excise was collected from the  claimant  or  paid by the claimant and that “incidence of such duty had not been passed  on  by him to any other person”. It clearly follows from  the  above  that   before the amendment of Section 11B of the Act,   principle  of  unjust  enrichment was not incorporated  under  the  unamended  provision.  In  fact  that  was precisely the reason for amending the provision so  that  this  doctrine  of “unjust enrichment” is incorporated, viz., to  take  care  of  the mischief that was prevailing under the  unamended  provision  which  was  removed  by making amendment, popularly known as Heydon’s Mischief Rule.

Proviso to sub-section (1) of Section 11B, as amended, would  be  applicable in a situation  where  an  application  for  refund  made  before  the  said amendment was still pending at the time when the provisions of  Section  11B were amended.  This is how the said proviso is interpreted by this Court in Mafatlal Industries Ltd. (supra).

The Hon’ble court stated that once we find that no such application was pending and the orders on the said application had already been passed, the proviso ceases to have any application.  The reason, even otherwise, is very obvious.   Section 11B relates to claim for refund of duty and the procedure for such a refund is stipulated in this section.  As per sub-section (1) thereof, any person claiming refund of any duty of excise has to move an application for refund of such duty to the Assistant Commissioner of Central Excise.  Once such an application is made, the same is to be considered in accordance with this provision.  As already pointed out above,  under  the  unamended  provision, the Assistant Commissioner was not required to go into the  question  as  to whether incidence of such duty had been passed on by the applicant  claiming refund to any other person or not.  However,  if  the  application  was  not decided till the time amendment was incorporated in the year  1991,  as  per the proviso,  while  dealing  with  such  an  application  for  refund,  the Assistant Commissioner is still empowered to  go  into  this  question  even when the application was  filed  before  the  commencement  of  the  amended provision.  This situation would  prevail  only  when  there  is  a  pending application before the Assistant Commissioner of Central  Excise,  which  is yet to be decided.  If the order for  refund  on  such  an  application  had already been passed before coming into force the amended  provision  and  no application was pending at  the  commencement  of  the  Central  Excise  and Customs Laws (Amendment) Act, 1991 before the  Assistant  Commissioner  and, therefore, question of applying the said proviso and going into the issue as to whether incidence of such duty had been passed by the applicant to any other person or not would not arise.  Thereafter, order passed on the application is only to be implemented by giving the refund as per that order.  By no stretch of imagination, the Officer, at the time of carrying out the orders for refund, which have already been passed, can be invested with the powers to go into the question of unjust enrichment by invoking the proviso to sub-section (1) of Section 11B.  In  the  instant  case,  the order on the refund  application  of  the  respondent  had  been  passed  on 06.06.1989,  which  was  much  before  the  amended  provision   came   into operation.  In fact,  even  after  the  order  of  refund  was  passed,  the appellant had not refunded the amount and it is in these circumstances  that Writ petition was filed in the High Court for initiation of contempt proceedings against the defaulting officers.  In such proceedings, the High Court had passed the order dated 18.07.1995.  In this order, no doubt, the Court observed that the Assistant Commissioner would go into the question if the respondent should be granted the refund in spite of Section 11B of the Act.  However, merely because of such observations, it cannot be said that the Assistant Commissioner was entitled  to  look  into  the  issue  of unjust  enrichment  when  if,  otherwise,  he  was  otherwise   had   no jurisdiction to do so in the facts of the present case.

Thus, when the order of the Assistant Commissioner was challenged and the matter came before the Tribunal, the Tribunal was duty bound to apply the law laid down in Mafatlal Industries Ltd. (supra), which it did. Similar exercise is done by the High Court in the impugned judgment. In view of the above, the appeal is dismissed.

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