Case Law Details
CA Urvashi Porwal
Brief 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.
