Mr.Rameshwarlal Motilal v. & Customs (Appeals)

Judgment

: : (Per V.C.Daga, J.) JUDGMENT JUDGMENT -------- -------- -------- . The petitioners herein are claiming refund amount protest, having recovered customers, contending respondents authority retain amount denial refund Rs.10,19,246/- protest during period 1st March, 1981 6th June, 1990 the Paper and Paper board Cess Rules, 1981 ("Cess - 2 - Rules, 1981" short) framed Industries (Development Regulation) Act, 1951 ("IDR Act, 1951" short) illegal. The petitioners, consequently, prayed quashing setting June, orders 13th December, 1989 25th 1990 passed Assistant Collector Central Excise & Customs, Nasik, respondent No.3 herein; and also prayed for direction to refund amount of cess with interest.

2. The petitioners have also challenged the constitutional validity section 11-B brought statute Central Excise Customs (Amendment) Act, 1991 ("Amendment Act 1991" short). However, challenge behalf survive the Apex Court Mafatlal Mafatlal Mafatlal Industries Industries Industries Ltd. Ltd. Ltd. v. v. v. Union Union Union India, India India 1989 ELT 249 has upheld the validity of section 11B of the Central Excise Act, 1944.

3. Before dealing with the points raised by the parties in the present petition, relevant facts of the case may be stated in brief. TheTheThe Facts : Facts : Facts : --------- --------- ---------

4. The petitioner No.1 Shree Vindhya Paper Mills Limited, alia; manufactures quoted - 3 - boards. The quoted boards manufactured purchased cess-paid paper. According petitioners, respondents compelled quoted boards manufactured Cess Rules,

1981. Accordingly, protest during period 1981 1990 payable products manufactured cess-paid Petitioners, time, paper. refund applications to claim refund of cess paid by them under protest under the Cess Rules, 1981.

5. According to the petitioners, all the refund applications pending respondents contending excisebility coated China Clay examination Ministry Industry. In 1990, Central Board Excise Customs accepted clarification Ministry Industries respondent No.1 payable coated manufactured cess-paid paper. Consequently, petitioners requested respondent No.3 refund applications extent manufactured boards. The petitioners refund applications - 4 - rejected advising appeals before the Commissioner of Central Excise (Appeals), respondent No.4 herein.

6. The petitioners, accordingly, preferred appeals directed. On 9th April, 1992, respondent No.4 allowed petitioners’ appeals.

rejecting refund applications proceedings remanded respondent No.3 examine refund claims touchstone doctrine unjust enrichment. respondent No.3 called petitioners 10th April, 1992 furnish documentary evidence The The establish amount cess, refund was being claimed, was not recovered by them from their customers.

7. According to the petitioners, the above notice issued respondent No.3 pregnant indication respondent No.3 provisions Amendment Act 1991 defeat petitioners’ refund. According petitioners, doctrine unjust enrichment cannot applied, firstly, during period 1st March, 1981 6th June, 1990 protest. Secondly, section 11B Central Excise Act, 1944 ("Central Excise - 5 - Act" short) 1991 cannot Cess Rules, 1981 provisions dealing refund Central Excise Act having incorporated Cess Rules 1981 existing 1981, a legislation incorporation subsequent amendment section 11B made in the year 1991 to the Central Excise Act, 1944 cannot be read into it. Submissions: Submissions: Submissions: ----------- ----------- -----------

8. Mr.Sanklecha, learned counsel for the petitioners a foundation submissions states levied collected a excise goods, namely, boards, provisions section 9 IDR Act,

1951. The Central Government framed "Paper Paper Board Cess Rules 1981", alia; collection board, exercise powers section 30 IDR Act,

1951. 3 Rules provides application Rule Central Excise Salt Act Rules thereunder relation collection cess on paper and paper board. Said Rules came into force on 16th February, 1981. - 6 -

9. rule, According to Mr. Sanklecha, the aforesaid namely, 3 incorporates provisions Excise Act Rules thereunder Cess Rules. The effect incorporation provisions, Cess Rules, written Cess Rules became a it. Rule 3 is, thus, On instance legislation incorporation. incorporation, provisions incorporated become integral Cess Rules former transposed. Any subsequent amendment provisions (in statute incorporation made, namely, Excise Act) effect incorporating statute, namely, the Cess Rules, 1981.

10. Mr. Sanklecha, learned counsel submits that section 11B Central Excise Act 16th Cess Act February, 1981 was, thus, incorporated Rules, 1981 actually written and, thereafter, cannot occasion section 11B Excise amendments thereto subsequent incorporation. In words, provisions Central Excise Act incorporated specific reference 1981 3 Cess Rules

1981. In circumstances, amendment - 7 - Central Excise Act 1981 considered while interpreting and applying the provisions of Cess Rules, 1981.

11. Mr.Sanklecha, learned counsel for the petitioners fairly pointed identical provision Jute Manufactures Cess Rules, 1976 ("Jute Cess Rules" short); identical 3 Cess Rules, 1981 considered Barnagore Barnagore Barnagore Jute Jute Jute Factory Factory Factory Co. Co. Co. v. v. v. Inspector Inspector Inspector Central Central Central Excise, Excise Excise 1991 (57) ELT 3 (SC) para-18 thereof Apex Court pleased Central Excise Act referred incorporation Jute Cess Rules, 1976 reference referred Jute Cess Rules. Thus, a legislation reference, incorporation. This conclusion reached Apex Court holding effect 3 Jute Cess Rules the words "as force" "the provisions Central Excise Salt Act 1944" 3 Jute Cess Rules. Mr. Sanklecha submit "for force" either Jute Cess Rules Cess Rules, 1981 Apex Court 3 Jute Cess Rules. In support 3 - 8 - submission interpreting a statute, placed reliance ofofof judgment Apex Court StateStateState Maharashtra Maharashtra Maharashtra v. v. v. Nanded Nanded Nanded Parbani Parbani Parbani Z.L.B.M.V. Z.L.B.M.V. Z.L.B.M.V. Operator Operator Operator Sangh, Sangh Sangh 2000 (2) SCC 69; wherein language statute Court a statute. Further, according learned counsel petitioners, factual involved Barnagore Barnagore Barnagore Jute Jute Jute Factory Factory Factory (supra) whether intermediate Co. Co. Co. liable before amendment 9 49 Central Excise Rules,

1944. The Apex Court account unamended 9 49 Central Excise Rules, 1944 intermediate liable duty. According learned counsel petitioners, aforesaid decision and, therefore, clearly not applicable to the facts of the present case.

12. According to Mr. Sanklecha, in view of his submission, 3 Cess Rules, 1981 required examined independently determine whether provisions Excise Law regard to refund have been incorporated by reference or is a mere reference in the Cess Rules, 1981. - 9 -

13. Learned counsel for the petitioners drew our attention judgments Apex Court Nagpur Nagpur Nagpur Improvement Improvement Improvement Trust Trust Trust v. v. v. Vasantrao, Vasantrao Vasantrao (2002) 7 SCC 657, U.P.Avas U.P.Avas U.P.Avas Vikas Vikas Vikas Parishad Parishad Parishad v. v. v. Jainul Jainul Jainul IslamIslamIslam, (1998) 2 SCC 467 Mahindra and Mahindra Mahindra Mahindra Mahindra Mahindra Ltd.Ltd.Ltd. v. v. v. Union Union Union India, India India (1979) 2 SCC

529. In judgments, Apex Court has, terms, incorporation reference provisions earlier legislation reference deemed incorporated latter legislation. Further amendment a earlier consequence construing Act latter Act. Whereas; legislation reference subsequent legislation merely contains a reference earlier statute general a amendment earlier statute subsequent enactment latter Act considered a latter Act at the time when the latter Act is sought to be applied.

14. Mr.Sanklecha, on the basis of the judgments referred hereinabove, contends Central Excise Act existed 1981 incorporated specific reference Cess Rules,

1981. This - 10 - account Cess Rules, 1981 a specific reference Central Excise Act a general reference Act. Therefore, according learned counsel petitioner, section 11B Central Excise Act existing 1981 applied considering application refund Cess Rules, 1981 and any amendment subsequent to 1981 in the Central Excise Act needs to be ignored.

15. Mr.Sanklecha, further submits that the rule interpretation, viz., incorporation reference and/or reference earlier Act a latter Act applied interpreting Legislature subordinate/delegated legislation. That principles interpretation applied legislations Legislature Legislatures method incorporation reference reference because pressure legislative time. However, submits delegated subordinate legislation concerned, primary reasons growth pressure legislative enabling delegate subordinate legislation a detailed legislation requiring - 11 - legislations. Therefore, submission, refund should considered authorities applying Central excise Act existed 1981 when the Cess Rule 1981 notified. According him, subsequent amendments Central Excise Act, 1991; be made applicable Cess Rules 1981, delegated legislation carried necessary amendment delegated legislation. In absence amendment to the Cess Rules, 1981, the Central Excise Act as it existed in 1991 alone is to be applied.

16. Mr.Sanklecha submitted that in any view of matter 3 Cess Rules, 1981 expression "so be" applying Central Excise Act it, clearly Central Excise Act applicable extent necessary otherwise. In submission, doctrine unjust enrichment section 11B Central Excise Act requires amount recovered customers excise credited Consumers Welfare Fund. This amount recovered manufactures customers general benefit consumers. So Cess Rules Act, 1951 concerned, object imposing IDR - 12 - betterment industry recovered. Thus, according learned counsel petitioners, circumstances between two, i.e. consumers petitioners petitioners better fulfilling object Cess Rules framed IDR Act, 1951 rather consumers. Based submission, Mr.Sanklecha, submitted provision unjust enrichment section 11B Central Excise Act applicable refund Cess Rules,

1981. He submits liable absolute in terms of prayer clauses in the petition. PerPerPer Contra : Contra : Contra : ---------- ---------- ----------

17. Mr.R.V.Desai, learned senior counsel appearing respondents, submits 3 Cess Rules, 1981 provisions Central Excise Act framed thereunder including relating refund incorporated reference, amended provision section 11B Central Excise Act hand. That refund allowable unless until the petitioners prove that the burden has not been passed on to their customers. - 13 -

18. Mr.Desai further submitted that respondent No.3 clearly noticed scrutiny refund petitioners collected customers amount them. No contrary thereto produced for refund set up by the petitioners is not maintainable.

19. Mr.Desai pressed into service one passage 279 Justice G.P.Singh, titled as "Principles of Statutory Interpretation" reading as under: "A statute previous instead statute referring particular specific reference subject provision therein generally. construed In including amendment cases, a subsequent adoption." Respondent placed reliance various judgments Apex Court Barnagore Barnagore Barnagore Jute Jute Jute Factory Factory Factory Co. Co. Co. (supra); Collector Collector Collector Customs Customs Customs v. v. v. Sampathu Sampathu Sampathu Chetty, Chetty Chetty AIR 1962 SC 316; M/s.Ujagar M/s.Ujagar M/s.Ujagar Prints Prints Prints v.v.v. Union of India Union of India, AIR 1989 SC 516 : (1989) 3 SCC Union of India 488 (para-92, 93, 94 and 95)

20. In the light of the above judgments of the Apex Court, learned counsel respondents submits 3 Cess Rules, 1981 - 14 - incorporates provisions Central Excise Rules framed thereunder reference Act and, therefore, amendments Central Excise Act Rules required applicable. In thereof, submission, Chapter-2 Central Excise Customs Law (Amendment) Act, 1991 applicable petitioners entitled refund much as there is non-compliance with the provision of section 11B as amended.

21. Alternatively, without prejudice to the aforesaid contention, further submitted principles unjust enrichment refund should granted exercise powers Article 226 Constitution India. The respondents, support submission, placed reliance judgment Apex Court Sahakari Sahakari Sahakari Khand Khand Khand Udyog Udyog Udyog Mandal Mandal Mandal Ltd. Ltd. Ltd. Commissioner Commissioner Commissioner C.Ex. C.Ex. C.Ex. & & & Cus., Cus. Cus. 2005 (181) ELT v. v. v. 328 (SC) judgment Bench BussaBussaBussa Overseas Overseas Overseas Properties Properties Properties Pvt.Ltd. Pvt.Ltd. Pvt.Ltd. v. v. v. Union Union Union India, India India 2003 (158) ELT 135 (Bom). It is, thus, submitted that the petition is devoid of any substance and the same is liable to be dismissed. - 15 - Consideration : : : Consideration Consideration ------------- ------------- -------------

22. Having heard rival parties, in our view, it necessary raised learned counsel petitioners 3 3 provision refund Central Excise Act incorporated Cess Rules, 1981 subsequent amendments section 11B Central Excise Act will not be applicable, in view of the judgment of the Apex Court holding the field. 23 The Apex Court in the case of Barnagore Jute Barnagore Jute Barnagore Jute Factory Factory Factory (supra) concerned interpretation 3 Jute Cess Rules provisions Central Excises Salt Act, 1944 Rules framed thereunder including relating refund applicable. The involved warrants interpretation Cess Rules, 1981 identical Jute Cess Rules. Both quoted hereinbelow for immediate reference. Rule 3 of Cess Rules, 1981 reads as under: Save otherwise provided 1944 relation Excise Act "3. relating provisions Rules collection Excise Central thereunder relation applied refund applied collection duties Act, including thereunder." - 16 - Rule 3 of the Jute Cess Rules reads as under: "3. Act -- Application otherwise of Central Central Rules provided provisions Act, 1944 thereunder, duty, relation collection manufactures (1 including shall, 1944) Excises thereunder Excises relating relation -- rules, be, collection excise Act." Salt Save Salt refund

24. Barnagore Jute Factory Co. (supra), In Barnagore Jute Factory Co. Barnagore Jute Factory Co. interpreting identical above-referred rule 3 of Cess Rules, 1981, Apex Court observed as under: " We think it convenient to deal with the contentions of Sri Ganesan at this stage, which we have set out hereinbefore. His main contention is that Rule 3 of the Jute Cess Rules is a case of legislation by reference and that in such a case the provisions of the Central Excise Act and the rules made thereunder as they were obtaining on the date of making of Rule 3 continue in the same form, unaffected by subsequent amendments or changes in the Central Excise Act and Rules. He, therefore, says that the amendment effected in 1982 in Rules 9 and 49 of Central Excise Rules is not available/or applicable to the levy and collection of cess under Section 9 of the Act. He also points out that the Act does not confer upon the Central Government the power to make rules with retrospective effect. He relied upon the decision of this Court in Mahindra & Mahindra v. Union of India &S Another [1979 (2) S.C.R. 1038]. In our opinion, however, the very approach of the learned counsel is based upon an incorrect premise. Firstly, it is not true to say that rules 9 and 49 of the Central Excise Rules, as they stood before the 1982 amendment, did not permit levy on capitively consumed goods." - 17 -

25. Since the aforesaid rule has already been interpreted Apex Court, referred incorporation Jute Cess Rules a reference thereof Jute Cess Rules. This conclusion reached Apex Court holding effect 3 Jute Cess Rules "as force" "the provisions Central Excise Salt 1944" Jute Cess Rules us. The contention petitioners the Apex Court could not have added the words to rule 3 of the Jute Cess Rules cannot be accepted. Act

26. Another judgment on the touchstone of doctrine unjust enrichment delivered Apex Court Sahakari Sahakari Sahakari Khand Khand Khand Udyog Udyog Udyog Mandal Mandal Mandal Ltd.Ltd.Ltd. (supra) petitioners. The Apex Court, taking survey various judgments delivered by it on the subject, held as under:

48. From the above discussion, it is clear that the doctrine of ‘unjust enrichment’ is based on equity and has been accepted and applied in several cases. In our opinion, therefore, irrespective of applicability of Section 11B of the Act, the doctrine can be invoked to deny the benefit to which a person is not otherwise entitled. Section 11B of the act or similar provision merely gives legislative recognition to this - 18 - doctrine. That, however, does not mean that in absence of statutory provision, a person can claim or retain undue benefit. Before claiming a relief of refund, it is necessary for the petitioner/appellant to show that he has paid the ;amount for which relief is sought, he has not passed on the burden on the consumers and if such relief is not granted, he would suffer loss.

49. In the present case, not only no such case has been made out by the appellant-Mandal, the position is to the contrary. All the authorities below have expressed recovered a finding that the appellant-Mandal has recovered the amount from consumers and as such excise duty is passed on the consumers/customers. In view of specific finding, in our opinion, the conclusion is inescapable that the appellant-Mandal is not entitled to claim any amount. allowing exemption or refund of amount would result in ‘unjust enrichment’ by the appellant which cannot be permitted. In our opinion, therefore, even on that count, orders passed by the authorities and refusal to grant benefit cannot be held arbitrary, unreasonable or inequitable. The said ground also, therefore, has to be rejected.

27. The aforesaid judgment of the Apex Court in clearest possible doctrine unjust enrichment equity applicable irrespective application section 11B Central Excise Act. Such similar provision merely recognition equitable doctrine unjust enrichment. Absence statutory provision that, a person retain benefit. Before claiming a relief refund, person claiming refund amount relief sought; - 19 - passed burden consumers and that if such relief is not granted, he would suffer loss.

28. In the instant case it is not in dispute petitioners recovered customers. In undisputed fact, academic debate whether incorporation provisions Central Excise Act a legislation incorporation reference. Irrespective applicability section 11B Central Excise Act, refund be allowed unless it stands to the test of doctrine of unjust enrichment.

29. This bench in the case of Bussa Overseas and Bussa Overseas and Bussa Overseas and Properties Properties Properties Pvt.Ltd. Pvt.Ltd. Pvt.Ltd. (supra) occasion consider an identical issue based on identical submission; wherein this Court ruled as under: " Even otherwise, while exercising the Writ jurisdiction, if the Writ Court finds that any direction to refund results in unjust enrichment to the Petitioner, then it is open to the Writ Court to decline to exercise its Writ jurisdiction, even though the Petitioner has a right to obtain refund. This reasoning of ours is supported by the Full Bench decision of this Court in the case of New India Industries v. Union of India reported in 1990 (46) E.L.T. 23 (Bom.) = 1990 (1) BCR 515, as well as the decision of the Apex Court in the case of Mafatlal Industries Ltd. (supra at Para 95). In the present case, admittedly, the - 20 - Petitioners have passed on the incidence on duty to the customers and have recovered the amount due to them. In this view of the matter, we declined to issue Writ in favour of the Petitioners."

30. For the aforestated reasons, in our view, petition devoid substance liable dismissed. In result, petition fails. Rule stands discharged with no order as to costs. J.) (J.P.DEVADHAR, J.) J.) (J.P.DEVADHAR, (J.P.DEVADHAR, J.) (V.C.DAGA, J.) J.) (V.C.DAGA, (V.C.DAGA,