M/s Unipack, Bhiwadi Unit, (Since Closed) Then Registered v. Additional Commissioner CGST, CGST Commissionerate

Judgment

4. Additional Commissioner CGST, CGST Commissionerate, Alwar, A Block, Surya Nagar, Alwar, Rajasthan 301001 Assistant Commissioner, CGST, Division D, Alwar Bypass Road, Alwar 301019 Union Of India, Through Commissioner, State Goods And Service Tax, Kar Bhawan, Ambedkar Circle, Jaipur. State Of Rajasthan, Through Chief Commissioner, State Goods And Service Tax, Jaipur Zone, New Central Revenue Building, Statue Circle, C Scheme, Jaipur, Rajasthan. ----Respondents For Petitioner(s) : Mr. R. Krishnan, through VC with Mr. Shanker Lal Verma & Mr. Nirmal Kumar Goyal For Respondent(s) : Mr. Kinshuk Jain with Mr. Saurabh Jain HON'BLE THE CHIEF JUSTICE MR. K.R. SHRIRAM HON'BLE MR. JUSTICE MANEESH SHARMA Reportable

ORDER ORDER RESERVED ON: 26 th August 2025 ORDER PRONOUNCED ON: 1 st September 2025 ( PER HON'BLE MR. MANEESH SHARMA, J. )

1. This writ petition has been filed assailing the order-in-original No.04/REFUND-CE/BHD-D/2024-25 dated 7th October 2024 passed by the Assistant Commissioner, CGST, rejecting petitioner's claim [2025:RJ-JP:33974-DB] (2 of 13) [CW-3252/2025] for interest on an excess amount of Rs.8,75,461/-. This amount pertained to trading turnover that was initially deposited as Central Excise duty on 05th February 2013, 12th February 2013, 05th March 2013 and 25th March 2013. This was, vide an order dated 7th October 2024, finally ordered to be refunded by the Additional Commissioner, CGST, after a lapse of more than eleven and a half years.

2. Brief facts giving rise to this petition are that petitioner is a manufacturer of corrugated boxes with a factory located at J- 1296, Rampur Mundana, Bhiwadi (Rajasthan). A team of the Anti- Evasion Wing of the erstwhile Central Excise Commissionerate, Jaipur-I, visited the factory for investigation. On the basis of records seized, statements recorded from the proprietor, and investigation done, it was found that petitioner was incorrectly claiming the small-scale exemption for up to a turnover of Rs.

1.50 crore, by not including the turnover of its Delhi unit and another unit named Unipack Solutions Chopanki, Bhiwadi, which had no manufacturing facility at all. The investigating team asked petitioner to deposit the Central Excise duty of around Rs. 30 lakhs, as the combined turnover exceeded the threshold of Rs.

1.50 crore for exemption. Thus, petitioner was compelled to deposit the alleged Central Excise duty, and petitioner deposited a sum of Rs. 26,10,164/- through the following challans:- Challan Dated Duty Deposited (Rs.)

05.02.2013

12.02.2013

05.03.2013

25.03.2013 Total Rs.5,00,000/- Rs.8,96,296/- Rs.11,04,670/- Rs.1,09,198/- Rs.26,10,164/- [2025:RJ-JP:33974-DB] (3 of 13) [CW-3252/2025]

3. In addition, petitioner had also deposited a concessional penalty and interest on the duty amount (as mentioned in Para No.3 of the impugned order dated 7th October 2024) as under:- Date of Deposit Penalty Interest

25.03.2013

03.04.2013 Rs.3,67,283/- Rs.3,46,777/- Rs.27,300/- Rs.1,09,198/-

4. Subsequently, respondents issued a show-cause notice No. C.No.V(H)ADJ-1/CE-48/32/2014/1312 dated 24th March 2015, proposing a demand of Rs. 30,28,380/- along with interest and penalty.

5. Petitioner contested the said demand, arguing that the manufacturing turnover of the Bhiwadi unit was double-counted due to the improper inclusion of stock transfers from the Delhi unit, and requested a re-computation.

6. The matter proceeded through a protracted legal battle, details of which are as below: i) The show cause notice was adjudicated vide order dated 31 st March 2016, confirming the entire demand of duty, ignoring the pleas raised by petitioner. Petitioner challenged the original order in an appeal before the Commissioner of Central Excise (Appeals), Jaipur, who rejected the appeal, vide order dated 31st May 2018, except for remanding a limited issue, namely, the clearance of the Delhi Unit's finished products (Stock transfers by the Delhi Unit). ii) Petitioner challenged the said order in appeal dated 31st May 2018 passed by the Commissioner of Central Excise (Appeals), Jaipur before the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (Tribunal for short) seeking inter-alia elimination of trading turnover of both petitioner's unit and that of [2025:RJ-JP:33974-DB] (4 of 13) [CW-3252/2025] Unipack Solutions by placing documentary evidence relating to the purchase of finished goods of the Delhi Unit by petitioner as well as the Unipack Solutions, Chopanki, Bhiwadi. iii) The learned Tribunal, vide final order No. 51160/2019 dated 30th August 2019, remanded the matter back to the adjudicating authority to arrive at the correct value of clearance after eliminating the stock of the finished goods transferred from the Delhi Unit to the Bhiwadi Unit. iv) It is also pertinent to mention here that there were some typographical errors in the order dated 30th August 2019 for which an application for rectification was filed, and the learned Tribunal corrected the same vide a miscellaneous order No.MO/50889/2019-Ex[DB] dated 28th November 2019. Pursuant to the same, petitioner submitted their grievance before the learned Additional Commissioner, who passed a detailed order-in-original No.ALW-EXCUS-Addl-Addl.Commr. 09/2024-25 on 10th June 2024, whereby, after eliminating the stock transfers of finished goods from Delhi unit and outright purchase of finished goods by the Bhiwadi unit, being trading turnover, determined, inter alia, the excise duty liability to be only Rs. 17,34,703/-, as against the amount already deposited, i.e., Rs. 26,10,164/-, and also reduced the proportionate interest and penalty. v) Pursuant to the learned Tribunal's order dated 10th June 2024, petitioner applied, vide letter dated 03rd July 2024 (received by Respondent No.2 on 08th July 2024), before respondent No.2-Assistant Commissioner, CGST for refund of excess excise duty, interest and penalty deposited by petitioner in the year [2025:RJ-JP:33974-DB] (5 of 13) [CW-3252/2025] 2013, and further for demanding interest to be paid by respondent on the excess excise duty amounting to Rs.8,75,461/-.

7. Respondent No.1-Additional Commissioner, CGST, then issued a show cause notice No. (V) (Ref) 235/Ref Unipack/Div-D/2024-25 dated 18th July 2024 directing petitioner to show cause as to why their claim should not be rejected. Petitioner filed a detailed reply to the show cause notice dated 03rd August 2024 and also made additional submissions during the personal hearing granted by respondent No.1. Subsequently, respondent No.1 vide impugned order-in-original dated 07th October 2024, granted refund of the excess excise duty amounting to Rs.8,75,461/-. Respondent No.1, however, refused to grant interest on the excess excise duty collected, citing the provisions of Section 11BB read with Section 35FF of the Central Excise Act, 1944 (for short ‘the Act of 1944’).

8. Learned counsel for petitioner submits that the refusal to grant interest on the excise duty amounting to Rs.8,75,461/- is per se illegal and arbitrary. He prays for quashing of the order-in-original No. 04/REFUND-CE/BHD-D/2024-25 dated 07th October 2024 qua rejection of the claim of interest is concerned.

9. Mr. R. Krishnan, Learned counsel for petitioner relied upon the judgment passed by a Single Bench of this Court at Principal Seat, Jodhpur in Swastik Metals Vs. Union of India (UOI)1. He further relied upon a judgment of the Delhi High Court in Redihot Electricals Vs. Union of India and Ors.2, as well as a judgment 1 2 1990 (49) ELT 45 (Raj.) 1989 (43) ELT 253 (Del) [2025:RJ-JP:33974-DB] (6 of 13) [CW-3252/2025] of the Hon'ble Supreme Court of India in Mafatlal Industries Ltd. Vs. Union of India3. Relying on these judgments, it was submitted that this Court should award interest from the date of collection till the date of actual payment and provisions of Section 11BB of the Act of 1944, cannot be an impediment. Petitioner, in fact, was entitled to be compensated in the form of interest.

10. Per contra, the learned counsel for respondents raised preliminary objections regarding the maintainability of the writ petition, arguing that petitioner has an alternative statutory remedy of an appeal before the Joint/Additional Commissioner, CGST (Appeals), and further relied upon the various judgments referred to in the reply, qua the maintainability of the writ petition.

11. Learned counsel for respondents further submits that as per Section 11BB of the Act of 1944, the refund amount was to be paid within three months from the date of receipt of application under Sub-Section (1) of Section 11B, and as such, no interest was found admissible to petitioner. He further submits that petitioner applied for refund of the excess excise duty vide application dated 08th July 2024, whereby petitioner has merely prayed for interest at the rate of 6% p.a. whereas, in the writ petition has prayed for interest at the rate of 12% p.a., and accordingly prayed for rejection of the writ petition.

12. This Court, while dealing with the preliminary objection qua maintainability of the writ petition, finds that the preliminary objection regarding maintainability of the writ petition is not sustainable. Petitioner's contention was upheld after a chequered history of litigation. Having deposited the excess amount of excise 3 1997 (89) ELT 247 (S.C.). [2025:RJ-JP:33974-DB] (7 of 13) [CW-3252/2025] duty back in 2013, and after numerous rounds of litigation, he finally succeeded on 10th June 2024. Furthermore, his prayer for a refund was partly allowed vide order dated 07th October 2024, wherein interest on the excess excise duty amounting to Rs. 8,57,461/-, was allegedly declined arbitrarily and contrary to various judgments passed by the Hon'ble Apex Court. Therefore, relegating petitioner to the windmill of statutory appeals by filing an appeal before the Joint Commissioner will merely add on to the unjust hardships already suffered by petitioner, who has been litigating for the last 12 years for his rights. Therefore, the argument of the counsel for respondent that petitioner should avail alternative statutory remedy cannot be deemed efficacious. To settle the controversy at hand, the present writ petition is heard on merits.

13. It is an undisputed fact that petitioner's contention was finally upheld in his favour, as per the order dated 10 th June 2024. The final liability was adjudged to be Rs. 17,34,703/-, and in the present case, petitioner has deposited a sum of Rs. 26,10,164/-, as per the details mentioned below. Challan Dated Duty Deposited (Rs.)

05.02.2013

12.02.2013

05.03.2013

25.03.2013 Total Rs.5,00,000/- Rs.8,96,296/- Rs.11,04,670/- Rs.1,09,198/- Rs.26,10,164/- In addition, petitioner had also deposited a concessional penalty and interest on the duty amount mentioned above as per details hereunder (as mentioned in Para No.3 of the impugned order dated 07th October 2024):- [2025:RJ-JP:33974-DB] (8 of 13) [CW-3252/2025] Date of Deposit Penalty Interest

25.03.2013

03.04.2013 Rs.3,67,283/- Rs.3,46,777/- Rs.27,300/- Rs.1,09,198/-

14. In the impugned order dated 07th October 2024, the following was observed by respondent No.2: "23. Now, I take up the third issue of admissibility of refund of excess paid duty, interest and penalty of Rs. 8,75,461/-, Rs. 2,51,497/- and Rs. 1,34,378/- respectively. I find that the adjudication authority vide OIO dated 10.07.2024 has confirmed that the Central Excise Duty liability as Rs. 17,34,703/- and has appropriated the same in the Govt. account. Whereas, the assessee had deposited an amount of Rs. 26,10,164/- towards the same. As such, it is indubitably clear that an amount of Rs. 8,75,461/- Rs. 2610,164/- minus Rs. 17,37,304/-) has been deposited in excess than what was required to be deposited in discharge of their Central Excise Duty liability. So the question arises as to whether the said excess amount of Rs. 8,75,461/- is refundable to the assessee or not?

24. I find that the Central Excise Law does not say anything as to whether the said excess amount so collected or deposited by the assessee is refundable neither does it say anything that the said excess amount shall be retained with the Govt. As such, I find that the law is silent about it. Whereas, I find that the Hon'ble Apex Court in its judgement in the case of UOI vs ITC Ltd. 1993(67)E.L.T.3(S.C.) observed that- Writ jurisdiction - Refund -Limitation - Duty collected without authority of law - Bar of limitation as provided for in Section 11B of Central Excises and Salt Act, 1944 not applicable when assessee not guilty of any laches in claiming refund - Article 226 of Constitution of India. - It has been settled by this Court that where excess duty was not payable by the party under the provisions of a statute but had in fact been paid under a mistake of law, the party has a right to recover it and there is a corresponding legal obligation on the part of the Government to refund the excess duty so collected because the collection in such cases would be without the authority of law. The payment and recovery of excess excise duty was thus on account of a mutual mistake. We are, therefore, of the opinion that the High Court, while disposing of the writ petition under Article 226 of the Constitution of India, was perfectly justified in [2025:RJ-JP:33974-DB] (9 of 13) [CW-3252/2025] holding that the bar of limitation which had been put against the respondent by the Collector of Central Excise (Appeals) to deny them the refund for the period 1-9-1970 to 28- 5-1971 and 1-6-1971 to 19-2-1972 was not proper as admittedly the respondent had approached the Assistant Collector Excise soon after coming to know of the judgment in Voltas case and the assessee was not guilty of any laches to claim refund. [paras 5. 6. 7. 8]

26. Besides the above I also find force in the contention of the assessee put forth vide their reply dated 03.08.2024 and the various case laws cited therein that any amount collected without authority of law cannot be retained by the Govt. and has to be returned to the assessee in terms of article 256 and 226 of the Constitution of India. Thus, I find that the excess amount of Central Excise Duty of Rs. 8,75,461/- so collected and retained by the Department is refundable to the assessee."

15. From a bare perusal of the record, it is evident that petitioner was forced to pay the excess excise amount from their meager source, and that respondents have collected the same, retaining and enjoying the benefits of this money for an extended period of time without any lawful authority. Thereafter, the argument advanced by the learned counsel for respondents that petitioner is not entitled to any interest cannot be accepted in the teeth of the judgment of the Hon'ble Apex Court in the matter of Mafatlal Industries Ltd. (supra), where it was held as under: "69. ......the person who paid the tax is entitled to claim refund and such a claim cannot be governed by the provisions in Rule 11/Section 11-B. The very collection and/or retention of tax without the authority of law entitles the person, from whom it is collected, to claim its refund. A corresponding obligation upon the State to refund it can also be said to flow from it. This can be called the right to refund arising under and by virtue of the Constitutional provisions, viz., Article 265. ......

163. ......the State cannot be permitted to levy any tax without authority of law and if any tax has been collected unlawfully that must be restored to the person from whom it was collected. If the tax has been collected from any person unlawfully, it is the taxpayer's money that is in unlawful possession of the State. The State has a constitutional [2025:RJ-JP:33974-DB] (10 of 13) [CW-3252/2025] obligation to give back the money to the tax payer. An act done in violation of constitutional mandate is void and no right flows out of that void act to the State. The State is in unlawful possession of the taxpayer's property. The State cannot retain it on any equitable ground nor can it give it to any other person out of any supposed equitable consideration. The constitutional mandate cannot be ignored on the pretext of any rule of equity or on the ground of what is perceived as substantive justice. ......"

16. Apart from the above, in Redihot Electricals (supra), with which we respectfully agree, it was held as under: "13. ......It is a clear case of unjust recovery and illegal retention of the hard-earned money of the private undertaking and or of the little persons having meagre income, Krishna Aiyer, J. speaking for the Court in M/s. Shiv Shankar Dal Mills and others Vs. State of Haryana and others MANU/SC/0032/1979 : [1980]1SCR1170 under similar circumstances observed: "Where public bodies, under colour of public laws, recover people's money. later discovered to be erroneous levies, the dharma of the situation admits of no equivocation there is no law of limitation, especially for public bodies, on the virtue of returning what was wrongly recovered to whom it belongs. Nor it is palatable to our jurisprudence to turn down the prayer for high prerogatives writs on the negative plea of "alternative remedy" since the root principle of law married to justice is ubi jus ibi remedium." ..... Further on, the Court observed : "Another point. In our jurisdiction, social justice is a pervasive presence; and so, save in special situations, it is fair to be guided by the strategy of equity by asking those who claim the service of the judicial process to impress the basic rule of distributive justice, while Moudling the relief by consenting to restore little sums taken in little transactions, from little persons to whom they belong."

14. ......Interest is the return or compensation for the use or retention of another's monies. The contentions of the respondents in this case are not tenable. The applicants were forced to pay the amount from their meagre resources to beat the dead line. Some advances were secured from the banks on interest. The respondents have collected, retained, and enjoyed the benefit of this ill-gotten money for a sufficiently long time without the authority of law. Under these circumstances, the applicant [2025:RJ-JP:33974-DB] (11 of 13) [CW-3252/2025] is entitled to interest. It is just and proper that the respondents should pay interest at the rate of 12% p.a. from the date of collection of the amount till the date of actual payment. It is ordered accordingly." (emphasis supplied)

17. That a similar view has already been taken in the matter of Swastik Metals (supra), where it was held as under: "16. In the result, I allow this writ petition and S.B. Civil Writ Petition 1744/89 and 1745/1989 for the reasons mentioned above and direct the respondents to refund the amount of the excise duty charged with 12% per annum interest from the date of actual payment to the date of refund. The respondents are directed to make payment of the amount with interest as aforesaid within a period of 4 months from today."

18. Further, in a judgment of the Bombay High Court in the matter of Vinoda B. Jain Vs. Jt. Commissioner of Income-tax & Ors.4, while considering the ratio laid down in Sandvik Asia Ltd. Vs. Commissioner of Income Tax-I & Ors.5, it was observed as follows: "33. The Hon'ble Supreme Court in a case of Sandvik Asia Ltd. (supra) while dealing with the claim for payment of interest under section 214 of the Act, 1961 made by the petitioner whether there was gross delay on the part of the revenue ranging from 12 to 17 years held that, there is no question of the delay being 'justifiable' as is argued and in any event if the revenue takes an erroneous view of the law, that cannot mean that the withholding of monies is 'justifiable' or 'not wrongful'.

34. The Hon'ble Supreme Court considered the issue that, this Act provided for payment of compensation for delayed payment of amounts due to an assessee in a case where these amounts include interest? It is held that, the Act recognizes the principle that a person should only be taxed in accordance with law and hence where excess amounts of tax are collected from an assessee or any amounts are wrongfully withheld from an assessee without authority of law the revenue must compensate the assessee. The Hon'ble Supreme Court in that matter directed the revenue to pay interest at the rate of 9% p.a. from the date it became payable till 4 5 (2024) 462 ITR 58 (Bom) (2006) 2 SCC 508 [2025:RJ-JP:33974-DB] (12 of 13) [CW-3252/2025] the date it was actually paid holding the revenue solely responsible for the delayed payment.

36. In our view the principles laid down by the Hon'ble Supreme Court of India in a case of Sandvik Asia Ltd. (supra) would apply to the facts of this case. The respondents were solely responsible for the gross delay in not releasing the cash amount of the petitioners under section 132B(4)(b) of the Act, 1961 and thus cannot refuse the payment of compensation to the petitioners for wrongfully withholding the said amount from the date of assessment order till payment." (emphasis supplied)

19. One thing, therefore, is evident from the judgments relied upon by petitioner that social justice is a pervasive presence and so, save in special situations, it is fair to be guided by the strategy of equity. Interest is the return or compensation for the use or retention of another's monies. Petitioner paid the amount from its meagre resources. Petitioner would have perhaps even borrowed money to pay. Respondents have collected, retained and enjoyed the benefits of this money for a sufficiently long time without the authority of law. Petitioner had to run from pillar to post to get his money. Therefore, in our view, borrowing from the words of His Lordship V.R. Krishna Iyer (as he then was), we can even mould the relief by consenting to restore little sums taken in little transactions from little persons to whom they belong.

20. Therefore, in view of the facts stated hereinabove, the law propounded in the judgments cited above, it is evident that the very collection and retention of excess excise duty by respondents was without the authority of law; therefore, respondents are under a statutory obligation to refund the same with interest from the date of actual deposit. [2025:RJ-JP:33974-DB] (13 of 13) [CW-3252/2025]

21. Therefore, the rejection of the interest on the excess excise duty amount of Rs.8,75,461/- claim in the impugned order dated 07th October 2024, is unsustainable in the eyes of law. Accordingly, the impugned order dated 07th October 2024 to the extent of denying the claim of interest on the excess excise duty (Rs.8,75,461/-) is hereby quashed and set aside.

22. It is pertinent to mention here that petitioner had deposited this excessive excise duty back in 2013, i.e., a lapse of 12 years has transpired ever since, and had petitioner utilised the refund amount (Rs.8,75,461/-) for his working capital, petitioner would have multiplied the same much more than the interest @ 12% p.a. Therefore, in order to compensate petitioner for the unjust hardship suffered at the hands of arbitrary action by respondents, we are inclined to award interest @ 12% p.a. on the refund amount, i.e., Rs.8,75,461/-.

23. Resultantly, this present writ petition stands allowed.

24. For the reasons mentioned above, this Court directs respondents to refund the excess excise duty amount of Rs. 8,75,461/- with interest at the rate of 12% per annum. The interest shall be calculated from the date of the actual payment of each installment of the excess amount until the date of its refund. Respondents are directed to make payment of the interest amount, within a period of six weeks from today.

25. All other pending application(s), if any, stand disposed. (MANEESH SHARMA),J (K.R. SHRIRAM),CJ Seema/19