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Andhra Pradesh High Court
Judges : ALLADI KUPPUSWAMI, RAMANUJULU NAIDU
Kesoram Cements, Basantnagar - Appellant
Versus
Union of India - Respondent
Decided On : 12-31-81
EXCISE DUTY - LEVY ON COST OF JUTE BAGS - ILLEGALITY - REFUND - DOCTRINE OF UNJUST ENRICHMENT - APPLICABILITY - CENTRAL EXCISES AND SALT ACT, 1944 (1 OF 1944), SEC. 4 - CENTRAL EXCISE RULES, 1944, R. 11.
Fact of the Case:
The petitioner-company, engaged in the manufacture of cement, challenged the levy of excise duty on the cost of jute bags in which the excisable commodity of cement was packed and sold between 1-10-1975 and 8-1-1976. The company paid the duty under protest and sought a refund of the same.
Finding of the Court:
The court held that the levy of excise duty on the cost of jute bags was illegal and without authority of law. The court also held that the doctrine of unjust enrichment was not applicable in the present case and that the company was entitled to a refund of the excise duty paid under protest.
Issues: 1. Whether the levy of excise duty on the cost of jute bags was legal and valid? 2. Whether the doctrine of unjust enrichment was applicable in the present case? 3. Whether the company was entitled to a refund of the excise duty paid under protest?
Ratio Decidendi: 1. The court held that the levy of excise duty on the cost of jute bags was illegal and without authority of law because: a. The Central Excises and Salt Act, 1944 (1 of 1944), Section 4, did not authorize the levy of excise duty on the cost of jute bags. b. The Central Excise Rules, 1944, Rule 11, which provided for the refund of duties or charges erroneously paid, did not apply to cases where the duty was collected without authority of law. 2. The court held that the doctrine of unjust enrichment was not applicable in the present case because: a. The company had paid the excise duty under protest, which indicated that it did not intend to pass on the burden of the duty to its consumers. b. The company had undertaken to reimburse its consumers or the ultimate consumers in respect of the amounts of excise duty collected from them on the cost of jute bags. 3. The court held that the company was entitled to a refund of the excise duty paid under protest because: a. The levy of excise duty on the cost of jute bags was illegal and without authority of law. b. The doctrine of unjust enrichment was not applicable in the present case.
Final Decision: The court quashed the order confirming the levy of excise duty on the cost of jute bags and issued a writ of mandamus directing the respondents to refund the same amount to the petitioner-company.
RAMANUJULU NAIDU, J.
( 1 ) IN this Writ Petition the legality of levy of exercise duty in a sum of Rs. 22,55,795. 76 on the cost of jute bags in which excisable commodity of cement manufactured by the petitioner-company, hereinafter referred to as the Company, was packed and sold between 1-10-1975 and 8-1-1976 is questioned and refund of the amount of excise duty paid by the Company under protest prior to or at the time of the removal of the commodity is prayed for.
( 2 ) IN W. P. No. 1532 of 1976 filed by the K. C. P. Limited, engaged in manufacture of cement at Macherla, Guntur District, an identical question was raised and answered in favour of the assessee therein by a Division Bench of this Court consisting or one of us and Sri Kondaiah, the former Chief Justice. The said Writ Petition was disposed of along with a batch of Writ Petitions filed by some other assessees in which the scope of Section 4 of the Central Excise and Salt Act, 1944 as amended by the Central Excise and Salt (Amendment) Act, 1973 which came into force on 1-10-1975, was canvassed. The decision of the Division Bench was reported in Indo-National Limited, Nellore-4 and others vs. Union of India and others, 1979 ELT 334 (AP ). In paragraph 63 of the judgment, which disposing of the batch of Writ Petitions, the Division Bench observed :". . . . . . . . THE only question raised by the petitioner-company is the legality of levy of excise duty on the cost of jute bags in which the excisable goods manufactured by the Company were packed and sold between 1-10-1975 to 8-1-1976. Admittedly, even after the amended Section 4 came into force, till 4-12-1975, the excise authorities did not include the cost of jute bags in the assessable value. However, from 5-12-1975 to 9-1-1976, the excise authorities made a demand in a sum of Rs. 2,08,791. 05 towards excise duty on the cost of jute bags. The petitioner objected to the demand, but, however, paid the amount under protest. For the earlier period between 1-10-1975 and 4-12-1975, a demand was subsequently made by the 3rd respondent in a sum of Rs. 3,85,835. 46 towards excise duty on the cost of jute bags on the ground that by mistake the sum was not collected earlier. For the reasons assigned by us, while dealing with the claim of exclusion of the cost of packing in Writ Petition No. 5948 of 1975, we hold that the cost of jute bags in which the goods of the company were packed and sold is not liable to be included in the assessable value of the goods. We may also observe that, realising the mistake committed by the excise authorities, the Government of India also issued the notification dated 9-1-1976 exempting payment of excise duty on the cost of jute bags in which cement is packed and sold by the manufacturers of cement. The petitioner-company is, therefore, entitled to refund of the amount of excise duty on the cost of jute bags levied and collected between 5-12-1975 and 8-1-1976. The demand dt. 31-3-1976 made upon the petitioner for payment of excise duty in a sum of Rs. 3,85,835. 46 on the cost of jute bags for the period from 1-10-1975 to 4-12-1975 is, therefore, liable to be quashed. "following the decision of the Division Bench, we quash the order dated 11-8-1978 passed by the 3rd respondent confirming the levy of excise duty, in a sum of Rs. 22,55,795. 76 on the cost of jute bags in which the excisable duty of cement manufactured by the Company was packed and sold between 1-10-1975 and 8-1-1976.
( 3 ) SRI K. Srinivasamurthy, learned counsel for the Company submits that the Company is entitled to the consequential relief of refund of the amount of excise duty paid under protest. Sri K. Subrahmanya Reddy, learned counsel appearing for the respondents strenuously contends that the entire amount of excise duty levied and collected from the Company was passed on by the Company to its consumers and that any refund of the amount of excise duty to the Company, if ordered, would amount to unjust enrichment of the Comp
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