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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE S NAINAR SUNDARAM
Soft Beverages Private Limited, Madurai - Appellant
Versus
Union of India and Another - Respondent
Case No : W.P. No. 3604 of 1979
Decided On : 29 September 1981
EXCISE DUTY - REFUND - MISTAKE OF LAW - PETITIONER PAID EXCISE DUTY UNDER A MISTAKE OF LAW - DEPARTMENT APPROVED THE CLASSIFICATION LIST OF GOODS VOLUNTARILY FILED BY THE PETITIONER - PETITIONER CANNOT BE ESTOPPED FROM CLAIMING REFUND - PETITIONER CANNOT BE DENIED REFUND ON THE GROUND OF UNJUST ENRICHMENT - WRIT PETITION ALLOWED.
Fact of the Case:
The petitioner, an authorized bottler of Coca Cola Export Corporation, paid excise duty under a misconception of the law and facts. The petitioner discovered the mistake only after the judgment of the Bombay High Court in W.P. 944 of 1973, -Messrs Duke & Sons Ltd.v.Superintendent, Central Excise, dated 8/11-10-1976. The petitioner filed a claim for refund for the period from 26-7-1976 to 16-6-1977, which was rejected by the second respondent. The petitioner preferred an appeal before the Appellate Collector of Customs and Central Excise, Madras, which was also rejected. The petitioner preferred a revision before the first respondent, challenging the order of the Appellate Collector. The first respondent allowed the revision since the claim of the petitioner for refund is limited to the period which is not barred under rule 11 of the Central Excise Rules.
Finding of the Court:
The court held that the petitioner is entitled to refund of the excise duty paid under a mistake of law. The court further held that the petitioner cannot be estopped from claiming refund on the ground that it had voluntarily filed a classification list of its goods and paid duty under a procedure called 'self removal procedure'. The court also held that the petitioner cannot be denied refund on the ground of unjust enrichment.
Issues: 1. Whether the petitioner is entitled to refund of the excise duty paid under a mistake of law? 2. Whether the petitioner can be estopped from claiming refund on the ground that it had voluntarily filed a classification list of its goods and paid duty under a procedure called 'self removal procedure'? 3. Whether the petitioner can be denied refund on the ground of unjust enrichment?
Ratio Decidendi: 1. The court held that the petitioner is entitled to refund of the excise duty paid under a mistake of law, relying on the following principles: * A mistake of law is a ground for recovery of money paid under a mistake. * The petitioner paid duty under a misconception of the law and facts. * The petitioner discovered the mistake only after the judgment of the Bombay High Court in W.P. 944 of 1973, -Messrs Duke & Sons Ltd.v.Superintendent, Central Excise, dated 8/11-10-1976. * The petitioner filed a claim for refund for the period from 26-7-1976 to 16-6-1977, which was rejected by the second respondent. * The petitioner preferred an appeal before the Appellate Collector of Customs and Central Excise, Madras, which was also rejected. * The petitioner preferred a revision before the first respondent, challenging the order of the Appellate Collector. * The first respondent allowed the revision since the claim of the petitioner for refund is limited to the period which is not barred under rule 11 of the Central Excise Rules. 2. The court held that the petitioner cannot be estopped from claiming refund on the ground that it had voluntarily filed a classification list of its goods and paid duty under a procedure called 'self removal procedure', relying on the following principles: * There is no question of estoppel when the mistake of law is common to both the parties. * In the present case, the mistake of law was common to both the petitioner and the Department. 3. The court held that the petitioner cannot be denied refund on the ground of unjust enrichment, relying on the following principles: * The court cannot deny refund of tax even if the person who paid it has collected it from his customers and has no subsisting liability or intention to refund it to them. * The petitioner can hold the amount refunded in trust for the ultimate consumers and the petitioner can be made liable as a trustee to refund the duty pro rata to the actual consumers as and when they make their claims.
Final Decision: The writ petition was allowed, directing the refund of the amount as prayed for within three months from the date of the judgment. The petitioner was directed to keep the amount refunded in trust for the actual consumers or purchasers and it shall be refunded pro rata to the actual consumers or purchasers as and when claims are made by them with interest.
The prayer in the writ petition is for the issue of aWrit of Mandamus, directing the respondents to refund to the petitioner a sum of Rs. 13, 01, 628.15, being the amount paid by it over and above ten per cent.ad valoremduty in respect of its products Coca Cola and Fanta declared by them from 17-3-1976 to 25-7-1976, as per the chart marked annexure A to the petition. The petitioner has approached the court under the following circumstances. The petitioner was the authorised bottler of Coca Cola Export Corporation for bottling Coca Cola and Fanta. The formulae for the said two soft drinks were supplied by Coca Cola Export Corporation and the petitioner used to manufacture Coca Cola and Fanta and market them. There is no dispute now, the manufacture by the petitioner of the above products was not by the use of blended flavouring concentrates in any form. Yet, due to a misconception of the legal and factual position, the petitioner used to declare that its products fall under Central Excise Tariff Item 1-D(1) (a) and paid 26 paise by way of excise duty per bottle. The products Coca Cola and Fanta factually and legally would only come under Central Excise Tariff Item 1-D(2) and not under 1-D(1) (a) and by virtue of a notification bearing No. 56/76, Central Excise, dated 16-3-1976, the duty to be payable was only 10 per cent. The mistake was discovered only later and Mr. B.R. Dolia, learned Counsel for the petitioner, states that the mistake was discovered only after the judgment of the Bombay High Court in W.P. 944 of 1973, -Messrs Duke & Sons Ltd.v.Superintendent, Central Excise, dated 8/11-10-1976. For the period from 26-7-1976 to 16-6-1977, the petitioner made a claim for refund. The second respondent rejected even that claim by order dated 24-11-1977, though the claim was within time. Aggrieved by that order, the petitioner preferred an appeal before the Appellate Collector of Customs and Central Excise, Madras and the said appeal was also rejected by order dated 16-3-1979. The petitioner preferred a revision before the first respondent, challenging the order of the Appellate Collector. The matter stood thus at the time of the filing of the writ petition. On the basis that excise duty under a wrong tariff item was paid by the petitioner on a misconception of the law and facts, the petitioner has approached this court with the prayer set out above. It is now brought to my notice that by order dated 10-3-1981, the first respondent has allowed the revision since the claim of the petitioner for refund is limited to the period which is not barred under rule 11 of the Central Excise Rules. The writ petition has beem is fled on 12-6-1979. It is now well settled that the period of limitation prescribed for recovery of money paid under a mistake of law is three years from the date when the mistake is known and that period may ordinarily be taken to be a reasonable standard for which delay in seeking remedy under Art. 226 of the Constitution of India can be measured. If the date of the judgment of the Bombay High Court referred to above is counted as the date of discovery of the mistake, it is not possible to reject the claim of the petitioner on the ground of delay alone.
2.None of the above statements of fact is being disputed by the respondents. Mr. K.N. Balasubramaniam, learned Counsel for the respondents, would urge only two factors to counteract the claim of the petitioner. One is that the petitioner paid duty under a procedure called 'self removal procedure' and the petitioner having filed a classification list of its goods voluntarily stating that the aerated water manufactured by it contained blended flavouring concentrates, the rate of duty attracted by it being the maximum, the department approved it and the petitioner is estopped from resiling from its previous stand and claim refund on a ground of either mistake of law or of fact. The second ground that is sought to be put against the claim of the petitioner is t
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