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'REPORTABLE'

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3600 OF 2006

COMMISSIONER OF CENTRAL EXCISE,  TIRUCHIRAPALLI

.....APPELLANT(S)

VERSUS

M/S. DALMIA CEMENT (BHARAT) LTD. .....RESPONDENT(S)

J U D G M E N T

A.K. SIKRI, J.

On  an  application  under  Section  35G(3)  of  the  Central

Excise  Act,  1944  (hereinafter  referred  to  as  the  'Act'),  the

Customs  Excise  and  Gold  (Control)  Appellate  Tribunal

(hereinafter  referred  to  as  the  'CEGAT')  referred  the  following

question to the High Court of Delhi for its opinion :-

“Whether Section 11B of the Central Excise Act, as amended, applies to cases where though an order has been passed directing refund, implementation of the order is pending?”

2) The High Court has answered the aforesaid question in favour of

assessee  holding  that  since  the  proceedings  under  the  old

Section  11B  of  the  Act  had  attained  finality,  the  amended

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provision  of  Section  11B  of  the  Act,  in  particular,  proviso  to

sub-section (1)  shall  not  apply. In other words,  the principle of

'unjust enrichment' which was introduced by way of amendment

of  Section  11B in  the  year  1991  shall  not  be  attracted  in  the

instant case as the proceedings under the unamended Section

stood  finalised  with  the  direction  in  the  application  filed  under

unamended Section 11B of the Act to refund the excise duty that

was paid by the respondent/assessee.  To put it pithily, the High

Court  has  held  that  merely  because  implementation  of  the

aforesaid order was pending, in the sense that direction to refund

the amount had not been carried out, the authority could not go

into the question of unjust enrichment by invoking the proviso to

sub-section (1) of Section 11B of the Act that had been introduced

by that  time by way of  amendment  in  Section 11B of  the Act.

Therefore, it was not open to the concerned officer, who was only

supposed to carry out the implementation of the order, to go into

the question as to whether there was any unjust enrichment on

the part of the assessee or not. In coming to this conclusion, the

High Court has extensively referred to a 9-Judge Bench of this

Court  in  the  case  of  Mafatlal  Industries  Ltd.  and  Others  v.

Union of India and Others1.  

1 (1997) 5 SCC 536

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3) It is not disputed before us that the law laid down in the aforesaid

judgment would be applicable. However, the appellant contends

that there is a small window left open in the said judgment which

would cover the situation that has arisen in the present case. As

per the case set up by the appellant, even where order is yet to

be implemented, though passed under the unamended provision,

at  this  stage  of  implementation  as  well  the  question  of  unjust

enrichment can be gone into by the concerned authority.

4) We may point out at this stage itself that Section 11B, as it existed

prior  to  its  amendment  in  the  year  1991,  did  not  contain  any

provision of unjust enrichment. Thus, if the assessee was entitled

to refund of duty under the Act, it could make an application for

such a refund to the Assistant Collector of Central Excise before

the expiry of six months from the refund date and the procedure

how such application is to be dealt with was stipulated in the said

provision. This Section was amended with effect from 20.09.1991

by Central  Excise and Customs Laws (Amendment)  Act,  1991.

Under the amended provision, while considering the application

for refund, the Assistant Collector of Central Excise is empowered

to go into the question as to whether incidence of such duty has

been  passed  on  by  the  person  claiming  refund  to  any  other

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person. If the claimant has passed on the incidence of excise duty

to other person then the application for refund can be rejected on

the  ground  that  it  would  amount  to  unjust  enrichment  to  that

person who is not out of pocket even when the excise duty was

paid in excess etc. Proviso to this sub-section (1) further provides

that  even  when  application  for  refund  was  filed  before  the

amendment of this Section and still pending, it shall be deemed

that such an application made under amended sub-section (1) of

Section 11B of the Act and is to be dealt with in accordance with

the provisions of sub-section (2), substituted by the amendment.

Thus, the applications even filed under the unamended Act, if not

disposed of and still pending, are to be treated as filed under the

amended Section 11B and the consequence thereof is that even

in  respect  of  such  applications  doctrine  of  “unjust  enrichment”

would be applicable. In this scenario, when an application was not

pending,  in  the  sense  that  orders  thereon  had  already  been

passed directing refund but the amount had not been refunded so

far, we have to determine as to whether such a situation has also

to be dealt with under the amended section thereby bringing into

operation  the  doctrine  of  “unjust  enrichment”?  As  mentioned

above, the High Court has answered this question in the negative

and this Court is called upon to decide the veracity of the said

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view taken by the High Court in the instant appeal.    

5) The facts which need to be noted for the purposes of this appeal

do not need a large canvass and are recapitulated in brief,  as

under:

6) 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

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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 inasmuch 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

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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.  Again,  as  pointed out  above,  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.”

7) On the basis of  what  is  pointed out  above,  it  is  clear  that  the

exercise to be undertaken is  to  find out  the ratio  laid down in

Mafatlal Industries Ltd. (supra) in the given situation. Before we

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advert  to the same, we deem it  appropriate to refer  to,  at  this

stage, unamended and amended provisions of Section 11B.

“Section 11B: Claim for refund of duty  (1) Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant  Collector  of  Central  Excise  before  the expiry of six months from the relevant date.

Provided that the limitation of six months shall not apply where any duty has been paid under protest.  

(2)   If  on  receipt  of  any  such  application,  the Assistant  Collector  of  Central  Excise  is  satisfied that the whole or any part of the duty of excise paid by the applicant should be refunded to him, he may make an order accordingly.

(3)   Where  as  a  result  of  any  order  passed  in appeal or revision under this Act refund of any duty of  excise  becomes  due  to  any  persons  the Assistant  Collector  of  Central  Excise  may refund the amount  to such person without  his having to make any claim in that behalf.

(4)   Save as otherwise provided by or under this act, no claim for refund of any duty of excise shall be entertained.

(5)    Notwithstanding  anything  contained  in  any other law, the provisions of this Section shall also apply to a claim for refund of any amount collected as  duty  of  excise  made  on  the  ground  that  the goods  in  respect  of  which  such  amount  was collected  were  no  excisable  or  were  entitled  to exemption from duty and no court shall have any jurisdiction in respect of such claim.”

8) After 1991 amendment, the material part of Section 11B reads as

follows:

“11B. Claim for refund of duty and interest, if any, paid on such duty.—(1) Any person claiming refund

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of any duty of excise and interest, if any, paid on such duty may make an application for refund of such [duty and interest, if any, paid on such duty to the  Assistant  Commissioner  of  Central  Excise  or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application  shall  be  accompanied  by  such documentary  or  other  evidence  (including  the documents  referred  to  in  section  12A)  as  the applicant may furnish to establish that the amount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest,  if  any, paid on such duty had  not  been  passed  on  by  him  to  any  other person:

Provided  that  where  an  After  1991 amendment,  the material  part  of  Section  11B reads as follows:application for refund has been made  before  the  commencement  of  the  Central Excises  and  Customs  Laws  (Amendment)  Act, 1991  (40  of  1991),  such  application  shall  be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt  with  in  accordance  with  the  provisions  of sub-section (2) as substituted by that Act:  

Provided further  that  the  limitation  of  one year shall not apply where any duty and interest, if any,  paid  on  such  duty  has  been  paid  under protest.

(2)  If,  on  receipt  of  any  such  application,  the Assistant  Commissioner  of  Central  Excise  or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest,  if  any,  paid  on  such  duty  paid  by  the applicant  is  refundable,  he  may  make  an  order accordingly and the amount so determined shall be credited to the Fund:

Provided that the amount of [duty of excise and  interest,  if  any,  paid  on  such  duty  as determined  by  the  Assistant  Commissioner  of Central Excise or Deputy Commissioner of Central

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Excise  under  the  foregoing  provisions  of  this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if  such amount is relatable to--  

(a)  rebate  of  duty  of  excise  on  excisable  goods exported  out  of  India  or  on  excisable  materials used  in  the  manufacture  of  goods  which  are exported out of India;

(b)  unspent  advance deposits  lying in balance in the applicant's account current maintained with the Commissioner of Central Excise or Commissioner of Central Excise;

(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued,After 1991 amendment, the  material  part  of  Section  11B  reads  as follows: under this Act;

(d) the duty of excise and interest, if any, paid on such duty paid by the manufacturer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;

(e) the duty of excise and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;  

(f) the duty of excise and interest, if  any, paid on such  duty  borne  by  any  other  such  class  of applicants  as  the  Central  Government  may,  by notification in the Official Gazette, specify:  

Provided  further  that  no  notification  under clause (f) of the first proviso shall be issued unless in  the  opinion  of  the  Central  Government  the incidence of duty and interest, if any, paid on such duty  has  not  been  passed  on  by  the  persons concerned to any other person.

(3)  Notwithstanding  anything  to  the  contrary contained  in  any  judgment,  decree,  order  or direction of the Appellate Tribunal or any Court in any other provision of  this Act or the rules made

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thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2).

(4)  Every  notification under  clause (f)  of  the first proviso to sub-section (2) shall be laid before each House of Parliament, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven days of its reassembly, and the Central  Government  shall  seek  the  approval  of Parliament to the notification by a resolution moved within a period of  fifteen days beginning with the day on which the notification is so laid before the House of the People and if Parliament makes any modification  in  the  notification  or  directs  that  the notification  should  cease  to  have  effect,  the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done thereunder.

(5) For the removal of doubts, it is hereby declared that any notification issued under clause (f) of the first proviso to sub-section (2), including any such notification approved or modified under sub-section (4), may be rescinded by the Central Government at any time by notification in the Official Gazette.

Explanation.--For the purposes of this section,--

(A) "refund" includes rebate of  duty  of  excise on excisable  goods  exported  out  of  India  or  on excisable  materials  used  in  the  manufacture  of goods which are exported out of India;

(B) "relevant date" means,--

(a)  in  the  case  of  goods  exported  out  of  India where a refund of excise duty paid is available in respect  of  the goods themselves or, as the case may  be,  the  excisable  materials  used  in  the manufacture of such goods,--

(i) if the goods are exported by sea or air, the date on  which  the  ship  or  the  aircraft  in  which  such goods are loaded, leaves India, or

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(ii) if the goods are exported by land, the date on which such goods pass the frontier, or

(iii) if the goods are exported by post, the date of dispatch of goods by the Post Office concerned to a place outside India;

(b) in the case of goods returned for being remade, refined,  reconditioned,  or  subjected  to  any  other similar process, in any factory, the date of entry into the factory for the purposes aforesaid;  

(c)  in  the  case of  goods to  which banderols  are required  to  be  affixed  if  removed  for  home consumption  but  not  so  required  when  exported outside India, if  returned to a factory after having been removed from such factory for export out of India, the date of entry into the factory;

(d) in a case where a manufacturer is required to pay a sum, for a certain period, on the basis of the rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for  the  duty  leviable  on his  production  of  certain goods,  if  after  the  manufacturer  has  made  the payment on the basis of such rate for any period but  before  the  expiry  of  that  period  such rate  is reduced, the date of such reduction;

(e)  in  the  case  of  a  person,  other  than  the manufacturer, the date of purchase of the goods by such person;  

(ea) in the case of goods which are exempt from payment of  duty by a special  order issued under sub-section (2) of section 5A, the date of issue of such order;

(eb)  in  case  where  duty  of  excise  is  paid provisionally  under  this  Act  or  the  rules  made thereunder, the date of adjustment of duty after the final assessment thereof;

(ec) in case where the duty becomes refundable as a  consequence  of  judgment,  decree,  order  or direction of  appellate authority, Appellate Tribunal or any court,  the date of  such judgment,  decree,

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order or direction;

(f) in any other case, the date of payment of duty.”

9) We have already narrated the facts and events in the instant case

in  detail  above.  However,  it  is  pertinent  to  keep  in  mind  that

applications  for  refund  of  excise  which  were  preferred  by  the

assessee  had  already  been  allowed  finally  by  the  orders  of

CEGAT  dated  01.06.1989  and  06.06.1989.  This  obviously

happened before the amendment in the Section in the year 1991.

At the same time, the refund had not been actually paid to the

assessee till 1991 when the provisions of Section 11B came to be

amended.  We now advert to the decision in the case of Mafatlal

Industries Ltd. (supra).

10) It is a nine Judge Bench decision. Majority opinion was delivered

by B.P. Jeevan Reddy, J. for himself and on behalf of four other

Judges. K.S. Paripoornan, J. and S.C.Sen, J. wrote their separate

opinions.  Hansaria, J. agreed with the conclusions and reasoning

of  Paripoornan,  J.  However,  insofar  as  issue  at  hand  is

concerned, they concurred with the majority opinion rendered by

B.P. Jeevan Reddy, J.  Thus, eight out of nine Judges have taken

the same view. A.M. Ahmadi, the then Chief Justice, was the only

dissenting Judge, who took contrary view on this particular issue.

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With this background in mind, we reproduce the following relevant

portions from the opinion of B.P. Jeeven Reddy, J.:

“57. The first decision of this Court to consider the amended Section 11-B is in  Union of India v. Jain Spinners Ltd (1992) 4 SCC 389 The validity of the 1991  (Amendment)  Act  was,  however,  neither raised nor considered by the court. The impugned orders of the High Court, made before the coming into force of the 1991 (Amendment) Act, directing refund  of  the  excess  duty  collected  to  the manufacturers,  this  Court  held,  would  defeat  the provisions  of  amended  Section  11-B  which  had come into force during the pendency of the refund proceedings.  The Court  held  that  so long as the refund  proceedings  are  pending,  the  amended provisions  get  attracted  and  disentitle  the manufacturer-payer  from  claiming  any  refund contrary to the said provisions. In other words, the contention of the manufacturers that the amended Section  11-B  applies  only  to  claims  of  refund arising  after  the  coming  into  force  of  the  said Amendment Act was rejected.

96. There  is  yet  another  circumstance:  Section 12-B does not create a new presumption unknown till  then;  it  merely  gives  statutory  shape  to  an existing situation, as explained hereinbefore. At the most, it can be said that there were two views on the subject and Section 12-B affirms one of them. Even without Section 12-B, the true position is the same,  as  held  by  us  in  the  earlier  part  of  this judgment. The obligation to prove that duty has not been passed on to another person is always there as a precondition to claim of refund. It cannot also be said that by giving retrospective effect to Section 11-B,  any  vested  rights  or  substantive  rights  are being taken away. The deprivation, if at all, is not real.  The manufacturer  has  already collected  the duty from his purchaser and has thus reimbursed itself. By applying for refund yet, he is trying to reap a windfall; deprivation of that cannot be said to be real or substantial prejudice or loss. A manufacturer had no  vested legal right to refund even when he had passed on the burden of duty to others. No law conferred such a right in him — not Article 265, nor

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Section 11-B. It was only on account of an incorrect view  of  law  taken  in  Kanhaiya  Lal 1959  SCR 1350 : AIR 1959 SC 135 : (1958) 9 STC 747 and that  cannot  be  treated  as  a  vested  legal  right. Correction  of  judicial  error  does  not  amount  to deprivation  of  vested/substantive  rights,  even though  a  person  may  be  deprived  of  an unwarranted  advantage  he  had  under  the overruled decision. In cases, where the burden is not passed on, there is no prejudice; he can always get the refund.

97.  There  is  yet  another  circumstance:  Section 12-B does not create a new presumption unknown till  then;  it  merely  gives  statutory  shape  to  an existing situation, as explained hereinbefore. At the most, it can be said that there were two views on the subject and Section 12-B affirms one of them. Even without Section 12-B, the true position is the same,  as  held  by  us  in  the  earlier  part  of  this judgment. The obligation to prove that duty has not been passed on to another person is always there as a precondition to claim of refund. It cannot also be said that by giving retrospective effect to Section 11-B,  any  vested  rights  or  substantive  rights  are being taken away. The deprivation, if at all, is not real.  The manufacturer  has  already collected  the duty from his purchaser and has thus reimbursed itself. By applying for refund yet, he is trying to reap a windfall; deprivation of that cannot be said to be real or substantial prejudice or loss. A manufacturer had no  vested legal right to refund even when he had passed on the burden of duty to others. No law conferred such a right in him — not Article 265, nor Section 11-B. It was only on account of an incorrect view  of  law  taken  in  Kanhaiya  Lal 1959  SCR 1350 : AIR 1959 SC 135 : (1958) 9 STC 747 and that  cannot  be  treated  as  a  vested  legal  right. Correction  of  judicial  error  does  not  amount  to deprivation  of  vested/substantive  rights,  even though  a  person  may  be  deprived  of  an unwarranted  advantage  he  had  under  the overruled decision. In cases, where the burden is not passed on, there is no prejudice; he can always get the refund.

98.  A  major  attack  is  mounted  by  the  learned

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counsel for petitioners-appellants on Section 11-B and  its  allied  provisions  on  the  ground  that  real purpose  behind  them  was  not  to  benefit  the consumers by refusing refund to manufacturers (on the ground of passing on the burden) but only to enable  the  Government  to  retain  the  illegally collected taxes. It is suggested that the creation of the  Consumer  Welfare  Fund  is  a  mere  pretence and not an honest exercise. By reading the Rules framed under Section 12-D, it is pointed out, even a consumer, who has really borne the burden of tax and is in a position to establish that fact, is yet not entitled to  apply  for  refund of  the duty  since the Rules  do  not  provide  for  such  a  situation.  The Rules  contemplate  only  grants  being  made  to Consumer Welfare Societies. Even in the matter of making  grants,  it  is  submitted,  the  Rules  are  so framed  as  to  make  it  highly  difficult  for  any consumer organisation to get the grant. There is no provision  in  the  Act,  Shri  Nariman  submitted,  to locate the person really  entitled to refund and to make  over  the  money  to  him.  “We  expect  a sensitive Government not to bluff but to hand back the amounts to those entitled thereto”, intoned Shri Nariman.  It  is  a  colourable  device  — declaimed Shri Sorabjee — “a dirty trick” and “a shabby thing”. The reply of  Shri  Parasaran to this criticism runs thus: It ill-becomes the manufacturers/assessees to espouse  the  cause  of  consumers,  when  all  the while  they  had  been  making  a  killing  at  their expense.  No  consumers’  organisation  had  come forward  to  voice  any  grievance  against  the  said provisions. Clause (e) of the proviso to sub-section (2) of Section 11-B does provide for the buyer of the goods, to whom the burden of duty has been passed  on,  to  apply  for  refund  of  duty  to  him, provided that he has not in his turn passed on the duty  to  others.  It  is,  therefore,  not  correct  to suggest that the Act does not provide for refund of duty  to  the  person  who  has  actually  borne  the burden. There is no vice in the relevant provisions of the Act. Rules cannot be relied upon to impugn the validity of an enactment, which must stand or fall  on its own strength.  The defect  in the Rules, assuming  that  there  is  any,  can  always  be corrected if the experience warrants it.  The Court too may indicate the modifications needed in the

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Rules.  The  Government  is  always  prepared  to make the appropriate changes in the Rules since it views the process as a “trial and error” method — says Shri Parasaran.

105. It would be evident from the above discussion that  the  claims  for  refund  under  the  said  two enactments  constitute  an  independent  regimen. Every  decision  favourable  to  an assessee/manufacturer, whether on the question of classification,  valuation  or  any  other  issue,  does not automatically entail refund. Section 11-B of the Central Excises and Salt Act and Section 27 of the Customs  Act,  whether  before  or  after  the  1991 Amendment — as interpreted by us herein — make every refund claim subject to proof of not passing on the burden of duty to others. Even if a suit is filed,  the very same condition operates.  Similarly, the  High  Court  while  examining  its  jurisdiction under  Article  226  — and  this  Court  while  acting under  Article  32  —  would  insist  upon  the  said condition  being  satisfied  before  ordering  refund. Unless the claimant for refund establishes that he has not passed on the burden of duty to another, he would not be entitled to refund, whatever be the proceeding and whichever  be the forum.  Section 11-B/Section  27  are  constitutionally  valid,  as explained  by  us  hereinbefore.  They  have  to  be applied and followed implicitly  wherever  they  are applicable.

108. The  discussion  in  the  judgment  yields  the following propositions. We may forewarn that these propositions  are  set  out  merely  for  the  sake  of convenient reference and are not supposed to be exhaustive.  In case of  any doubt  or  ambiguity  in these propositions, reference must be had to the discussion  and  propositions  in  the  body  of  the judgment.

(i)  Where  a refund of  tax/duty  is  claimed on  the ground  that  it  has  been  collected  from  the petitioner/plaintiff  —  whether  before  the commencement  of  the  Central  Excises  and Customs  Laws  (Amendment)  Act,  1991  or thereafter — by misinterpreting or misapplying the provisions  of  the  Central  Excises  and  Salt  Act,

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1944 read with Central  Excise Tariff Act,  1985 or Customs Act, 1962 read with Customs Tariff Act or by misinterpreting or misapplying any of the rules, regulations  or  notifications  issued under  the  said enactments,  such  a  claim  has  necessarily  to  be preferred  under  and  in  accordance  with  the provisions of the respective enactments before the authorities  specified  thereunder  and  within  the period  of  limitation  prescribed  therein.  No suit  is maintainable in that behalf. While the jurisdiction of the High Courts  under  Article 226 — and of  this Court under Article 32 — cannot be circumscribed by the provisions of the said enactments, they will certainly have due regard to the legislative intent evidenced by the provisions of the said Acts and would exercise their jurisdiction consistent with the provisions  of  the  Act.  The  writ  petition  will  be considered and disposed of in the light of and in accordance  with  the  provisions  of  Section  11-B. This is for the reason that the power under Article 226 has to be exercised to effectuate the rule of law and not for abrogating it.

The said enactments including Section 11-B of the Central Excises and Salt Act and Section 27 of the Customs Act do constitute “law” within the meaning of  Article  265  of  the  Constitution  of  India  and hence, any tax collected, retained or not refunded in  accordance  with  the  said  provisions  must  be held to be collected, retained or not refunded, as the case may be, under the authority of law. Both the  enactments  are  self-contained  enactments providing for levy, assessment, recovery and refund of duties imposed thereunder. Section 11-B of the Central Excises and Salt Act and Section 27 of the Customs  Act,  both  before  and  after  the  1991 (Amendment)  Act  are  constitutionally  valid  and have to be followed and given effect to. Section 72 of  the Contract  Act  has no application to such a claim  of  refund  and  cannot  form  a  basis  for maintaining  a  suit  or  a  writ  petition.  All  refund claims except those mentioned under Proposition (ii)  below  have  to  be  and  must  be  filed  and adjudicated  under  the  provisions  of  the  Central Excises and Salt  Act or the Customs Act,  as the case may be. It is necessary to emphasise in this behalf that Act provides a complete mechanism for

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correcting  any  errors  whether  of  fact  or  law and that not only an appeal is provided to a Tribunal — which is  not  a  departmental  organ — but  to  this Court, which is a civil court.

(ii)  Where,  however,  a  refund  is  claimed  on  the ground that the provision of the Act under which it was  levied  is  or  has  been  held  to  be unconstitutional,  such  a  claim,  being  a  claim outside the purview of the enactment, can be made either by way of a suit or by way of a writ petition. This principle is, however, subject to an exception: Where a person approaches the High Court or the Supreme  Court  challenging  the  constitutional validity  of  a  provision  but  fails,  he  cannot  take advantage of the declaration of unconstitutionality obtained by another person on another ground; this is for the reason that so far as he is concerned, the decision has become final and cannot be reopened on  the  basis  of  a  decision  on  another  person’s case; this is the ratio of the opinion of Hidayatullah, C.J. in Tilokchand Motichand (1969) 1 SCC 110 : (1969) 2 SCR 824 : AIR 1970 SC 898  and we respectfully  agree  with  it. Such  a  claim  is maintainable  both  by  virtue  of  the  declaration contained in Article 265 of the Constitution of India and also by virtue of Section 72 of the Contract Act. In such cases, period of limitation would naturally be  calculated  taking  into  account  the  principle underlying clause (c) of sub-section (1) of Section 17 of  the Limitation Act,  1963.  A refund claim in such  a  situation  cannot  be  governed  by  the provisions of  the Central Excises and Salt  Act or the Customs Act,  as the case may be, since the enactments  do  not  contemplate  any  of  their provisions being struck down and a refund claim arising on that account. In other words, a claim of this  nature  is  not  contemplated  by  the  said enactments and is outside their purview. (iii)  A claim  for  refund,  whether  made  under  the provisions  of  the  Act  as  contemplated  in Proposition (i) above or in a suit or writ petition in the  situations  contemplated  by  Proposition  (ii) above,  can  succeed  only  if  the  petitioner/plaintiff alleges and establishes that he has not passed on the  burden  of  duty  to  another  person/other persons. His refund claim shall be allowed/decreed

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only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as a constitutional imperative  or  as  a  statutory  requirement,  it  is neither  an  absolute  right  nor  an  unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of  the duty has been passed on,  the claimant cannot say that he has suffered any real loss  or  prejudice.  The  real  loss  or  prejudice  is suffered  in  such a  case  by  the  person  who has ultimately  borne  the  burden  and  it  is  only  that person who can legitimately claim its refund. But where  such  person  does  not  come  forward  or where it is not possible to refund the amount to him for  one  or  the  other  reason,  it  is  just  and appropriate  that  that  amount  is  retained  by  the State, i.e., by the people. There is no immorality or impropriety involved in such a proposition.

The  doctrine  of  unjust  enrichment  is  a  just  and salutary doctrine. No person can seek to collect the duty  from both  ends.  In  other  words,  he  cannot collect the duty from his purchaser at one end and also collect  the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised  for  unjustly  enriching  a  person.  The doctrine  of  unjust  enrichment  is,  however, inapplicable  to  the  State.  State  represents  the people  of  the  country. No one can speak  of  the people being unjustly enriched.

(iv) It is not open to any person to make a refund claim  on  the  basis  of  a  decision  of  a  court  or tribunal rendered in the case of another person. He cannot  also  claim  that  the  decision  of  the court/tribunal in another person’s case has led him to discover the mistake of law under which he has paid the tax nor can he claim that he is entitled to prefer  a  writ  petition  or  to  institute  a  suit  within three years of such alleged discovery of mistake of law. A person, whether a manufacturer or importer, must fight his own battle and must succeed or fail in such proceedings. Once the assessment or levy has become final  in his  case, he cannot  seek to

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reopen it nor can he claim refund without reopening such assessment/order on the ground of a decision in  another  person’s  case.  Any  proposition  to  the contrary not only results in substantial prejudice to public  interest  but  is  offensive  to  several well-established principles of  law. It  also leads to grave public mischief.  Section 72 of  the Contract Act,  or  for  that  matter  Section  17(1)(c)  of  the Limitation Act, 1963, has no application to such a claim for refund.

(v)  Article  265  of  the  Constitution  has  to  be construed in the light of the goal and the ideals set out  in  the  Preamble  to  the  Constitution  and  in Articles  38  and  39  thereof.  The  concept  of economic  justice  demands  that  in  the  case  of indirect  taxes  like  Central  Excises  duties  and Customs  duties,  the  tax  collected  without  the authority  of  law  shall  not  be  refunded  to  the petitioner-plaintiff unless he alleges and establishes that he has not passed on the burden of duty to a third  party  and  that  he  has  himself  borne  the burden of the said duty.

(vi) Section 72 of the Contract Act is based upon and  incorporates  a  rule  of  equity.  In  such  a situation, equitable considerations cannot be ruled out while applying the said provision.

(vii)  While  examining  the  claims  for  refund,  the financial  chaos  which  would  result  in  the administration of the State by allowing such claims is  not  an  irrelevant  consideration.  Where  the petitioner-plaintiff  has  suffered  no  real  loss  or prejudice, having passed on the burden of tax or duty to another person, it would be unjust to allow or decree his claim since it is bound to prejudicially affect the public exchequer. In case of large claims, it  may  well  result  in  financial  chaos  in  the administration of the affairs of the State.

(viii) The decision of this Court in STO v. Kanhaiya Lal  Mukundlal  Saraf must  be  held  to  have been wrongly  decided  insofar  as  it  lays  down  or  is understood to have laid down propositions contrary to the propositions enunciated in (i) to (vii) above. It must equally be held that the subsequent decisions

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of  this  Court  following  and  applying  the  said propositions  in  Kanhaiya  Lal have  also  been wrongly  decided  to  the  above  extent.  This declaration — or the law laid down in Propositions (i)  to  (vii)  above — shall  not  however  entitle  the State to recover the taxes/duties already refunded and in respect whereof no proceedings are pending before  any  authority/Tribunal  or  Court  as  on  this date.  All  pending  matters  shall,  however,  be governed  by  the  law  declared  herein notwithstanding  that  the  tax  or  duty  has  been refunded  pending  those  proceedings,  whether under the orders of an authority, Tribunal or Court or otherwise.

(ix)  The  amendments  made  and  the  provisions inserted by the Central Excises and Customs Law (Amendment) Act, 1991 in the Central Excises and Salt Act and the Customs Act are constitutionally valid and are unexceptionable.

(x) By virtue of sub-section (3) to Section 11-B of the Central Excises and Salt Act, as amended by the aforesaid Amendment Act, and by virtue of the provisions contained in sub-section (3) of Section 27 of the Customs Act, 1962, as amended by the said  Amendment  Act,  all  claims  for  refund (excepting  those  which  arise  as  a  result  of declaration  of  unconstitutionality  of  a  provision whereunder  the  levy  was  created)  have  to  be preferred and adjudicated only under the provisions of the respective enactments. No suit for refund of duty is maintainable in that behalf.  So far as the jurisdiction of the High Courts under Article 226 of the Constitution — or of this Court under Article 32 —  is  concerned,  it  remains  unaffected  by  the provisions of  the  Act.  Even so,  the Court  would, while  exercising  the  jurisdiction  under  the  said articles,  have due regard  to  the  legislative  intent manifested by the provisions of  the Act.  The writ petition  would  naturally  be  considered  and disposed of in the light of and in accordance with the  provisions  of  Section  11-B.  This  is  for  the reason that the power under Article 226 has to be exercised to effectuate the regime of law and not for abrogating it. Even while acting in exercise of the  said  constitutional  power,  the  High  Court

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cannot  ignore the law nor  can it  override it.  The power under Article 226 is conceived to serve the ends of law and not to transgress them.

(xi) Section 11-B applies to all pending proceedings notwithstanding  the  fact  that  the  duty  may  have been refunded to the petitioner/plaintiff pending the proceedings  or  under  the  orders  of  the Court/Tribunal/Authority  or  otherwise.  It  must  be held that Union of India v. Jain Spinners and Union of India v. ITC have been correctly decided. It is, of course, obvious that where the refund proceedings have  finally  terminated  — in  the  sense  that  the appeal  period  has  also  expired  —  before  the commencement  of  the  1991  (Amendment)  Act (19-9-1991),  they  cannot  be  reopened  and/or governed by Section 11-B(3) [as amended by the 1991 (Amendment)  Act].  This,  however, does not mean that the power of the appellate authorities to condone delay in appropriate cases is affected in any manner by this clarification made by us.

(xii)  Section 11-B does provide for  the purchaser making the claim for refund provided he is able to establish that he has not passed on the burden to another person. It,  therefore,  cannot be said that Section  11-B  is  a  device  to  retain  the  illegally collected taxes by the State. This is equally true of Section 27 of the Customs Act, 1962.”

11) It is clear from the above 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

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appeal period has also expired – before the commencement of

the  amended  provision,  these  cannot  be  re-opened  and/or

governed  by  the  amended  provision.  Concurring  with  the

aforesaid view,  K.S. Paripoornan, J. expressed his opinion in the

following manner:

“342.…..Sections 11-B(2) and (3) cannot be made applicable to refunds already ordered by the court or the refund ordered by the statutory authorities which  have become final.  It  follows  from a  plain reading of Section 11-B, clauses (1), (2) and (3) of the Act. The provisions contemplate the pendency of the application on the date of  the coming into force  of  the  Amendment  Act  or  the  filing  of  an application  which  is  contemplated  under  law  to obtain  a  refund after  the  Amendment  Act  comes into  force.  I  am  of  the  opinion  that  if  the  said provisions  are  held  applicable,  even  to  matters concluded  by  the  judgments  or  final  orders  of courts, it amounts to stating that the decision of the court  shall  not  be  binding  and  will  result  in reversing  or  nullifying  the  decision  made  in exercise of the judicial power. The legislature does not possess such power. The court’s decision must always bind parties unless the condition on which it is  passed  are  so  fundamentally  altered  that  the decision could not have been given in the altered circumstances.........”

12) The same view has been expressed by S.C. Sen, J.:

“255. I shall now examine the other provisions of the  newly-added  sections.  Sub-section  (1)  of Section 11-B requires an application for refund to be  made.  Sub-section  (2)  requires  the  Assistant Commissioner to pass an order of refund provided the  conditions  set  out  therein  are  fulfilled. Sub-section (3)  merely  lays down that  no refund shall  be made except  as provided in sub-section (2).  There is  a  non obstante clause that  this  will operate  notwithstanding  anything  to  the  contrary contained in any judgment, decree, order etc. It is

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obvious  that  new  provisions  will  apply  in  cases where  applications  for  refund  were  made  before the  new  provisions  came  into  force  and  also subsequently. Sub-section (3) has no retrospective effect.  When  a  case  has  been finally  heard  and disposed of and no application for refund need be made,  sub-section (3)  cannot  apply. If  there is  a judgment, decree or order which has to be carried out, the legislature cannot take away the force and effect of that judgment, decree or order, except by amending the law retrospectively  on the basis  of which the judgment was pronounced.”

13) Notwithstanding,  the aforesaid dicta,  Mr. Panda, learned senior

counsel appearing for the appellant, still sees some light coming

through  a  small  window as  he  wants  pending  proceedings  to

include  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.   To buttress  this  submission,  he

argued that 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. He also

relied upon the orders dated 18.07.1995 by the High Court in Civil

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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

with the following observation :

“Both the Counsel agree that a date may be fixed when  the  petitioner  shall  appear  before  the collector/Assistant  Collector,  Central  Excise, Trichiapalli,  to  go  into  the  question  if  petitioner should  be granted  the refund in  spite  of  Section 11B  of  the  Central  Excise  and  Salt  Act.   We, accordingly,  direct  that  petitioner  shall  appear before the concerned Collector/Assistant Collector, Central  Excise,  Trichirapalli  on  22nd September 1995. no further orders are required in this petition, which stands disposed of.”

14) After  examining the matter  in  its  entirely, we find that  it  is  not

possible to countenance the aforesaid submission of Mr. Panda.

In  the first  instance,  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

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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.

15) 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

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proviso is interpreted by this Court  in  Mafatlal Industries Ltd.

(supra).

16) 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

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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,

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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 he was otherwise had no

jurisdiction  to  do  so  in  the  facts  of  the  present  case.   Such

observations were given in view of the statement of the counsel

for the Government who brought to the notice of the Court the

amended provisions contained in sub-section (3) of Section 11B

of the Act.  The High Court did not go into the issue as to whether

such a course of action was permissible or not.  Another pertinent

aspect which needs to be kept in mind is that the interpretation

that is to be accorded to the amended provision had not been

decided by this Court till that time and the law on this issue came

to be settled in the year 1997 only when the judgment in Mafatlal

Industries Ltd. (supra) was pronounced by this Court.

17) 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

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Ltd.  (supra), which it did.  Similar exercise is done by the High

Court in the impugned judgment.  We find that the view taken by

the High Court is in consonance with the law laid down by this

Court in the aforesaid case.

18) We find that  there is  no scope to  interfere  with  the impugned

decision of the High Court and, accordingly, dismiss this appeal.

No costs.

.............................................J. (A.K. SIKRI)

.............................................J. (ROHINTON FALI NARIMAN)

NEW DELHI; SEPTEMBER 02, 2015.

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