2006 (12) TMI 39 - SC - Central Excise

Supreme Court rules on excise duty incidence, sets aside High Court judgment

TRIVENI CHEMICALS LTD. Versus UNION OF INDIA

The Supreme Court allowed the appeal, setting aside the High Court's judgment that erred in demanding proof from the appellant regarding passing on excise ... Refund – Appellant were pay duty under protest and later after clarification demanded for refund but application for refund is rejected – After considering all the fact respective authority made decision in favour of appellant Issues Involved:1. Classification of the product under the Central Excise and Salts Act, 1944.2. Entitlement to refund of excess excise duty.3. Applicability of Section 11B of the Central Excise Act, 1944, post-amendment.4. Doctrine of unjust enrichment.5. Compliance with judicial orders.Detailed Analysis:1. Classification of the Product:The appellant, a manufacturer of 'Adhesive', classified under Tariff Item No. 68 of the Central Excise and Salts Act, 1944, deposited excise duty under protest. A dispute arose regarding its classification, which was resolved by an order dated 11-11-1985, affirming the classification under Tariff Entry No. 68. This order attained finality.2. Entitlement to Refund of Excess Excise Duty:The appellant filed an application for a refund of the excess excise duty on 19-3-1985, which was rejected. However, upon appeal, the Collector of Central Excise (Appeals) allowed the refund on 7-9-1989, stating that the department's appeal against a similar case (Nevichem Synthetic Industries) would not affect the appellant's case. Despite several representations, the refund was not processed, leading to a writ petition which was dismissed by the High Court due to procedural delays and lack of a written order from the respondent.3. Applicability of Section 11B of the Central Excise Act, 1944, Post-Amendment:The key issue was whether the amended Section 11B, effective from 20-9-1991, applied to the appellant's case. The amendment required proof that the incidence of duty was not passed on to another person. The Supreme Court noted that the refund application was allowed by the Appellate Authority before the amendment, and no further appeal was taken, thus attaining finality. Therefore, the amended Section 11B did not apply to cases where proceedings had concluded before the amendment came into force.4. Doctrine of Unjust Enrichment:The respondents argued that the appellant had to prove that the duty burden was not passed to customers, invoking the doctrine of unjust enrichment. The Supreme Court held that this plea was not raised before the Appellate Authority and could not be introduced later. The authorities were bound to comply with the Appellate Authority's order under the doctrine of judicial discipline.5. Compliance with Judicial Orders:The Supreme Court emphasized that the authorities were obligated to comply with the Appellate Authority's order for a refund. The retrospective effect of Section 11B applied only to pending applications, not to cases where proceedings had concluded. The court referred to the Mafatlal Industries Ltd. case, which clarified that Section 11B did not apply to concluded proceedings. The court also cited judgments from K.S. Paripoornan and S.C. Sen, reinforcing that legislative amendments could not nullify final judicial decisions.Conclusion:The Supreme Court concluded that the High Court erred in requiring the appellant to prove that the duty incidence was not passed on to customers. The impugned judgment was set aside, and the appeal was allowed with costs, mandating compliance with the Appellate Authority's order for a refund.