1986 (11) TMI 7 - HC - Income Tax

Court allows writ petition despite limitation, rejects Rule 11 relevance, emphasizes Constitution enforcement

Assistant Collector Of Central Excise Versus Andhra Fertiliser Limited

Assistant Collector Of Central Excise Versus Andhra Fertiliser Limited - [1989] 175 ITR 549 Issues Involved:1. Limitation for filing the writ petition.2. Applicability of Rule 11 of the Excise Rules.3. Jurisdiction under Article 226(3) of the Constitution.4. Refund of excise duty and the concept of unjust enrichment.Detailed Analysis:Limitation for Filing the Writ PetitionThe primary issue discussed was whether the writ petition was barred by limitation. The Department contended that the writ petition should have been dismissed due to the lapse of an unconscionably long period since the collection of excise duty. The petitioner argued that the writ petition was filed within a reasonable time after the Madras High Court judgment, which clarified the illegality of the excise duty collection. The court held that the explanation offered by the petitioner was reasonable and that the writ petition was filed within three years from the date of the Madras High Court judgment. Therefore, the petition was not barred by limitation.Applicability of Rule 11 of the Excise RulesThe appellant argued that Rule 11 of the Excise Rules, which pertains to claims for refund made to the Department, should apply. The court found this argument irrelevant, stating that Rule 11 applies only to departmental claims and not to writ petitions filed under Article 226 of the Constitution. Thus, the court held in favor of the petitioner on this point.Jurisdiction under Article 226(3) of the ConstitutionThe appellant contended that the writ petition should have been dismissed based on Article 226(3) of the Constitution, which prohibits High Courts from entertaining writ petitions when an alternative remedy is available. The court noted that this argument was not raised before the learned single judge, and therefore, the Department was barred from raising it at this late stage. The court held that the appellant's second contention failed.Refund of Excise Duty and the Concept of Unjust EnrichmentThe most significant issue was whether the petitioner was entitled to a refund of the excise duty collected illegally, considering the concept of unjust enrichment. The appellant relied on the Supreme Court judgment in State of M. P. v. Vyankatlal, which held that a refund should not be granted if the burden of the tax had been passed on to the consumers. The petitioner, however, cited the Supreme Court judgment in D. Cawasji and Co. v. State of Mysore, which held that a refund could not be denied on the grounds that the tax had been passed on to the customers.The court analyzed both judgments and concluded that the theory of unjust enrichment does not apply to situations covered by Article 265 of the Constitution, which prohibits the State from levying or collecting taxes without legal authority. The court emphasized that the primary duty of the courts is to enforce the Constitution and laws, and the arbitrary collection of excise duty without legal authority should be rectified. The court held that justice demanded similar treatment for the petitioner as received by other manufacturers who had been refunded the excise duty. Therefore, the court dismissed the writ appeal and directed the refund of the excise duty to the petitioner.Certification of Substantial Question of LawGiven the conflicting observations of the two Supreme Court judgments, the court certified that this case involves a substantial question of law of general importance that needs to be decided by the Supreme Court.