Illegal excise duty refund recoverable despite unjust enrichment, and civil suit maintainable for recovery of money paid by mistake.

Excise duty collected without authority of law was held recoverable by the payer because the payment was made under a mistake of law and the doctrine of unjust enrichment could not justify retention by the State. Section 72 of the Indian Contract Act, 1872 supported restitution of money paid by mistake. The civil suit for refund was also not barred by the Central Excises and Salt Act, 1944 or the refund machinery under that statute, because rejection of an earlier refund application as time-barred did not oust civil court jurisdiction. The suit was therefore maintainable and refund was decreed in favour of the assessee.

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Issues: (i) Whether the plaintiffs were entitled to refund of excise duty collected without authority of law notwithstanding the plea of unjust enrichment. (ii) Whether the suit for refund was barred by the Central Excises and Salt Act, 1944 and by the provisions governing refund applications.

Issue (i): Whether the plaintiffs were entitled to refund of excise duty collected without authority of law notwithstanding the plea of unjust enrichment.

Analysis: The duty had been collected on a product later held not to be excisable, and the payment was made under a mistake of law. The settled view of the Court was that tax or duty collected without authority of law must be refunded to the person from whom it was collected. The doctrine of unjust enrichment could not be used by the State to retain illegally collected excise duty. Section 72 of the Indian Contract Act, 1872 reinforced the obligation to repay money paid by mistake.

Conclusion: The plea of unjust enrichment failed and the refund claim was maintainable in favour of the assessee.

Issue (ii): Whether the suit for refund was barred by the Central Excises and Salt Act, 1944 and by the provisions governing refund applications.

Analysis: The earlier refund application had been rejected as time-barred, but that did not oust the civil court's power to entertain a suit for recovery of duty collected without authority of law. Section 40 of the Central Excises and Salt Act, 1944 afforded protection for acts done in good faith and did not bar a claim for illegal collection and refund. The civil court, once the legal liability was established, was bound to grant relief. The notice period under Section 80 of the Code of Civil Procedure, 1908 was also taken into account in holding the suit within limitation.

Conclusion: The suit was not barred and the civil court had jurisdiction to decree refund in favour of the assessee.

Final Conclusion: The legal effect of the decision is that excise duty collected without authority of law is recoverable by civil suit and cannot be retained by invoking unjust enrichment or the statutory protection relied upon by the revenue.

Ratio Decidendi: Money collected as excise duty without authority of law must be refunded to the payer, and neither unjust enrichment nor section 40 of the Central Excises and Salt Act, 1944 bars a civil suit for such recovery.

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