Mistake of law and excise duty refund: voluntary payment, estoppel, and passing on did not bar restitution.

Excise duty paid under a mistake of law was treated as refundable under Article 226, because a voluntary payment made under a mistaken tariff understanding does not lose its character as money paid under mistake. The court applied the principle that limitation for refund runs from discovery of the mistake, not from payment, and held that delay alone did not defeat the claim on the facts stated. It further noted that common mistake, estoppel, and alleged passing on of the duty to consumers did not bar restitution absent a statutory prohibition, and that any refunded amount could be held for pro rata repayment to actual consumers.

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Issues: (i) Whether excise duty paid under a mistake of law could be refunded under Article 226 of the Constitution of India despite voluntary payment and a prior classification list; (ii) Whether refund could be denied on the ground of estoppel or because the amount had allegedly been passed on to consumers.

Issue (i): Whether excise duty paid under a mistake of law could be refunded under Article 226 of the Constitution of India despite voluntary payment and a prior classification list.

Analysis: Money paid under a mistake, including a mistake of law, is recoverable under Section 72 of the Indian Contract Act, 1872. The court relied on the settled principle that payment made under a mistaken belief as to the applicable tariff item does not cease to be refundable merely because it was made voluntarily. It also treated the period for seeking refund as measured from the date on which the mistake became known, and found that the writ was not liable to fail on delay alone.

Conclusion: The claim for refund was maintainable and not barred merely because the duty had been paid voluntarily under a mistaken understanding of the law.

Issue (ii): Whether refund could be denied on the ground of estoppel or because the amount had allegedly been passed on to consumers.

Analysis: A common mistake of law between the assessee and the department does not create estoppel against refund. The court further held that the principle of unjust enrichment could not defeat restitution of duty recovered without authority of law in the absence of any statutory bar. It treated the Supreme Court's declaration that refund cannot be denied merely because the payer had recovered the duty from customers as binding under Article 141 of the Constitution of India. The court also stated that the refunded amount could be held in trust for actual consumers and repaid pro rata on claims.

Conclusion: Refund could not be denied on estoppel or unjust enrichment grounds, and the assessee was entitled to repayment.

Final Conclusion: The writ petition succeeded and the assessee was entitled to refund of the excess excise duty, with the amount to be held for pro rata reimbursement to actual consumers if claims were made.

Ratio Decidendi: Excise duty collected without authority of law and paid under a common mistake of law is refundable under Article 226, and neither voluntary payment, estoppel, nor alleged passing on of the burden to consumers can by itself defeat restitution in the absence of a statutory prohibition.

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