1986 (2) TMI 64 - HC - Central Excise

High Court denies exemption from excise duty for complex fertilizers under Notification No. 25/70-CX

The High Court ruled in favor of denying the respondent exemption from excise duty under Notification No. 25/70-CX for complex fertilizers. The Assistant ... Fertilizers - Demand Issues Involved:1. Entitlement to exemption from excise duty under Notification No. 25/70-CX dated 1-3-1970.2. Validity of the Assistant Collector's order denying exemption.3. Finality and interpretation of the Central Government's order dated 18-2-1976.4. Right to claim refund of excise duty paid.5. Principle of unjust enrichment.Detailed Analysis:1. Entitlement to Exemption from Excise Duty:The respondent, a government company, sought exemption from excise duty on complex fertilizers (NPK 14-28-14 and NPK 17-17-17) manufactured from urea and imported muriate of potash, under Notification No. 25/70-CX. The Assistant Collector denied the exemption, arguing that ammonium phosphate, an excisable item formed during the manufacturing process, disqualified the respondent from the exemption.The Appellate Collector upheld this decision, stating that the exemption applies only to mixed fertilizers produced by physical actions without chemical reactions. The Central Government, however, set aside this decision, noting that the notification did not impose such a condition and allowed the exemption if the conditions were met.2. Validity of the Assistant Collector's Order:The Assistant Collector initially granted the exemption on 5-3-1976 but later issued a show cause notice on 7-6-1976, withdrawing the exemption and denying the refund of excise duty. The respondent challenged this order, leading to the writ petitions.The learned single Judge quashed the Assistant Collector's order, holding that the Central Government's order dated 18-2-1976 was final and binding, and the Assistant Collector had no jurisdiction to reopen the matter.3. Finality and Interpretation of the Central Government's Order:The Central Government's order did not conclusively grant the exemption but stated that the exemption would apply if the conditions were fulfilled. The Supreme Court's ruling in Coramandel Fertilizers Ltd. v. Union of India clarified that the exemption applies only to mixed fertilizers produced from duty-paid fertilizers without involving other excisable products like sulphuric acid and ammonia.The High Court found that the Central Government's order did not provide a final determination in favor of the respondent but required compliance with the notification's conditions. Thus, the Assistant Collector's subsequent actions were justified.4. Right to Claim Refund of Excise Duty Paid:The respondent sought a refund of the excise duty paid before 5-3-1976. The learned single Judge allowed the refund, but the High Court disagreed, citing the principle of unjust enrichment.5. Principle of Unjust Enrichment:The High Court referenced several judgments, including Ogale Glass Works Ltd. v. Union of India and Shiv Sankar Dal Mills v. Haryana, which held that an assessee should not benefit from both collecting excise duty from consumers and obtaining a refund from the government. The Court concluded that granting the refund would result in unjust enrichment for the respondent.Conclusion:The High Court allowed the appeals, setting aside the learned single Judge's orders in W.P. Nos. 152 and 455 of 1977. It held that the respondent was not entitled to exemption under Notification No. 25/70-CX, and the Assistant Collector's order denying the exemption was valid. The Court also ruled against the refund of excise duty to prevent unjust enrichment.