Unlawful excise levy on exempt goods was refundable with interest; limitation and unjust enrichment defences failed.

Excise duty collected on acid oil, soap stock and spent earth was held refundable because the goods were covered by the exemption notification and the levy was without authority of law, rendering the assessments invalid under Article 265. The refund claim was not barred by limitation, as money collected unlawfully could not be protected by limitation and the claim was made within a reasonable time after the assessee obtained definite knowledge of the exemption position. Refund was also not defeated by alleged passing on of the duty burden, since unjust enrichment was rejected on the facts. Interest was payable on the refunded amount at 12% per annum for the period of wrongful retention.

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Issues: (i) whether the excise duty collected on acid oil, soap stock and spent earth was recoverable when the goods were covered by the exemption notification and the levy was without authority of law; (ii) whether the refund claim was barred by limitation under the excise law or the general law; (iii) whether refund could be refused on the ground that the incidence of duty had been passed on to buyers; and (iv) whether interest was payable on the refunded amount.

Issue (i): Whether the excise duty collected on acid oil, soap stock and spent earth was recoverable when the goods were covered by the exemption notification and the levy was without authority of law.

Analysis: The exemption notification under the excise rules covered goods manufactured in the relevant industry, and the products in question were held to be exempt. Collection of duty contrary to the exemption was inconsistent with Article 265 of the Constitution of India and amounted to recovery without authority of law. The consequent assessments were also invalid.

Conclusion: The levy and collection were illegal, and the assessee was entitled to refund.

Issue (ii): Whether the refund claim was barred by limitation under the excise law or the general law.

Analysis: A statutory limitation could not protect money collected without lawful authority. In any event, the Court found that the assessee acquired definite knowledge of the exemption position only when the competent excise authority communicated it, and the refund claim followed within a reasonable period thereafter. The payments made after the issue was under departmental consideration were treated as provisional in nature.

Conclusion: The refund claim was not barred by limitation.

Issue (iii): Whether refund could be refused on the ground that the incidence of duty had been passed on to buyers.

Analysis: The Court applied the principle that an unlawful exaction remains refundable notwithstanding passing on of incidence, unless the statute clearly provides otherwise. The excise law contained no such bar on the facts found, and the defence of unjust enrichment was rejected.

Conclusion: Refund could not be denied on the ground of unjust enrichment.

Issue (iv): Whether interest was payable on the refunded amount.

Analysis: Since the State had retained money collected without authority of law, the assessee was held entitled to compensation for the period of retention.

Conclusion: Interest at 12% per annum was payable from the date of collection until payment.

Final Conclusion: The assessee succeeded in full relief on the substantive tax dispute and obtained refund with interest, as the duty had been collected illegally and none of the objections to restitution was accepted.

Ratio Decidendi: Money collected as duty without authority of law is refundable in writ jurisdiction, and such refund cannot be denied merely by invoking statutory limitation or the fact that the incidence of duty was passed on, unless the governing statute expressly bars restitution.

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