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Issues: (i) Whether the excise duty collected from the plaintiffs, though later found to have been levied without authority of law, could be refused refund on the ground of unjust enrichment because the burden had allegedly been passed on to customers; (ii) Whether the civil suit for refund was barred by the Central Excises and Salt Act, 1944, including the objection founded on Section 40.
Issue (i): Whether the excise duty collected from the plaintiffs, though later found to have been levied without authority of law, could be refused refund on the ground of unjust enrichment because the burden had allegedly been passed on to customers?
Analysis: The duty had been collected under a mistake of law on goods which were held not to be liable to excise duty for the relevant period. The Court followed the settled line of authority of the Bombay High Court and the Supreme Court that money collected by the State without authority of law must be refunded to the person from whom it was collected. The doctrine of unjust enrichment was held not to defeat a claim for refund of illegal tax collection. Section 72 of the Indian Contract Act, 1872 supported the restitutionary obligation to repay money paid by mistake.
Conclusion: The refund could not be denied on the ground of unjust enrichment and the claim was maintainable in favour of the assessee.
Issue (ii): Whether the civil suit for refund was barred by the Central Excises and Salt Act, 1944, including the objection founded on Section 40?
Analysis: The Court held that Section 40 of the Central Excises and Salt Act, 1944 protected acts done in good faith and did not bar a suit for recovery of duty collected without authority of law. Where the levy itself was outside the statute, the civil court retained jurisdiction to grant relief. The statutory refund remedy and the objection based on limitation did not extinguish the right to sue for recovery of money illegally collected.
Conclusion: The civil suit was not barred and the civil court had jurisdiction to decree refund in favour of the assessee.
Final Conclusion: The appeal failed, the decree for refund was sustained, and the respondents remained entitled to recover the amount collected without authority of law.
Ratio Decidendi: Money collected by the State as tax or duty without authority of law is recoverable by the person from whom it was collected, and the defence of unjust enrichment or a general statutory bar cannot defeat a civil claim for restitution unless the statute expressly and validly excludes such remedy.
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